People who love to complain have lots of opportunities to do so with the European payment market: everything is dominated by large financial institutions, we lack a European payment scheme, Strong Customer Authentication (SCA) may lead to losing some sales, innovation is slow, etc. In addition, not only the interchange level is low, but it is even decreasing: Mastercard and Visa just agreed to significantly reduce (on average by around 40%) their multilateral interchange fees (MIF or interchange) for payments in the EEA with consumer cards issued elsewhere.
However, the European payment market remains attractive to non-European players.
Softbank, a major Japanese mobile network operator and global player, is investing EUR 900 million in Wirecard, a German digital payments company. This investment by SoftBank will help Wirecard to expand further into Asian markets, including Japan and South Korea, and see the companies collaborate on digital payments, data analytics, artificial intelligence and other digital financial services.
At the same time, Stripe, anther global player is increasing its involvement in European payment markets. The company is introducing Stripe Billing in Europe, a tool that simplifies the recurring billing process for SaaS and subscription-based companies. The subscription e-commerce market has grown more than 100% per annum over the past five years, and 32% of people would prefer to buy goods via subscriptions than one-off purchases; in Europe, subscription businesses are growing even faster than in the US, according to Stripe.
Stripe also announced they are acquiring Touchtech Payments, an Ireland-based startup that works with banks to help them build and manage Strong Customer Authentication, a verification process that will typically require customers to provide two different forms of authentication in order to process card transactions. SCA will be required on most transactions in Europe from September 14 of this year. John Collison, Stripe’s co-founder and president, said that a similar directive put in place in India had a chilling effect on the market after it wasn’t handled well. “There was a 25% drop in sales overnight when the changes came into effect in India,” he said in an interview with TechCrunch.
At the same time, PYMNTS published a report called “Payments 2022”in collaboration with Stripe that shows there is still room for improvement at digital platforms, the likes of Uber or Airbnb: only 4% of platforms consider how they convert visitors to sales as “extremely” effective. Moreover, only a tiny fraction of platforms consider their fraud detection systems as “extremely” effective, with a majority citing false-positives as a major friction point. Also, 62% of platforms cite chargebacks/dispute resolution as a transactional pain point. These digital platforms have large plans for investment in the next few years to improve on their payment capabilities.
The European payment market is actually evolving fast: even with low margins it remains more attractive than ever.