Building a commercially viable European payments model

A transformation agenda for generating revenues and reducing complexity

Executive summary

Payments globally are moving toward a cashless future. There is immense potential for scalable, pan-European innovation in digital payments, helping improve the lives of the region’s citizens on many levels.

Yet although Europe is a leader in payment standards and customer privacy, its ability to grasp this future is being held back by a fragmented payments landscape, structural impediments that limit revenue-generation potential for banks, a focus on data privacy, and insufficient industry innovation.

The opportunities for financial-services firms have been clear since at least 2018, but European banks and payment providers have not yet taken advantage of them. We have three key recommendations:

  1. Innovate on a European scale. Make customers, not infrastructure, the focus: Invest more in convenience and user experience, as compared with the historical emphasis on costs, standards, and security.
  2. Empower users. Give users more control over payment methods, while educating and enabling them to reap the benefits of sharing their own data.
  3. Rationalize Europe’s payment infrastructure. Simplify and upgrade Europe’s payments backbone for instant payments.

In following these recommendations, European financial-services firms must act now, in a collaborative, cross-border way. It is risky to postpone taking action; it could make individual banks fall further behind, making them more vulnerable to upstart competitors. But if they can rapidly develop and execute a strategy for noncash payments, the European FS sector can capture the potential benefits of innovation and generate enough revenue to thrive.

Download infographic (PDF, 1.0 MB)

Infographic: Building a commercially viable European payments model


Our proposals for an innovative European payments model would benefit consumers, banks and payment companies, and merchants in the following ways: 

  • Consumers would enjoy more convenient noncash payment methods with enhanced functionality. New technologies would give them greater control over their personal finances. Users would have greater power to decide whether to share their data in return for rewards and benefits.
  • Banks and payment companies would increase their volume of revenue-bearing transactions through accelerated displacement of cash, enhanced functionality, and, critically, the rationalization of Europe’s payments infrastructure. Increased profits would enable further innovations.
  • Merchants would benefit from improved payment offerings, better risk management, and greater opportunities to personalize products and services based on data. A cross-border payments model would reduce complexity for larger merchants operating in more than one European country. Merchants would also have greater flexibility if noncash payments were recognized as legal tender throughout Europe.

However, following the curbs on interchange and cross-border transaction fees, plus limits on using customer data, it is all the more important for the payments industry — including banks — to be able to foster services that leverage open banking and GDPR, Europe having taken a lead in both dimensions.

It is already clear that Europe’s fragmented payments and settlement model is not fit for purpose. Europe-wide action is urgently required before the currently disjointed payments model becomes too unprofitable or intractable to reform.

Contact us

Andreas Pratz

Andreas Pratz

Partner, Strategy& Germany

Marco Folcia

Marco Folcia

Partner, PwC Italy