Europe’s banks are dampening their ambitions to challenge large American payment groups

A European banking alliance set up to take on the US-dominated payments market has tempered its ambitions and plans to roll out a pilot scheme later this year after agreeing to buy two fintech companies.

The European Payments Initiative was originally launched by more than 30 banks and credit card processors to compete with Visa and Mastercard, but it has instead settled on a more modest start.

EPI has agreed to buy Dutch payments company Currence Ideal and Luxembourg-based app Payconiq. It will focus on launching a digital wallet and instant payment system in Germany and France by the end of the year.

It intends to roll out the offering to other European countries and add new features such as buy now, pay later financing, as well as digital identity features and merchant loyalty program integration.

Since its launch, EPI’s membership has shrunk with its shareholder base now consisting of 16 lenders, mainly based in France, Germany and the Netherlands – such as BNP Paribas, Société Générale, Deutsche Bank and ING.

The group’s ambitions have also been revised. Having originally stated its intention to “build a European payment master that can take on PayPal, Mastercard, Visa, Google and Apple”, EPI is now focused on creating an instant payment system that can transfer money between accounts in seconds across several European jurisdictions.

EPI chief executive Martina Weimert said the body’s decision to refocus on instant payments was partly a response to legislation by the European Commission last year to help speed up the delivery and use of instant payments.

The banks have also invested in this area, which is dominated by national players, but without a dominant cross-border supplier in Europe, she said.

“We see a huge potential for instant payments in Europe,” she told the Financial Times. “We have a European rulebook, but no solution.”

Weimert added that while EPI was no longer trying to set up a card payment system, instant payments were an alternative to traditional credit and debit cards.

EPI did not disclose financial terms for the acquisitions of Currence Ideal and Payconiq. But a person with knowledge of the transactions said the businesses would cost up to €70m in total.

The person added that EPI had set aside up to €20 million to cover Payconiq’s annual losses. Payconiq did not immediately respond to a request for comment.

Currence Ideal was launched in 2004 and is owned by the Dutch banks ING, ABN Amro and Rabobank. Payconiq was developed by ING, which owns it together with KBC, Rabobank and Belfius. All the owners of both fintechs are EPI shareholders.

Payconiq’s shareholders have the right to take back the business if EPI is unsuccessful in the rollout, according to two people familiar with the deal.

Additional reporting by Siddharth Venkataramakrishnan in London