As the EU attacks U.S. giants, Visa and Mastercard get local

• Key insight: Visa and Mastercard are adding tech to support payments in Europe amid pressure on U.S. firms in the region. 
• What's at stake: The ECB is supporting local alternatives and CBDC projects.
• Forward look: Visa will focus on data and AI as part of its investment in the EU.

As European payment developers try to capitalize on Trump anxiety to cut into Visa and Mastercard's dominance of local European markets, the U.S. card networks are bolstering technology in the region.

Visa this week announced it would invest about $673 million in European payments technology, while Mastercard said it would participate in a local real-time payments test. 

The moves aren't just about benevolence. Visa and Mastercard are trying to protect their reach into European payments. U.S.-based card networks process more than 60% of card payments in the European Union, according to the European Central Bank, but  there are nine European card networks that mostly support individual countries.

The ECB is supporting emerging pan-European projects such as the Wero Wallet, which is part of the European Payments Initiative, a long-standing European bank effort to build an alternative to Visa and Mastercard. Wero recently passed 43 million users and is in the middle of launching an e-commerce feature. "In an increasingly digital payments landscape, it is important to ensure resilience, choice and strong European capabilities, including through initiatives such as the digital euro," the ECB's press office said in an email. 

Visa and Mastercard in Europe

Mastercard is participating in the Target Instant Payment Settlement System, or TIPS (unrelated to the U.S. retail chain). The card network will partner with Danmarks NationalBank and Sveriges Riksbank to test cross-currency payments that settle in real-time. As part of the pilot, the Mastercard Move digital-transfer app was part of an automatic settlement between euros and the Danish kroner.

The pilot program is a milestone in Mastercard's strategy to build direct connections to local payment systems, the card network said, while also touting Mastercard's ability to align with ECB governance. European sovereignty concerns about US-owned payment networks have been an issue for decades now, but local efforts to create an alternative have failed to catch fire, according to Aaron McPherson, principal at AFM Consulting.

"Part of the problem, ironically, is that European countries have capped interchange to the extent that rival networks can't make a business case," McPherson told American Banker. "Mastercard and Visa appear concerned enough to emphasize their investment in local European services, such as data centers."

Visa this week detailed its investment in the European Union. The projects include a new data processing center based in the Eurozone in an effort to increase the resilience, security and local processing of European payments.  

"Europeans are right to expect that payment systems serving the region are resilient, secure and meet European standards. We share that view. We have built our European business around it," Cahill said. 

Other Visa moves include a new location for its Central Europe team in Frankfurt. This site will include a regional innovation center focused on European clients, partners and developers as commerce evolves through digital, AI-enabled and data-driven experiences.

Visa also plans to open a tech center in Warsaw next year, focused on developing local staff  in areas such as AI, cybersecurity and digital payments infrastructure for Europe. 

"Visa's business is run in Europe, under a European board, managed by local leadership teams and local experts, addressing local needs in every country," Cahill said, adding the card network operates under the supervision of the Bank of England and oversight by the ECB and several national central banks across the region. "This governance structure ensures accountability and alignment with European regulatory and operational expectations. It reflects that Visa Europe is part of Europe's financial ecosystem, working every day with European banks, fintechs, merchants, governments and regulators in service of European businesses and citizens."

The best alternative to cards is faster payments, so Mastercard and Visa are also trying to participate in that area through Mastercard Move and Visa Direct, their account-to-account transfer subsidiaries, McPherson said. 

"Their ability to do so depends partly on the goodwill of the authorities, so that is probably a factor in their outreach. If I were Mastercard or Visa, however, I wouldn't be too worried," McPherson said. "They are still better positioned than any local initiative, and can always co-opt them."

Why worry?

European payments independence is an acute concern, reflected broadly at the ECB. Several ECB officials have recently given speeches on the topic. Executive board member Piero Cipollone addressed the topic at the European Parliament, pointing out how much of European payments go through non-European providers. The ECB also produced a report on card schemes and processors, providing data on the role of international cards in the euro area and the broader discussion on strategic autonomy in payments.

ECB officials have recently expressed concerns about the dominance of U.S. payment firms. ECB Executive Board Member Piero Cipollone recently discussed "The digital euro: strengthening Europe's payments ecosystem"' at an industry conference, and made an Introductory statement by Piero Cipollone to the European Parliament, which notes that a significant share of retail payments in Europe depends on non-European providers and highlights implications for resilience and autonomy. And the ECB's report on card schemes and processors provides data on the role of international card schemes in the euro area and the broader discussion on strategic autonomy in payments.

The degree to which this threatens Visa and Mastercard is debatable, but the threat is visible. "EPI has resurfaced as a perceived competitive sovereign scheme risk amid renewed headline attention, though we continue to view it as early stage, with any meaningful impact dependent on mass adoption, a process that is structurally slow in payments given entrenched consumer & merchant behavior," analysts at TD Cowen said in a research note. 

The ECB has also recruited academics and financial experts to work on a potential Euro-backed central bank digital currency as a counter to broader U.S. influence over the European economy.

 "Mastercard and Visa trumpeting their increased investments in EU data centers is a strategic move to assuage European politicians' and regulators' increasingly strident calls for 'payments sovereignty,'" Eric Grover, a principal at Intrepid Ventures, told American Banker. 

Grover said projects such as EPI and its Wero digital wallet are explicitly cheered by the ECB and European Commission to challenge U.S. payment networks like Mastercard and Visa, and U.S. digital wallets such as Apple Pay, Google Wallet and PayPal. 

"However, while localized data processing helps address European data privacy concerns, it won't entirely eliminate the political friction," Grover said. "At the end of the day, Mastercard and Visa remain U.S.-domiciled companies."

Ultimately, the choices made by consumers, businesses, banks and governments will determine the winners, according to Grover, adding genuinely global, convenient instant settlement will be a massive leap forward for economic efficiency. 

"Despite some governments preferring domestic champions, Mastercard's unmatched global network reach puts it in a prime position to connect national and regional real-time platforms worldwide, as demonstrated by its involvement with the ECB's TIPS system," Grover says.