Thanks to rapid digitalisation, increasingly sophisticated payments technology, and the explosion in e-commerce, there is a growing range of payment options that consumers expect to see at your checkout.
Whether it’s Swish in Sweden, or Przelewy24 in Poland, your customers will want to see their preferred option available, which has created a rather fragmented payments ecosystem in the European Union (EU).
But things may be beginning to change with the introduction of the pan-European digital wallet, wero, which promises the convenience consumers are looking for and also greater interoperability across the continent.
The inexorable rise of digital wallets
The most commonly used payment methods in Europe include debit cards, credit cards, digital wallets like PayPal, and bank transfers. And although debit and credit cards remain popular for everyday transactions, digital wallets are on the rise, especially when it comes to online shopping.
There are also newer options making headlines in the industry press, such as Buy Now Pay Later (BNPL) schemes and Open Banking-powered account-to-account (A2A) payments.
Whilst many naturally think of Europe as being homogenous, it still has a very fragmented payments scene. Even neighboring countries can vary significantly. In France, for example, cards are still the dominant force with Cartes Bancaires driving the growth in non-cash payments. In Germany, meanwhile, wallets (PayPal in particular) have become incredibly popular and now outrank all other payment methods.
And Germany is not alone. The prevalence of wallets has risen exponentially in recent years due to the widening footprint of smartphones, government initiatives to support a more cashless society, and consumer appetite for convenience and speed.
Recent research from Ipsos highlights this increasing mobile wallet penetration across Europe. Around three-quarters (72%) of Europeans now actively engage with mobile wallets, with the research revealing that Nordic markets (Norway, Sweden, Denmark, and Finland) and Switzerland are leading the way in adoption. In these markets, mobile wallet usage ranges from 83-94%, which is 10-15% higher than the European average.
Furthermore, mobile wallet usage now spans the generations - in 2020, Gen Z and Millennials took the lead in mobile wallet usage, but the landscape has rapidly transformed over the past few years, with the research showing that Gen X (69%) and Baby Boomers (62%) are using wallets widely.
A new age of interoperability
Whilst digital wallets have been busy capturing market share across Europe, the region’s fragmentation – where each nation has a distinct national payments champion – has been a bit of a problem.
But this is changing. In July 2024, the European Payments Initiative (EPI), which is committed to offering a sovereign payment solution to all consumers on the continent, launched the first iteration of its new digital wallet – wero – in Germany. The new wallet will also likely be available in Belgium soon, before landing in France this autumn. It’s expected to be available to all EPI bank members within the next six months.
The EPI, which was originally known as the Pan-European Payments System Initiative (PEPSI), is a unified digital payment service backed by 16 European banks and payment service providers (PSPs), including BNP Paribas, Deutsche Bank, and ING. The group claims to represent access to 75-85% of banking customers in Germany, France, and Benelux (Belgium, the Netherlands, and Luxembourg).
Wero is an A2A payments solution, meaning that transfers will go through almost immediately once they are approved. It follows the SEPA Instant Credit Transfer protocol established by the European Payments Council in 2017. Users will not hold a separate balance on their wero account, rather they can only transfer funds to and from their linked bank account. Users must therefore hold a bank account with one of the EPI shareholder subsidiaries to use the service. In a similar manner to PayPal, wero users can open their mobile app, select a payee, and then send their chosen amount with a message (and an emoji, if they wish).
While the initial use cases are focused on person-to-person (P2P) payments, by next year wero is expected to be able to support direct in-wallet payments to small businesses, online merchant payments via a QR code, and the management of recurring payments, such as subscriptions. In future, it’s likely to extend to in-store payment and BNPL capabilities.
Ultimately, wero should become more convenient for end users than existing mobile payment apps because of its interoperability with many major European banks. And whilst competitor solutions, such as Przelewy24 or Spain’s Bizum, are popular in their respective countries, they don’t offer as much flexibility as wero when it comes to cross-border payments.
And with the Bank of England expecting the value of cross-border payments to surpass $250 trillion by 2027 (representing a rise of more than $100 trillion in just 10 years) amidst growing consumer demand for goods and services, and expanding capabilities of industries in emerging markets, the pan-European functionality of wero is perhaps its greatest selling point.
At payabl., we’re keeping a close eye on wero as it’s rolled out so that we can help you to integrate it in the manner that best suits your operations.