Digital wallets, open banking, and instant payments are reshaping competition as banks fight to retain customer ownership and engagement.
Consumer payments across Europe and the United Kingdom are entering a new phase of competition. While cards remain firmly embedded in everyday commerce, digital wallets, instant payments, and open banking are reshaping how consumers interact with financial institutions and how payments are embedded into broader digital experiences.
For years, the payments industry focused on digitising existing payment methods. Today, the competitive battleground is shifting toward customer ownership, ecosystem integration, and top-of-wallet positioning. The institutions best placed to compete will be those that combine payment functionality with seamless digital engagement.
Credit cards continue to hold their position
Despite growing attention to alternative payment methods, credit cards remain a significant part of the European payments market. Data published by the European Central Bank (ECB), UK Finance, and national central banks continues to show growth in electronic card payments, payment transactions, and contactless usage across Europe and the UK.
The continued shift from paper-based payments to digital alternatives, combined with broader merchant acceptance and digital-first banking experiences, continues to support card usage. At the same time, issuers are competing more aggressively around rewards, customer experience, and premium engagement.
Across the market, card providers continue to expand propositions through travel rewards, dining benefits, subscription credits, wallet integration, and digital servicing capabilities. Increasingly, cards are no longer positioned solely as payment products but as part of broader customer ecosystems designed to drive engagement and retention.
This evolution matters because payment providers are facing growing pressure from digital-native competitors. Embedded finance, buy now, pay later services, and account-to-account payment functionality are creating new alternatives for consumers at both the point of sale and within e-commerce journeys.
As a result, issuers are increasingly focused on maintaining top-of-wallet positioning through personalised rewards, integrated digital experiences, and ongoing customer engagement supported by transaction data and analytics.
Regulation and open banking are reshaping competition
Regulatory developments continue to influence the European payments landscape. Organisations including the European Commission, European Central Bank, Financial Conduct Authority, and UK Payment Systems Regulator continue to address interchange regulation, payment competition, consumer protection standards, open banking implementation, and instant payment frameworks.
At the same time, open banking and real-time payments are steadily expanding the range of non-card payment options available to consumers and merchants. While cards continue to dominate many payment environments, account-to-account payment functionality is becoming increasingly important within e-commerce, bill payments, and digital wallet experiences.
This creates both pressure and opportunity for financial institutions. The challenge is no longer simply enabling payments but remaining central to the customer relationship as payment journeys become more fragmented across wallets, platforms, merchants, and fintech ecosystems.
Digital wallets are becoming the consumer interface for payments
Digital wallets continue to represent one of the most significant shifts in the European payments market. According to the ECB, card payments accounted for 56% of all non-cash payments in the euro area in 2024, while UK Finance reported that 94% of eligible in-store card transactions in the UK were contactless.
At the same time, digital wallet adoption continues to accelerate across online and in-store commerce. Worldpay’s Global Payments Report identified digital wallets as the leading e-commerce payment method across several European markets, including the United Kingdom, Germany, and the Netherlands.
Unlike the U.S. market, where peer-to-peer applications and merchant wallets play a larger role, the European and UK markets remain more concentrated around mobile operating system wallets, online checkout wallets, and open banking-enabled payment functionality.
The market now spans a broad mix of providers, including Apple Pay, Google Pay, and Samsung Pay for mobile contactless payments; PayPal, Klarna, and Click to Pay for online checkout; and account-to-account solutions such as Trustly, Wero, and Pay by Bank. Financial super-apps, including Revolut and Curve, are also continuing to expand their role within the broader digital payments ecosystem.
The growth of digital wallets reflects wider changes in consumer behaviour. Younger consumers, particularly Generation Z and millennials, continue to demonstrate higher wallet adoption and a stronger preference for mobile-first payment experiences. Convenience, speed, tokenisation, and smartphone integration continue to drive usage across both physical and digital commerce.
What the industry needs to consider next
The future of payments in Europe is unlikely to be defined by one payment method replacing another. Instead, the market is moving toward increasingly integrated payment ecosystems where cards, wallets, instant payments, and open banking functionality coexist within broader digital experiences.
For financial institutions, this means the strategic focus can no longer sit solely on issuing cards or enabling payments. The more important question is who owns the customer interface and how institutions remain relevant within increasingly digital payment journeys.
Digital wallets are becoming more than payment tools. They are increasingly acting as gateways to commerce, identity, loyalty, rewards, and financial services. As instant payments and account-to-account functionality continue to expand, institutions that fail to prioritise digital engagement risk losing visibility within the customer relationship.
The next stage of competition in payments will not be determined solely by transaction volume, but by which organisations can create the most seamless, trusted, and integrated consumer payment experiences.
