Unlocking Europe's financial independence through open banking systems
Europe is actively pursuing account-to-account (A2A) payments as a cornerstone for achieving strategic independence in its payment infrastructure. This shift is driven by several initiatives focused on open banking, instant payments, and pan-European payment schemes.
The European Commission aims to address gaps in open-banking services with PSD3 and the Payment Services Regulation (PSR). These regulations set minimum requirements for API interfaces, better data protection, and fairer oversight of all service providers. Companies like finAPI, a provider of account information and payment initiation services regulated by BaFin, are already enabling A2A payments and account connections in twelve European countries.
One of the key initiatives is the Open Banking and "Pay by Bank" model, which has been made possible by the implementation of PSD2. Banks must provide public APIs for licensed third-party providers, enabling seamless A2A payments. Major card companies have invested heavily in European TPPs to engage with this space. For example, Visa acquired Tink, while Mastercard invested in token.io and Aiia.
National and regional schemes, such as the Netherlands' Ideal/Tikkie, Poland's Blik, and other digital wallet-based A2A payment schemes, have gained significant market traction. These regional successes are converging towards broader pan-European solutions, like the European Payments Initiative (EPI) with its digital wallet Wero. Wero, developed by 16 major banks across several countries including Germany, France, the Netherlands, and Belgium, targets everyday payments starting from person-to-person (P2P) and now expanding to online merchant payments. Deutsche Bank recently began integrating Wero for payments acceptance across Germany, Belgium, France, and upcoming markets like the Netherlands and Luxembourg.
The European Central Bank (ECB) continues to enhance its target services, including TARGET Instant Payment Settlement (TIPS), which supports instant payments settled in central bank money across Europe. New initiatives have been launched to improve cross-border and multi-currency payments within the EU and expand access for non-bank payment service providers, further supporting the availability and reach of instant A2A payments. The ECB is also exploring settlement of wholesale distributed ledger technology (DLT) transactions, which could add to the efficiency of A2A payment infrastructure.
Advances in AI are helping improve fraud detection and authentication in digital payments, indirectly supporting the scalability and security of A2A payments. The rise of digital identities and biometrics also simplifies customer authentication, making A2A payments more user-friendly and secure.
By 2025, significant progress is expected in the adoption and integration of A2A payments across Europe. The European Payments Initiative (EPI) is set to launch in 2024 with Wero, a digital payment system for direct account-to-account transfers. The use of A2A payments is currently relatively low at 16.8% in euros, but is predicted to grow up to 20% market share in e-commerce for Western Europe by 2027.
A2A payments strengthen Europe's digital sovereignty by decoupling payments from international card companies that control almost 90% of the market for cross-border transactions. The future of European payments lies in Open Banking, offering an opportunity for strategic independence in Europe, technologically, politically, and economically. With the upcoming merger with the Italian open-finance player Fabrick, finAPI will become a pan-European provider of open-banking infrastructure, offering APIs for payment and account data services to over 400 customers in Europe, including banks, ERP providers, and e-commerce platforms.
The European Commission, in an effort to address gaps in open-banking services, has set minimum requirements for API interfaces and better data protection with PSD3 and the Payment Services Regulation (PSR), aiming to establish fairer oversight of service providers and enable companies like finAPI to provide account information and payment initiation services of which finance and technology are key components.
The European Payments Initiative (EPI), set to launch in 2024, is expected to strengthen Europe's digital sovereignty by providing a digital payment system for direct account-to-account transfers, which could potentially decouple payments from international card companies in the business technology sector.
