The CEO of TrueLayer, a UK tech firm supported by Stripe, Francesco Simoneschi, has cautioned about the dangers of Europe’s heavy dependence on American payment systems. This concern has surfaced with the rising probability of a Trump administration, which could introduce uncertainties in the robustness of these crucial structures.
Simoneschi, while speaking with the Financial Times, emphasised that enhancing the strength of European payment systems is increasingly critical, especially in view of the approaching US presidential election. He conveyed his apprehension that this election could possibly lead to a significant deviation from the thriving integration that had developed between the US and the UK/Europe over the last five decades. Simoneschi pointed out that a large proportion of European and UK payments are reliant on American companies, thereby making this vital infrastructure vulnerable internationally if targeted.
His statement is resonated by the increased necessity for independence, as highlighted by the widespread IT disruption in July caused by tech firm CrowdStrike. This incident underscored the inherent risk of heavy dependence on a single technology.
Simoneschi’s views were expressed at a time of increased regulatory scrutiny on competition in the UK’s payment market. Visa and Mastercard’s fee structure is currently under investigation by the Payment Systems Regulator, given they own a dominant 95% of all credit and debit card transactions in the UK. Notably, Vocalink, which controls the country’s faster payments scheme processing bank transfers, is also owned by Mastercard.
TrueLayer, recently evaluated at over $1 billion (or €904 million) in a 2021 fundraising event steered by Tiger Global, has broadcasted a series of collaborations for its “pay by bank” solution. This innovative service lets customers make online transactions bypassing Visa and Mastercard networks.
Supporters of bank-specific payment methods claim that this technology could revolutionise e-commerce by letting customers shop without having to manually input their card information. They argue that it could also provide a more cost-effective solution for merchants, as an alternative to Visa and Mastercard which have been hiking up their fees.
Simoneschi stated that Europe has acknowledged the critical need for establishing its own, independent payment methods, one example being the pan-European card scheme known as the European Payments Initiative. It’s a banking solution endorsed by various banks and facilitates bank transfers as well as digital wallet transactions.
Open banking, mandatory by UK competition authorities since 2017, was seen as a game-changer for UK’s fintech sector. But, it has failed to attain widespread acceptance and hasn’t managed to disrupt the dominance of Visa and Mastercard.
Copyright The Financial Times Limited 2024