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With uncertainty increasing in many aspects of international affairs, regulators across Europe are considering the question of payments sovereignty and how they can ensure that their payments systems are resilient.
In its Payments Report 2025, Sweden's Riksbank has argued that the country needs to focus on the resilience of its payments system, given the growing geopolitical uncertainty and risk.
The central bank emphasised the need for security in the context of the perception, especially in the Baltic and Nordic regions, that the threat from Russia is growing.
At the EU level, the European Central Bank (ECB) is focusing on a different aspect of payments security: the extent to which the bloc is reliant on global card networks.
It has noted that international card schemes, predominantly based outside the EU, controlled around 61 percent of euro area card payments in 2022, leaving national schemes with a shrinking market share.
Of course, the main two card networks, Visa and Mastercard, are based in the US, which is becoming an increasingly unreliable partner for Europe under the Trump administration.
The bigger picture
In recent months, there have been multiple instances of cables being damaged in the Baltic Sea, the bed of which is criss-crossed by a web of undersea infrastructure in relatively shallow water (less than 150m deep).
The suspicion is that these incidents are acts of Russian sabotage, although there has been no firm proof.
The Riksbank argues that these acts of sabotage present a threat to Sweden’s payments infrastructure, and that the country should be taking steps to ensure operational resilience in the event of a sabotage of its network.
The central bank suggests that card payments should be possible offline, so that they continue to work even without functioning data communication.
It notes that several of its Nordic-Baltic neighbours have already implemented or are in the process of implementing such a system, either through legislation (Estonia and Latvia), or through a voluntary agreement between market participants (Denmark).
The EU’s preferred solution to its own questions around payments sovereignty is the digital euro, which it contends could ensure the bloc’s monetary sovereignty and boost efficiency, competition and innovation.
The UK has expressed similar concerns to the EU in terms of the role of the major card schemes, with a recent multi-year review by the Payment Systems Regulator (PSR) concluding that the country’s card payment arrangements are not functioning effectively.
The PSR’s criticisms focused on cost — it found that both Visa and Mastercard have increased their core scheme and processing fees by at least 25 percent in real terms since 2017, costing UK businesses an estimated £170m more per year.
The regulator also criticised the lack of transparent fee structures, which it said has made it more difficult for acquirers and merchants to understand and manage their costs.
As European regulators and governments start to cast around for alternatives to their existing payments infrastructure to ward off external challenges, they may be well advised to look to markets in Asia-Pacific for examples of alternative approaches.
The key question facing a potential European payment system may well be whether or not anyone uses it rather than whether or not regulators can build one.
The jurisdictions where local payments systems have seen high adoption rates have usually been those where the use of a local payment system may be the first time that consumers have ever interacted with a non-cash payment system.
India is a prime example of this — the local UPI payment system has grown from 34 percent of cashless transactions nationally in 2019 to more than 84 percent in 2024, according to statistics released by the Reserve Bank of India.
Entrenched payments systems might not necessarily be a barrier to adoption, however, if there is political and industrial will for change.
In Singapore, for example, the PayNow system, an initiative by the city-state’s Association of Banks has received widespread support both from the industry and the Monetary Authority of Singapore (MAS).
PayNow is rapidly becoming Singaporeans’ preferred method for making e-money and QR code payments, which have surpassed card payment volumes in the island nation for several years now, according to the MAS.
Why should you care?
With European jurisdictions facing increased challenges to their payments infrastructure based on growing geopolitical instability, market concentration and cost, governments and regulators will likely seek to act.
Now that the US is an erratic ally, and the UK is raising questions about the value offered by the major card networks, alternatives to the existing approaches could come into play.
This will in turn create both challenges and opportunities for payments firms that may have to adjust their way of working — or that could provide the sort of home-grown alternatives that regulators are considering.
Similarly, as the threat from Russia becomes more tangible, governments may look to introduce new operational resilience requirements that will affect the way payments firms operate.
We may see renewed efforts to promote existing Europe-based alternative payment systems, such as the European Payments Initiative (EPI) and the SEPA Payment Account Access (SPAA) scheme.
The EPI’s key offering is Wero, a digital wallet created in partnership with leading European banks and payment service providers.
The SPAA scheme, meanwhile, is a set of rules, practices and standards intended to drive open payments in the EU.
Some regulators may even consider mandating cash acceptance, which will be a change in trajectory in jurisdictions that have been edging towards cashlessness.
The introduction of a home-grown European payment system might also present an opportunity to create a shift in consumer behaviour.
Europeans have long been heavily reliant on cards as their preferred method of payment, yet the costs of processing have long been a challenge to merchants’ already razor thin profits.
The introduction of a new system could be an opportunity to encourage a shift to more cost-effective options, as seen in Singapore, which swapped cash and prepaid cards for small purchases to QR codes.
Or the EU could increase the pace of its digital euro project and persuade consumers in the bloc that a central bank digital currency (CBDC) is a convenient alternative to the payment options they currently employ.
Whichever option — or combination of options — European authorities turn to, there seems to be growing momentum for payments sovereignty, which could lead to significant change for consumers and organisations across the region.
