The next phase of Europe’s payments sovereignty

The arrival of Europe’s first credible alternative to cards reinforces payments sovereignty amid geopolitical uncertainty, writes Shane Garahy

Europe’s payments landscape has reached a structural inflection point.

For the first time, account‑to‑account (A2A) payments represent a credible alternative to cards for everyday retail and e‑commerce use. This shift is driven by the convergence of mandatory instant payments, strengthened open banking and interoperable A2A wallet models.

Payments sovereignty has moved decisively from a theoretical concern to a strategic priority. Europe is reassessing its reliance on non‑European card schemes, technology providers and infrastructure amid heightened geopolitical and operational risks.

In response, regulatory reform, public‑sector positioning and market initiatives are converging around European‑controlled payment rails designed to reduce dependency, strengthen resilience and support long‑term autonomy.

A2A payments

A2A payments sit at the centre of this transition.

Mandatory SEPA Instant Payments have established a pan‑European, always‑on settlement layer, while the Third Payment Services Directive (PSD3) and the new Payment Services Regulation materially strengthen open banking and pay‑by‑account models.

Together, these reforms elevate A2A from a niche transfer mechanism to a viable foundation for everyday payments at scale.

Market adoption is accelerating. High‑profile merchant launches, including pay‑by‑bank at checkout, demonstrate that A2A is no longer experimental.

Overlay services such as wallets and identifier‑based payments are abstracting complexity from underlying bank rails, delivering consumer‑grade experiences that increasingly rival cards.

Ireland’s launch of Zippay illustrates how bank‑led models can reassert relevance by embedding frictionless A2A payments directly into existing digital channels.

Interoperable payments

Interoperability is the critical enabler of European scale. The February 2026 Memorandum of Understanding between Bancomat, Bizum, SIBS (MB Way), Vipps MobilePay and the European Payments Initiative (Wero) marks a major inflection point, through the joining up of established domestic schemes.

Cards will remain an important part of Europe’s payments mix. However, the structural foundations of everyday payments are shifting. Banks, PSPs, merchants and platforms must now reassess their strategies for a future in which interoperable, account‑based payments operate alongside cards as a core pillar of European commerce.

Those that adapt early will shape the next decade of Europe’s payments ecosystem.

Cards dominate in Europe, but a shift is happening

Europe is entering a decisive phase in the evolution of its payments ecosystem.

After decades of card scheme dominance, regulatory reform, sovereign-first policy thinking and rapid merchant adoption are converging to create the first credible, scalable alternative: interoperable, A2A payments.

Despite this shift, everyday payments at the point of sale (POS) and in e-commerce checkout remain dominated by card-based transactions.

In February 2026, the Banking & Payments Federation of Ireland (BPFI) published its quarterly Payments Monitor Report, highlighting that over 1.6 billion contactless POS transactions were made in 2025. These transactions had a total value of more than €30 billion, with contactless accounting for almost 90 percent of all POS card payments.

These card-based payments operate across a complex ecosystem of gateways, acquirers, issuing banks, processors, big tech companies and other third parties associated with the card schemes.

While card and payment infrastructures will continue to coexist, the emergence of interoperable A2A models is beginning to erode the structural advantages that have historically reinforced card dominance.

Implications for banks, payment service providers (PSPs) and market participants

The fundamental building blocks of payments are shifting at an unprecedented pace. Regulatory change, instant payments infrastructure, wallet interoperability and A2A capabilities are reshaping how consumers and businesses pay and get paid, both domestically and across borders.

Over the next five years, cards will remain important, but they will increasingly coexist with new rails and experiences that challenge long-established economics, operating models and customer journeys.

As a result, banks, PSPs and merchants must reassess what their payment strategies need to look like over the medium term. This is no longer about incremental optimisation of card-based models. Organisations must ensure they are positioned to support always-on, interoperable and increasingly account-based payments at scale.

What banks and merchants need to start doing now

Banks and PSPs

• Reassess everyday payment strategies to ensure account-to-account and wallet-based payments are embedded alongside cards within core customer journeys.
• Assess the readiness of instant payments infrastructure and cross-border operating models for always-on, cross-scheme scale.
• Strengthen governance, fraud, liability and anti-money laundering frameworks to support real-time, cross-border account-to-account payments.
• Evaluate long-term reliance on non-European card schemes and wallet providers as part of broader payments and digital sovereignty strategies.

Merchants

• Review checkout and point-of-sale strategies to support pay-by-account and local wallet payments alongside cards.
• Engage early with acquiring banks and PSPs to enable cross-border acceptance of account-to-account payment methods.
• Assess potential cost, settlement and cash-flow benefits, particularly for cross-border, e-commerce and tourist-heavy use cases.
• Factor pay-by-account and wallet interoperability into longer-term channel, geographic expansion and platform strategies, supporting simpler access to European customers through familiar local payment methods.

Europe’s first credible alternative to cards

Payment cards will remain a critical part of Europe’s payments ecosystem. However, for arguably the first time in over fifty years, Europe now has a commercially viable, genuine alternative for everyday payment that is capable of operating at scale.

The firms that adapt fastest to an A2A-centric, interoperable environment will shape the next decade of European payments.

Shane Garahy is Risk Consulting Partner at KPMG Ireland