The past few years haven’t been kind to Europe’s payments startups. Faced with mounting compliance demands and rising interest rates, VC funding for the sector has collapsed from a peak of $10bn in 2021 to less than $2bn last year.
Now there’s a new competitor in town. Backed by a consortium of 14 banks under the European Payments Initiative (EPI), Wero is a digital wallet enabling consumer peer-to-peer transfers in under ten seconds.
Launched in late 2024 across France, Germany and Belgium, Wero already has 30m users enrolled, says Ludovic Francesconi, the EPI’s chief member and strategy officer, and has caught the attention of Europe’s fintech VCs and founders — Balderton’s Greta Anderson described the bank-backed project as an “existential threat” to peer-to-peer payment apps earlier this month.
But other fintech industry watchers say it will face an uphill battle to gain traction. For starters, it’ll have to sow the seeds of adoption in an environment where most European customers already have a preferred payment method. There are also questions on how a group of big banks — who themselves have had a mixed track record on fintech projects — can make Wero a success.
Speaking on condition of anonymity, one person familiar with Wero’s operations says: “If it does pan out, it could make Europe’s payments startups irrelevant.”
What is Wero?
Wero’s aims to bring a patchwork of fragmented national payment schemes like Germany’s Giropay and France’s Paylib under a single European standard, akin to similar schemes in Brazil and India.
“The first objective of EPI is to offer a unified payments solution for Europe,” says Francesconi.
To do so, Wero is leveraging open banking, a system permitting the transmission of financial data between third parties and banks that has long been expected to usher in instant bank transfers also known as account-to-account payments (A2A).
The payment method eliminates banks’ reliance on traditional payment networks like Visa and Mastercard — which typically levy interchange fees of up to 0.5% — by utilising bank-to-bank transfer networks instead.
But the project’s aims are as political as they are financial. Wero originates from a desire by European lawmakers to ensure its economy isn’t dependent on internationally-owned payment to function.
“As European players we don’t want to depend on American or Asian players regarding an activity which is very, very important in the economy,” he says.
But to truly make good on its mission to become truly pan-European, Wero will have to get banks on board in every EU member state. Banks from Italy, Spain, Poland and Finland were involved in the first iteration of the project, but later dropped out.
“Those banks were there to promote their local solution,” he says. “And in the end all the shareholders which remain now are strongly committed and engaged with us, which maybe was not the case with the Italian banks to start with.”
Making it work
Pushing a pan-European payment network also requires customers to change their payment habits, says Lea Siering, managing director at Zalando Payments and former executive at open banking startup Token.
According to a recent report on global payments by Worldpay, A2A captures 7% of global transaction volume in e-commerce compared to the 50% accounted for by digital wallets and 22% by credit cards.
“It’s very difficult to make people change the way they pay,” she says.
Competitors such as French payments app Lydia instead let customers choose their preferred method, says its CEO Cyril Chiche.
The Accel-backed peer-to-peer payments company, which has over 8m users, will this later this year roll out the ability to auto-forward transfers to any bank account across the European Union.
Chiche claims that this can be done across any payment method – ”be it open banking, be it Apple Pay or whatever is more convenient” and only the sender has to have a Lydia account.
But EPI’s Francesconi says it has an “unfair advantage” compared to such privately-backed initiatives.
Wero’s EPI backing, which counts some of Europe’s largest banks such as BNP Paribas, Deutsche Bank and ING as shareholders, means it can rely on the customer trust of Europe’s centuries-old banks.
Being bank-backed over VC-funded could also mean it isn’t as vulnerable to the current trends of the VC funding market. After the fintech funding bubble burst in 2022, VCs have pushed their portfolio companies to prioritise profitability in the downturn over the growth-at-all-costs strategy adopted prior.
Wero’s next steps
Wero is currently offered as both a standalone app and integrated within existing banking offerings. It’s also set to add merchant payments and expand to Luxembourg and the Netherlands over the next two years.
And it’s also mulling more ambitious pushes into customer loyalty, digital ID and even public transport ticketing. To do so, Francesconi says it’s open to working with startups to implement extra features. Yesterday, Wero announced a partnership with UK payments platform PPRO — but he wouldn’t characterise the app as a superapp akin to the UK’s Revolut or China’s WeChat.
“It’s not our vision to be a superapp,” he says. “What we want to do is to be a very good payment app with value-added services.”
Read the orginal article: https://sifted.eu/articles/wero-interview/
