Wero: The EU’s ambition to rattle credit cards behemoths
The European Payments Initiative (EPI) was launched by 16 leading European banks and financial institutions with the goal of streamlining payments across Europe. EPI aims to create a unified payment system leveraging SEPA Instant Credit Transfer (SCT Inst) to support instant account-to-account (A2A) payments.
According to the ECB, in 2023, the total value of non-cash payments in the EU amounted to €111.4 trillion, with 56% accounted for by card payments. A significant portion of these transactions were processed by the US card giants Visa and Mastercard.
The companies have faced criticism from regulators, customers, and lawmakers worldwide—not only for their fees but also for their duopoly and dominance in the payment processing market. EPI’s objective is to establish the first sovereign payments solution, reducing dependency on US-based networks Visa and Mastercard.
At the heart of EPI’s efforts is Wero, a digital wallet accessible via mobile app. Wero offers users convenient and secure Peer-to-Peer (P2P), e-commerce, and POS payments by leveraging the SEPA Instant payment rails. It combines the functionality of PayPal, Google Pay, and Apple Pay but operates via A2A payments instead of card networks.
While several local payment methods exist, such as iDeal, giropay, Paylib, and Sofort, these are predominantly country-specific. For instance, a customer in France may struggle to pay a merchant in Germany using an A2A payment method. EPI envisions setting a new standard for payments across Europe by fostering collaboration among consumers, banks, acquirers, merchants
The roll-out of Wero is active as we speak, with Germany who launched in July, followed by France in October, and Belgium launching in November. Netherlands is planning to launch in early 2025, with more EU countries expected to adopt it soon. According to EPI, member banks together represent more than 75% of retail banking customers in our three launch markets of Belgium, France and Germany, with more countries expected to follow.
How Wero Differs from Mobile Banking Today
Wero allows users to make purchases using A2A payment rails, offering enhanced security through Strong Customer Authentication (SCA) and digital wallets. Additionally, it leverages tokenisation, enabling “card-not-present”-like features without requiring merchants to store sensitive account details.
Exploring the key Benefits of Wero:
- Card like experience with Immediate Settlement: Wero’s transaction processing time is comparable to, if not potentially faster than, traditional card solutions due to its use of instant payment rails and less intermediaries. More importantly, funds are immediately available to merchants, improving cash flow and liquidity.
- Cost Savings for Merchants: Merchants benefit from reduced fees, enabling them to offer competitive pricing and potentially pass on savings to consumers.
- Pan-European Cross-Border Payments: Wero simplifies cross-border payments. While existing mobile banking solutions support P2P transfers within a country, they often struggle with cross-border interoperability, especially when onboarding a new payee. Wero eliminates this hurdle through seamless bank interoperability.
- New Features and Payment Options for Users: Wero plans to integrate innovative features such as QR codes, and email addresses to streamline P2P payments. Additional capabilities like Request to Pay, subscription management, Buy Now-Pay Later (BNPL) options, merchant loyalty programs, and shared spending are also in the pipeline.
Implications for Incumbent Players
For Banks
Issuing and acquiring banks face a potential decline in revenue from interchange fees due to the adoption of A2A payment solutions. However, this shift encourages banks to embrace cost-effective and scalable A2A systems. Consolidating payments via SEPA Instant also offers better insights into consumer behaviour, enabling data-driven strategies.
For Consumers
Consumers benefit from real-time payments, enhanced security, and the convenience of using online banking credentials. However, they may miss out on rewards, cashback, and other perks associated with credit cards. Additionally, the absence of robust dispute resolution mechanisms and limited financing options could deter some users.
EPI and Wero represent promising initiatives poised to transform European payments by promoting sovereignty, innovation, and competition. They aim to create a unified and efficient payment ecosystem that benefits consumers, merchants, and financial institutions alike. While previous attempts to break the card payments duopoly have failed, Wero appears promising with initial roll-out in launch markets and a strong backing from the ecosystem.
The success hinges on collaboration among stakeholders, widespread market adoption, and the ability to deliver tangible value. If executed effectively, EPI and Wero could set a new standard for payments in Europe, potentially inspiring other regions to reduce reliance on global networks.
Are you ready to embrace this new era of European payments?
Links and references:
https://www.ecb.europa.eu/press/stats/paysec/html/ecb.pis2023~b28d791ed8.en.html
https://www.checkout.com/blog/wero-payments
https://cdn-group.bnpparibas.com/uploads/file/PR_EPI%20launches%20Wero%20in%20France.pdf
