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The hegemony of Visa and Mastercard increasingly under threat

Published December 02, 2021 - 4 mins reading time
Banks Loans

The two American giants Visa and Mastercard are seeing their dominance of the payments sector increasingly challenged. From Amazon's rejection of Visa credit cards in the UK to the EPI initiative launched in 2020 by several major European banks, the hegemony of Visa and Mastercard is being called into question.

The EPI project, Amazon and Mir: challenging the hegemony of Visa and Mastercard

The European Payments Initiative (EPI) project brings together 22 European banks, who want to set up a common payment solution to counter the hegemony of American giants Visa and Mastercard.

Announced in the summer of 2020, the EPI project involves the development of a pan-European payment system, based on instant transaction technology. This solution could support all dematerialized payments, whether by mobile, card, transfer or direct debit. The EPI initiative is supported by the European Central Bank, the European Commission and several EU member states.

For the time being, Visa and Mastercard don't seem to be worried about the introduction of a pan-European payment solution, but it's part of a more general move to challenge their supremacy.

For its part, Amazon has announced that its UK customers will no longer be able to pay with Visa credit cards. The measure, which will take effect from January 19, is due to the commissions charged on payments, which Amazon considers too high.

In Russia, the Mir card payment system, launched in 2015 following European and US sanctions linked to the Ukrainian crisis, is gaining market share on the two American giants. Mir now holds 25.3% of the transaction market by value.

Visa has also made no secret of its concerns regarding the Indian government's promotion of RuPay, a local initiative.

US payment giants turn to new uses

To stay one step ahead, Visa and Mastercard are playing the innovation card. Mastercard has bought CipherTrace, a cryptocurrency analysis company, and Aiia, an open banking player.

For its part, Visa has acquired Swedish fintech Tink, one of the leaders in open banking, for 1.8 billion euros. The American giant has also bought the British company Currencycloud, which facilitates cross-border payments by enabling fintechs and banks to provide foreign exchange solutions to their customers.

At the same time, Visa is developing its Visa Direct platform, which offers real-time payment solutions for businesses.

While these innovations ensure that Visa and Mastercard don't fall behind, the two American giants still have a comfortable lead. Between January and September, Mastercard's net income of $6.3 billion was up 36% year-on-year. Sales, at $13.7 billion for the first 9 months of the year, were up 22%.

Over the same period, Visa posted net income of $12.3 billion, up 13%, and sales of $24.1 billion, up 10% on the first 9 months of 2020.