Will JPMorgan Help Spark Pan-European Network Buildout a Decade After Monnet?

In the bid to build out a pan-European card network, will it be different this time?

More than a decade ago, the Monnet Project Association, a group of 24 European banks from seven countries, sought to launch such a network. But much hinged on agreements over interchange fees for the banks — and the European Commission had sought its own interchange fee rates.

Looking at the Fees

The great debate is raging over interchange fees. As reported here, and in one example, the U.K.’s Payment Systems Regulator (PSR), when it reviewed cross-border interchange fees on transactions between U.K. businesses and the European Economic Area (EEA), ruled that fees should be capped. The PSR recommended that there be a cap of 0.2% for consumer debit transactions between the U.K. and EEA, as well as a 0.3% cap on consumer credit transactions made online at U.K. businesses. In the U.S., the interchange fees are under the regulatory microscope for both credit and debit.

And now comes the news that JPMorgan has joined France’s Cartes Bancaires payments network — marking a leap from the states to the Continent. And the overarching goal may be to lob some competition toward Visa and Mastercard, primarily tied to the cost of processing payments there.

In a qualitative statement, JPMorgan said that in joining up with Cartes Bancaires, it will “provide competitive transaction costs.” Visa’s Intra Europe interchange fees, detailed here, show consumer-related transactions fees at about 0.3%. For commercial credit and debit transactions, the range is roughly between 1.3% to 1.8%. Mastercard’s interchange fees are in a similar range, depending on the transaction type.

Changing the Competitive Landscape?

The JPMorgan/Cartes Bancaires offering will join the existing capabilities of the bank’s EMEA Payments business, which processes over $1 trillion of payments daily and supports merchant acquiring to more than 1,500 European clients, JPMorgan said. Joining the French payments network will offer French merchants another option beyond the U.S. payments network giants.

Mastercard’s earnings showed that intra-Europe cross-border volumes were up 17% in the latest quarter. And here we see that gross dollar volumes in Europe were $761 million in the latest quarter.  Visa’s cross-border volume was up in the region the midteens percentage points to around $636 billion.

The European Central Bank reports here that “although technically feasible, a number of efforts and initiatives undertaken in the last few years to establish a European card scheme or to achieve European-wide cross-border coverage of national card schemes have so far not been successful.”

But there are other initiatives underway in Europe to compete with the established networks (Visa and Mastercard among them). That includes the European Payments Initiative, which is seeking to bring instant payment programs in France and Germany by the end of this year, via digital wallets.

As for JPMorgan, bringing its clients more firmly on board to the French payments network may spark a groundswell towards pan-European efforts that will be more marathon than sprint.