Dive Brief:

• Wero, the digital payments system launched by the European Central Bank and a pack of private banks in 2024, processes less than 1% of the European Union’s payments volume, according to a report from RBC Capital Markets that contrasts that figure with card networks Visa and Mastercard processing about two-thirds of the Euro area’s card volume.
• The continent has shown an interest in dislodging the dominance of the U.S. card networks, but the banks face a bevy of headwinds in that effort, including that the Wero system supplants only debit, not credit cards and it lacks widespread interoperability with other payments systems, the RBC analysts wrote in a Sept. 28 report.
• ”The ECB has been open about its need to reduce reliance on the largest card networks, Visa and Mastercard, with a key reason being the geopolitical tensions between the current US administration and Europe, which with such reliance on US payment networks, has potential to cut European citizens off from essential payments infrastructure,” RBC analyst Daniel Perlin and his colleagues wrote.

Dive Insight:

While the European consortium backing Wero has been determined to be less reliant on Visa and Mastercard, the initiative exists mainly in France, Germany, and Belgium, according to its website, which calls Wero “proudly European.” The 14 major European banks and two large payments processors backing the effort plan to expand in coming years, reaching into more countries and adding more features.

Wero currently has about 60 million users, offering peer-to-peer payments, person-to-professional payments and e-commerce options, with some limited service in certain locations, like QR payments in Luxembourg and point-of-sale payments in Belgium, according to RBC. The plan is to roll out the payments tool in other countries and eventually add more services, including merchant loyalty programs and subscription payments, the note said.

Still, there are a number of hurdles ahead for the Wero effort. While the payments system has chargeback and dispute resolution capabilities, it lacks embedded security strengths, the RBC analysts said. In an era where artificial intelligence is super-sizing fraud threats, cybersecurity has become an important concern for payments systems. 

Another key impediment to unseating the card networks is the fact that Wero is only a debit instrument and doesn’t offer the benefits of credit cards that lets consumers borrow on the spot to make purchases. 

“We believe Visa and Mastercard retain advantages in interoperability, security, and value-added services, and the absence of a credit offering suggests Wero primarily threatens debit, not credit,” the RBC analysts concluded.

The continent also has plans to begin using a digital currency system, based on the digital Euro, as of 2029. The electronic network that such a digital currency creates could build a universal acceptance platform for Wero that catalyzes adoption of the payments system, the RBC analysts suggested.