European Banks and European Payment Systems, 1978-1992

With the rise of credit cards and the progress of European integration in the 1980s, payment systems became a central discussion area among European banks, which felt threatened by the competition from American players such as Visa and from non-banks. The European Commission also wanted increased integration in the area, while banks saw cooperation as a way to avoid regulations. Banks from different European countries were involved in different payment systems and wanted to preserve their competitive position. However, they were also eager to facilitate cross-border payments in order to keep their clientele. Therefore, cooperation between competing systems often seemed the only option. Through the archives of several British and French banks and the records of business associations such as the British Bankers’ Association, the European Banking Federation, and the European Council for Payment Systems, this paper explores the reaction of European banks to these challenges and their exchanges with the European Commission on the topic, from the late 1970s to the early 1990s. It shows that political, economic and technical questions were closely intertwined. While historians have studied the subject of payment systems and credit cards in the US, there still are few historical studies on the European case. Starting with the creation of the European Council for Payment Systems in 1978 and ending in 1992 with the Maastricht treaty, the paper will mostly focus on retail payment systems as opposed to large value systems.

In the European context of the 1970s and 1980s, cross-border payment systems largely centred on interoperability between national payment systems and on credit cards. Credit­ card business represented a tiny fraction of bank revenues in Europe, but the stakes were bigger than this: increased competition diminished profits, and, most importantly, European banks wanted to retain control over more lucrative retail accounts. Indeed, American banks’ long-term strategy was to use this entry to offer a full range of financial services in Europe. Several defensive moves occurred at the national level in Europe, but the bigger strategy was to develop a Europe-wide payment system to keep the Americans at bay and their margins low.

The European Council for Payment Systems regularly met from the late 1970s. It was profoundly divided: Barclays, for instance, was close to Visa, whereas German banks were particularly opposed to it. Its main work in the mid-1980s centred around increasing the reciprocal delivery of agreed services, and increasing cooperation between Eurocheque and Eurocard, starting with a common data communication infrastructure. Despite rivalries, major banks were pushing for unity, because linking up electronic terminals across borders would give European banks leverage to force Visa and MasterCard to charge lower interest rates or fees.

The EEC Commission promoted compatibility and cooperation, but also competition. Indeed, it was opposed to the idea of having only one system like Eurocheque. In September 1986, the Commission issued a paper entitled: “Payment cards. Possible Community Action,” which tackled issues of new technologies and transnational dimensions. By 1987, the European Council for Payment Systems started to express a Payments Industry response to the E.E.C.

Combining these various dimensions, the paper aims at contextualising the economic and political stakes of cross-border payments systems at the regional level in the 1970s and 1980s, through the case of the European Community. It contributes both to the scholarship on payment systems and on business and European integration, as well as to the literature on credit cards and the evolving relationship to money.

Alexis Drach is assistant professor in modern economic history at Paris 8 Vincennes-Saint Denis University. He holds a PhD in history from the European University Institute in Florence, and has been Research Associate in international economic history at Glasgow University and Research Fellow at the European University Institute in Florence. His interests lie in the history of banking regulation and supervision, banks’ internationalisation, European integration, globalisation, and expertise. He has co-edited, with Youssef Cassis, the book Financial Deregulation: A Historical Perspective, published with Oxford University Press. His first monograph, Liberté surveillée: supervision bancaire et globalisation financière au Comité de Bâle, 1974-1988, appeared in February 2022 with Presses Universitaires de Rennes. He has published articles in journals such as Enterprise & Society, Business History, Financial History Review, or the European Review of History. He is currently working on European banks and European integration since the 1950s.