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EU banks set to challenge Visa and Mastercard duopoly with new universal payment system

The EU wants to challenge the payment companies' dominance.
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20 major EU banks are going to announce a new payment initiative that would remove the need for depending on either VISA or MasterCard’s network. Card payments, mobile payments, and fund transfers will all rely on the Target Instant Payment Settlement (TIPS) system.

Electronic Payments International hints that the whole new ecosystem is referred to as the Pan European Payment System (PEPSI), and is said to be backed by the European Central Bank (ECB) and the European Commission (EC). What’s more, it is being hinted that PEPSI could one day even replace national payment schemes. Simply put, if enforced, PEPSI could be the biggest threat for card networks such as VISA and MasterCard.

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Of late, the interchange fee regulations have troubled banks and have brought their performance down, while letting card networks stay unaffected. What’s more, banks have lost nearly $3.2 billion annually due to the EC’s Interchange Fee Regulation (IFR), whereas card networks such as VISA and MasterCard saw a $619 million boost in their revenue.

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With the upcoming PEPSI regulation, banks may potentially be able to cut card network fees and increase their revenue through a myriad of other tactics such as proprietary fees.

There may be an announcement in the near future which would provide more information about the system. A scheme manager will also be appointed to take care of setting up the whole infrastructure to facilitate PEPSI. Deutsche Bank, Commerzbank of Germany, Santander in Spain, and Banca Intesa Sanpaolo in Italy are a few institutions sponsoring the project. Once the new project gets going, transactions can be processed without having to rely on American card networks such as Visa or MasterCard.

There has been a similar project in the past known as The Monnet Project. Launched in 2012, the project comprised launching a fully European card system. It, however, failed and also didn’t receive any real support from the EC. However, Europe is increasingly skeptical about the dominance of networks such as Mastercard and Visa and it’s more likely than ever that they would be looking to challenge it.

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