President Trump’s New Tariffs Will Push More Central Banks Toward Domestic Payment Schemes

President Trump’s new tariffs, which were due to go into effect on April 9, but have since been given a 90-day freeze, have already influenced the stock price of companies active in the transaction side of the payments market. With Visa, Mastercard, and the potential new owners of Discover, Capital One, seeing a 6%, 6.1%, and 13% respective drop in value within the first week of the announcement, until the tariffs were frozen on April 9.

Two weeks later, these companies have yet to see their stock prices return to pre-tariff levels, with the added uncertainty of whether or not the tariffs will go into effect, the current market environment presents the ideal scenario for more domestic payment schemes to develop.

These tariffs have already had a real-world effect when it comes to the development of payment networks. When speaking on The Pat Kenny Show on the April 5, the head of the European Central Bank (ECB), President Christine Lagarde, asked for a “payments revolution.” She further said “Visa, MasterCard, PayPal and Alipay are all controlled by American or Chinese companies,” arguing that “we should make sure there is a European offer.”

In the European Union (EU), there are already several countries that have diversified payment network landscapes that are not dominated by Visa or Mastercard. Two prominent examples include France’s Le Groupement des Cartes Bancaires (GIE CB) and Belgium’s Bancontact.

Although organizations like GIE have a heavy market share with a 95% penetration rate in France, they are still not wholly independent with the scheme being a joint enterprise between the main French banks and Mastercard. What the EU central bank is now looking for is the creation of an EU Europay, Mastercard, Visa (EMV) license to be used by the likes of GIE CB and Bancontact to replace the American-dominated EMV license market.

As outlined in an ABI Research report, How the Local Payment Systems Market Is Becoming More Diversified (AN-6336), there are four key points that are considered critical for a domestic payment scheme to succeed. For any potential EU card scheme to work, it would need to follow along these lines:

• The card scheme must receive clear support from local governments; for the EU, this is certainly possible with the EU central bank making soft suggestions for an EU payment scheme over the last few months, and the latest statement from ECB President Lagarde showing its clear support for a Europe-wide scheme.
• The scheme must have a strong regional card manufacturing industry inside the EU. This is achievable with market-leading card manufacturing companies like Giesecke+Devrient (G+D), Thales, and IDEMIA providing a strong backbone for a potential EU scheme. The biggest issue for the EU to overcome is procuring an alternative EMV license to the one with Visa, Mastercard, and Discover. An EMV license will have to be developed in-house either by the EU central bank or by another EU banking institution.
• To be able to compete successfully, the scheme must have the support of European banks. While this was already a possibility before the U.S. tariffs announcement, its implementation will incentivize local banks to move away from the increasingly economically isolationist United States.
• Lastly the scheme must have the support of the European public. While this might have been a hard sell before President Trump, today’s anti-EU sentiment expressed by the U.S. administration is driving the response of an anti-American stance and, in turn, more support for pan-Europeanism. This flip of public perception provides an opportunity to develop and deploy an EU payment scheme.

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