Europe’s payment sovereignty problem is not what we think

Europe has decided that payment sovereignty matters. It is right to. But the debate has not fixed on the true target. The argument that Europe is dangerously dependent on two American card schemes has become the headline case for the digital euro, and it mistakes the visible part of the system for the vulnerable one. The real exposure is not the card in your pocket. It is the currency behind it.

Payments sovereignty is not primarily about plastic cards. It is about currency power, legal jurisdiction, and the financial infrastructures that governs how money moves globally. Europe’s true payment vulnerability lies in the dominance of the US dollar and the extraterritorial reach of US law over global financial markets.

European banks are deeply embedded in dollar-denominated markets - for trade finance, energy markets, capital markets, correspondent banking, and clearing. The euro’s share of international currency use is close to 20 %, yet a significant share of large cross-border transactions, even between non-US parties, still transits the dollar system. That exposure subjects European institutions to US sanctions regimes, anti-money laundering rules and extraterritorial legislation, regardless of European political positions. The fines imposed on European banks over the past decade illustrate this imbalance clearly.

The logic is stark. Dollar dominance means European banks and companies must in practice comply with US sanctions even when European governments disagree with their scope. The choice is simple: comply or lose access to dollar clearing and global markets. Card schemes sit at the edge of this system; they are not at its core. Even if the international payments schemes were European-owned, European institutions would still have to apply US sanctions, because the exposure runs through currency, not the card.

The 'kill switch' fear misses the point

A recurring argument is that the United States could one day switch off American payment networks in Europe. That is hypothetical, and it is unlikely.

There is no precedent for US authorities threatening to cut Visa or Mastercard services in allied economies; doing so would harm US commercial interests, disrupt global trade and undermine trust in American-based infrastructure far beyond Europe.

And if tensions ever ran high enough to make this risk real, the transatlantic relationship would have deteriorated so badly that payments would become the least of Europe’s concerns. The fear is aimed at the wrong risk.

A payments landscape far more diverse than the narrative suggests

None of this means the card debate is baseless, only that it is overstated. Card payments are one part of a diverse European system that also runs on credit transfers, direct debits, instant payments, cash and emerging account to account solutions, and digital currency solutions. When all electronic payments are counted, the share of international card schemes falls to a third of all non-cash transactions at EU level, and much less in large markets like France and Germany.

In France, the domestic scheme Cartes Bancaires handles around four fifths card transactions, often co-badged with international networks for cross-border acceptance. In Germany, girocard plays a similarly dominant domestic role, complemented by account-to-account and instant payments.

These are two of Europe’s largest economies, among nine markets running a national card scheme - hardly the picture of total dependence the narrative implies. That said, many Member States have no domestic scheme and rely, to varying degrees, on non-European providers - and in the card segment specifically, a majority of domestic transactions at European level currently run through international schemes. Ironically, those non EU schemes remain the only truly pan European providers.

The concern was never really about the card companies. It is that their home government is no longer seen as a wholly reliable partner - that Washington might use dependencies to exert pressure for unrelated ends. Yet since the 1950s the international card schemes have operated under European law, processed millions of European transactions within Europe, and served local consumers, businesses and governments uninterrupted through decades of political tension.

A legitimate concern, correctly aimed

The underlying worry is legitimate. Payments are critical infrastructure: they generate growth, underpin daily life, and carry the resilience of states in times of crisis. Recent history proves it - the disconnection of Russian banks from international payment systems, the sanctions imposed through financial institutions, the Cuban embargo, the extraterritorial targeting of European officials.

Payments can be leveraged for geopolitical pressure. Questioning Europe's dependencies is not ideological; it is prudent. The task is to aim that prudence at the real dependency.

Pursuing sovereignty does not mean isolation. Europe will continue to depend on global payment solutions for cross border trade and travel, and initiatives like Wero or the digital euro - promising, but not yet fully operational - would not remove the need for international schemes to cover payments outside the euro area.

The presence of international payment firms strengthens the market, competition and innovation. It is a gateway for Europe's citizens and companies to the global transaction space. A sustainable path is a multilayered ecosystem where national, European and international solutions coexist without fragmentation.

Real sovereignty means strengthening the euro

Replacing one payment brand with another changes none of this. It would not change how liquidity is sourced, how transactions are settled, or which legal system prevails in a dispute. Sovereignty cannot be launched as a product; it requires structural change. If Europe wants real payments autonomy, it must increase the international role of the euro. The digitisation of finance offers three promising avenues.

First, a wholesale digital euro could strengthen euro-denominated settlement between banks, market infrastructures, and large institutions globally. Unlike retail initiatives, wholesale solutions bear directly on capital markets, cross-border transactions, and systemic dependence on dollar-based rails.

The ECB's current project is an opportunity to prioritize it. Second, a digital euro for business-to-business use as a token for DLT settlement: smart contracts and industrial applications need reliable payment rails, and a European central bank digital currency would be a globally attractive alternative to US dominated stablecoins.

Third, euro-denominated digital finance infrastructures more broadly – the Franco-German work on digital finance cooperation points the right way: strengthening euro-based digital finance instruments, improving market integration, and supporting innovation without fragmenting the single market.

Time for a strategic debate about global money and finance

Europe’s exposure stems not from the origin of its payment schemes but from the interdependence of global financial markets and the dollar’s central role within them. Autonomy comes from currency relevance, settlement capacity, legal jurisdiction, and industrial scale - not from reducing domestic card use, which would barely move the problem.

Payment sovereignty will be won by reinforcing Europe's monetary power. The euro already exists. The question is whether Europe is willing to use it strategically.

Prof. Dr. Joachim Wuermeling was a member of the Executive Board of the Deutsche Bundesbank from 2016 to 2023. The former State Secretary and politician from the Christian Social Union (CSU) had also held various senior positions in the finance and insurance sectors.