The US financial mafia takes over Germany

The US financial group Mastercard is discontinuing its product "Maestro" next year – the explosive nature of this news is unlikely to be aware of the vast majority of readers. Behind the scenes, the US financial giants Mastercard and Visa have been blowing the whistle for some time on the cashless payment systems that still exist largely independently in Europe and especially in Germany. That is likely to change soon and the consequences would be devastating. In just a few years, the US financial system could levy a kind of "second sales tax" on every cashless purchase and would also have power over the associated data. If the EU wants to become digitally sovereign, now is the time to take action. Tomorrow might be too late.

The finance mafia want our Money

We all use our cash cards. To withdraw cash at the machine and often also to pay at home and abroad. As a rule, we are not interested in how it is settled behind the scenes. This is understandable, since the financial connections are quite complex. In order to understand the explosive nature of the topic, however, a small introduction to the topic is inevitable.

Although the widely used debit card in question is often still colloquially referred to as a Eurocheque card, Eurocheque cards have not existed for almost 20 years. The term "EC" is now protected by trademark law and belongs to the financial group Mastercard. Its services are also implemented on most debit cards, but hardly play a role in Germany itself. Our "debit card" is a so-called debit card - in simple terms, this means that when paying, not like a real credit card, a loan is granted and money is drawn on the side, but that when used in a shop, an electronic direct debit is made from the buyer's account to the seller's account. The service providers in the area only ensure that the validity of the card and the coverage of the associated account is checked and the direct debit is then posted. In Germany, this is usually done with the debit cards of the German banks via the Girocard system. The ATM uses the Electronic Cash system, which also abbreviates EC, but has nothing to do with the identical brand of Mastercard.

Electronic Cash and Girocard are products operated by a merger of German banks. The Girocard system is the undisputed market leader in Germany and is used for almost all payment transactions. This procedure has many advantages - the fees are low, the acceptance in the country is great, and the data does not flow to the USA. A disadvantage is that the Girocard system was developed for stationary use and therefore cannot be used in online trading in its current form. But since this system is a purely German billing system, it has another serious disadvantage: pure Girocard cards cannot be used abroad. Therefore, the issuing banks have donated almost all debit cards an additional function of the two financial giants Mastercard and Visa - and the names Maestro (Mastercard) and v-pay (Visa) and are actually only recognizable to the customer by the corresponding symbols on the card. Maestro is implemented on most cards of the Savings Banks, while the Volksbanken mostly rely on v-pay. However, these two functions are rarely used domestically. However, if you use your debit card at a vending machine or in a shop abroad, the billing is handled automatically via one of these two systems. Sometimes the banks or shops charge fees for this, but often these fees are simply already applied to the prices, so that in the end they cross-finance all customers, no matter how they pay.

And these fees are not small. Depending on the condition, the business operator incurs between 0.3% and 3.0%. This means that if you pay 100 euros, between 30 cents and three euros in fees will flow to the financial sector. This is extremely much, the pure transfer costs the service provider only one to two cents. However, this is even cheaper compared to other settlement methods. If you do not pay with Maestro or v-pay, but with the "big" products of these financial groups, i.e. the Mastercard or the Visa card, between 0.8% and 5.0% of the price will be charged as fees. Both the Mastercard and the Visa card are available as debit cards, where the direct debit is made promptly, as well as "real" credit cards, where technically the customer is granted a "revolving credit", which must be repaid on an agreed date. Especially the latter, the financial corporations can pay royally. From an economic point of view, it is therefore understandable that customers should be driven by the "inexpensive" debit into expensive credit products and it is even more understandable that the European market is aiming to push even cheaper products such as the German Girocard out of the market.

With this in mind, Maestro's attitude is strategically smart. It is assumed in professional circles that Visa will also follow this step and will also discontinue its v-pay soon. If German banks can no longer offer these two products, this will have concrete consequences for customers. In order to ensure the usability of the debit card abroad, the German banks would have to implement either the debit card functionality of Mastercard or Visa in parallel to the Girocard functionality - but this is technically very complex and not really desired by Mastercard and Visa. The more likely alternative would be to no longer issue the EC cards as a Girocard, but completely as a debit card from Mastercard or Visa. Some direct banks that have received special conditions from Mastercard have already gone this way.

Once Mastercard and Visa have supplanted the Girocard as monopolists, not only does part of the turnover flow to the USA as a kind of "second sales tax" for each individual transaction, but they also have the market power to reorganize their fees and enforce conditions that only monopolists can enforce. Germany and ultimately the entire EU would then be completely dependent on two US companies for cashless payment by card. Mastercard and Visa would then also have a dominant monopoly in this sector and could enforce their rules without the EU being able to seriously do anything about it. Or does the EU Commission want to explain to its citizens that they will no longer be able to pay with their debit cards from tomorrow?

These rules also apply to data protection. All transaction data would then flow to the US and all EU data protection would be a blunt sword. Both Mastercard and Visa are U.S. companies that follow U.S. policy. What this means in concrete terms could be observed, for example, in the US fight against Wikileaks and Julian Assange – at that time Visa had simply cut Wikileaks off from payment transactions on instructions from the US government.

When Ursula von der Leyen talks about Europe, she repeatedly outlines the "digital sovereignty" of Europe as one of her core projects. Not becoming totally dependent on two US financial groups for cashless payments is a prime example of digital sovereignty. But there is no master plan in Brussels to avert the threat of Mastercard and Visa taking over the entire sector.

It is not that this problem is ignored in Europe. Only last summer, 16 major European banks founded the "European Payments Initiative" (EPI), a project that is to be set up directly as a European competition to the debit card systems of Mastercard and Visa. This project is also supported by the ECB and the European Commission. However, it is currently only a plan that is far from being implemented in concrete terms. With this in mind, the timing of Maestro's hiring is not surprising. Mastercard is betting that EPI will not have developed and implemented a competitive system by the time Maestro expires. Then the banks would hardly have a reasonable alternative to the debit card of Mastercard or the competing product of Visa.

The clock is ticking and without a major European effort, time is playing into the hands of the US financial giants. The EU should now give EPI the highest priority and implement it with concentrated energy and power. Unfortunately, this cannot be assumed. The whole issue is a shadowy one and even at the national level there is apparently not even the necessary awareness of the problem.

It must be mentioned that EPI is also a realistically feasible, but anything but desirable development. It would be the lesser of two evils. The advantages would be that the money and the data would remain in Europe and European laws would form the framework. However, the fact that the financial sector levies a "second sales tax" and withholds its "tithe" for each transaction also remains the case with EPI – only that the EU banks are allowed to cash in here and not the US banks.

In fact, the ECB is already developing a settlement system that could, at least in theory, be a real revolution. The TARGET Instant Payment Settlement (TIPS) is an interface through which a "real" transfer can be made within a maximum of five seconds. And this at a transaction fee of 0.2 cents per transfer. If you were to implement this function in a debit card, you could transfer the due amount to the provider's account throughout the EU as a customer at the counter (or online) in real time with a card. There is no credit risk, service providers such as Visa or Mastercard are simply no longer needed. Theoretically, it does not even need the banks, as a TIPS transaction could also be processed via a smartphone app. However, one does not need much imagination to realize that these advantages are rather disadvantages for the financial sector. Therefore, this revolution will probably fail.