Thursday, June 07, 2007

The 'Project Turquoise' of payments

Lafferty Group has an interesting news story on its web site about European banks being in "secret discussions" to set up a pan-European debit card scheme to rival Visa's and MasterCard's.

According to the report on Lafferty, the banks involved in the discussions are Societe Generale, Deutsche Bank, Dresdner Bank, Commerzbank, ABN AMRO, ING and Rabobank. The report states that they are "unhappy" with the likelihood that MasterCard's Maestro may become the dominant provider of debit card network services in Europe.

The European Commission and the European Central Bank have also expressed concerns about competition in the debit cards space in Europe. The Lafferty report says discussions amongst the banks are in the formative stages and that they are considering leveraging the work already done by the Euro Alliance of Payment Schemes, which has established bilateral links between domestic card processors.

There has been a lot of activity on the card processing side in preparation for the Single Euro Payment Area, with Voca joining forces with Link to give it card processing capabilities so it can compete more effectively with the likes of Equens in the Netherlands. US-based First Data is also looking to become a leading global card processor and has made a number of European acquisitions in the last 12 to 18 months.

Italy's SIA-SSB, the result of a merger between Società Interbancaria per l’Automazione – Cedborsa S.p.A. and Società per I Servizi Bancari – SSB S.p.A., is also a leading European debit and credit card processor with 48 million payment cards issued and more than three billion transactions managed in 2006. It also recently acquired Hungarian card processor, GBC.

The Lafferty Report says that "there are contrasting opinions" on the level of progress achieved by the banks holding the secret discussions, which suggests that not much progress has been achieved at all. This is not the first time that banks have considered setting up a rival debit card scheme, but previously there was not enough support from the banks to do anything.

What is different this time? Well SEPA is in the air, anything is possible, but banks in the payments space have not been as fleet of foot as their investment bank counterparts when it comes to setting up rival market schemes and infrastructures.

We have seen Project Turquoise, a multi-lateral trading facility set up by seven leading investment banks to rival the domestic exchanges in response to regulatory pressures from MiFID. Are we likely to see the 'Project Turquoise' of the debit card world being announced by leading European payment banks any time soon? It seems unlikely.

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