Inside Europe’s Payments Industry: Visa, Mastercard and the Fintechs

This analysis forms part of our coverage of the European banking sector and European Business News, and is updated alongside daily reporting in the European Business Magazine newsroom.

Payments have become the most strategically important layer of Europe’s financial system. Whoever controls how money moves controls data, customer relationships and ultimately the flow of value across the economy. What once looked like a dull utility — card processing, bank transfers and settlement rails — is now one of the most fiercely contested battlegrounds in European finance.

From global card networks to fast-growing fintechs, the industry is being reshaped by technology, regulation and geopolitics.

Why payments now sit at the heart of finance

In the digital economy, every commercial interaction begins and ends with a payment. That makes the payments layer the gateway to lending, investing, advertising and data. Control it, and you gain insight into how people and companies behave in real time.

Europe processes trillions of euros in card and account-to-account payments every year. Yet until recently, much of the profit from this activity flowed to two US companies: Visa and Mastercard. Their global networks sit between merchants, banks and consumers, taking a small cut of every transaction.

That model is now under sustained attack.

Visa and Mastercard: powerful, but under pressure

Visa and Mastercard still dominate Europe’s card payments. Their networks are trusted, secure and deeply embedded in global commerce. But they are increasingly exposed to political and commercial pressure.

European regulators have capped interchange fees and are scrutinising network charges. Merchants complain about rising costs. Governments are uncomfortable with the continent’s dependence on foreign infrastructure.

As a result, policymakers are encouraging alternatives such as instant bank transfers and digital wallets that bypass the card networks altogether. That is reshaping the competitive landscape — and opening the door to fintech challengers.

Fintechs are unbundling the value chain

The biggest change in Europe’s payments industry is not happening at the network level but at the application layer. Fintechs are building wallets, gateways, fraud tools and embedded-payment systems that sit on top of bank rails and card networks.

These firms do not need to replace Visa or Mastercard to win. They just need to own the customer interface. By doing so, they capture data, build relationships and monetise transactions through software rather than infrastructure.

This shift mirrors what has happened in digital banking more broadly, as described in our coverage of how banks fuel the private credit boom, where technology platforms increasingly sit between capital and borrowers.

Instant payments change the economics

One of the most disruptive forces in European payments is the rise of instant account-to-account transfers. Instead of going through card networks, money can now move directly between bank accounts in seconds.

This is cheaper for merchants and faster for consumers. It also undermines the card-based fee model that has powered Visa and Mastercard for decades.

As adoption grows, instant payments could become the default for everyday transactions — from online shopping to paying rent — dramatically reducing the cost of moving money across Europe.

That would reshape profitability across the entire financial sector, from banks to payment processors.

Why investors are watching this sector so closely

Payments have become one of the most valuable parts of the financial ecosystem. Companies that control transaction flows generate recurring, high-margin revenue and benefit from powerful network effects.

That is why payments firms and fintechs have become a key driver of European stocks performance. Investors increasingly see them as technology businesses rather than financial utilities.

As capital flows back into European markets and dealmaking accelerates, payments companies are also at the centre of mergers, acquisitions and strategic partnerships.

Banks risk being disintermediated

For Europe’s banks, payments are both a threat and an opportunity. They still hold the accounts, but fintechs increasingly own the user experience. That puts pressure on banks’ ability to cross-sell loans, investments and insurance.

Some lenders are responding by building their own digital wallets and merchant platforms. Others are partnering with fintechs or investing in payment infrastructure to stay relevant.

The danger is that banks end up providing low-margin balance-sheet services while technology firms capture the profitable layers of the value chain.

Geopolitics is entering the payments race

Payments are no longer just a commercial issue. They are becoming a geopolitical one.

Europe’s reliance on US card networks and global cloud providers has raised concerns about sovereignty and security. In response, the EU is exploring domestic alternatives and digital-euro infrastructure designed to keep control over the continent’s financial plumbing.

This echoes the broader struggle over Europe’s economic independence explored in our analysis of who killed Europe’s single market dream.

What to watch next

Three forces will determine the future of Europe’s payments industry.

First, regulation. Fee caps, competition policy and digital-euro initiatives will reshape the economics of payments.

Second, technology. Embedded finance, real-time data and AI-driven fraud detection will determine who controls the interface between consumers and money.

Third, consolidation. As competition intensifies, the sector is likely to see a wave of acquisitions as players fight for scale and survival.

The bottom line

Payments are no longer a back-office function. They are the strategic core of Europe’s financial system. Whoever controls them will shape how money moves, how businesses grow and how power is distributed across the economy.

For ongoing coverage of how this battle is unfolding, follow European Business News and the European Business Magazine newsroom.

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