Macro FAQ

The European Payments Initiative (EPI) is a consortium of 16 major European banks that built Wero, a digital wallet operating on SEPA Instant Credit Transfer infrastructure. Payments move directly between bank accounts in under 10 seconds using a phone number, email, or QR code, bypassing card networks entirely. EPI has committed roughly €500 million in capital and expanded to over 1,100 member institutions.

The EuroPA alliance, formalized via a February 2, 2026 Memorandum of Understanding, connects EPI's Wero system with Spain's Bizum (30.6M users), Italy's Bancomat, Portugal's SIBS, and the Nordic Vipps MobilePay (12.5M users) through a hub model. This created a 130-million-user network across 13 countries overnight, covering 72% of the EU population and giving Wero the scale to force merchant adoption.

A card transaction through Visa or Mastercard can cost European merchants up to 2% when interchange, scheme fees, and processing are included. Wero's proposed merchant pricing in Germany is 0.77% plus gateway charges. That spread of roughly 100 to 120 basis points per transaction is the core infrastructure arbitrage, because account-to-account payments skip the card network intermediation layer entirely.

The 2015 IFR capped consumer debit interchange at 0.2% and credit at 0.3%. Visa and Mastercard responded by raising unregulated scheme fees by 33.9% between 2018 and 2022. The net merchant service charge nearly doubled from 0.27% to 0.44%, neutralizing the regulatory benefit. Meanwhile, the capped interchange compressed the revenue pool available to fund new payment networks, inadvertently strengthening the duopoly's competitive moat.

UPI processed 228.3 billion transactions worth $3.6 trillion in 2025. Pix reached 175 million users and $4.6 trillion in 2024. Both achieved massive scale within years of launch. However, India had low card penetration (filling a vacuum rather than displacing incumbents) and Brazil mandated participation via central bank authority. Europe has high card penetration, entrenched consumer habits, and 27 regulatory jurisdictions, making direct comparison misleading.

The digital euro is an ECB central bank digital currency project. The EU Council agreed its negotiating position in December 2025, with a Parliament vote expected H1 2026 and potential first issuance around 2029. EPI positions Wero as complementary, but both are competing bets on European payment sovereignty. Wero is the pragmatic private-sector version. The digital euro is the maximalist public-sector version. Banks funding EPI also face estimated implementation costs of €4 to 5.8 billion for the digital euro.

Consumer inertia is the primary risk. Mastercard alone has over 900 million branded cards in EU circulation versus Wero's 47 million users. Credit cards offer credit facilities, rewards, and purchase protection that Wero cannot yet match. German adoption has been notably sluggish at only 5% of transaction volume despite being the first launch country. Dutch merchants have pushed back on the shift from iDEAL's flat €0.29 fee to Wero's percentage-based pricing model.

Both companies are executing a quiet multi-rail pivot. Visa acquired European open banking leader Tink for $2.2 billion in 2022, gaining account-to-account payment capability. Mastercard acquired cybersecurity firm Recorded Future for $2.65 billion in 2024 and expanded European operations. Both are positioning as payment technology platforms rather than pure card networks, aiming to process A2A payments if card volumes shift.

The UK rejected SAFE membership in late 2025 over cost and sovereignty concerns. The EU demanded €6-6.5 billion in participation fees, plus strict limits on non-EU subcontractors (15-35% of contract value). London viewed these requirements as an infringement on sovereignty, the same concerns that drove Brexit now locking Britain out of European defense architecture.

Britain finds itself without a bloc. It refused Trump's transactional "Board of Peace" on principle while remaining excluded from EU defense cooperation. The "mid-Atlantic bridge" strategy assumed both the US and EU wanted Britain as an intermediary, but now the US treats allies as protection rackets and the EU is building walls around its defense industrial base.

UK firms retain limited "third country" access to SAFE-funded projects, capped at 35% of component value as minority subcontractors. However, procurement cycles last decades, so structural exclusion now means the gap widens with each passing year. The IISS analysis warns this will erode the UK defense industrial base over time.

Canada negotiated SAFE participation successfully in late 2025, gaining preferential treatment on par with EU firms. The UK's negotiations broke down because London refused the sovereignty constraints that Canada accepted. This contrast highlights how "principles without alternatives is just isolation."

Britain's options are limited. It can align with Washington and accept Trump's transactional terms, align with Brussels and accept sovereignty constraints, or go it alone with a defense budget that cannot sustain independent capability against peer competitors. NATO membership remains, but the alliance faces its own tensions with US leadership.

Middle power realism is a foreign policy framework articulated by Canadian PM Mark Carney at Davos 2026. It's built on three observations: the US is no longer a reliable partner, nostalgia for the pre-2016 order is dangerous, and sovereignty requires the capacity to say no. Middle powers must build domestic strength, diversify partnerships even with rivals, and form horizontal coalitions to avoid being "on the menu."

Using Václav Havel's greengrocer parable, Carney argued that US allies have been displaying signs of a liberal order that doesn't actually exist. He declared the world has experienced "a rupture, not a transition," and called on middle powers to stop pretending and instead build autonomous capacity. The speech received a rare standing ovation.

The Donroe Doctrine is a portmanteau of "Donald" and "Monroe," describing Trump's policy of asserting American hegemony over the Western Hemisphere through economic coercion, military pressure, and territorial ambitions. It treats allies as protection rackets and international law as an impediment to American interests.

Canada became the first non-European G7 nation to join SAFE, the EU's €150 billion joint defense procurement fund. Canadian firms now have preferential access to the European defense market, treated on par with EU companies. The move exemplifies middle power realism: diversifying partnerships to maintain leverage and sovereignty.

The UK remains excluded from SAFE due to post-Brexit negotiating failures and sovereignty concerns over the strict "Buy European" provisions. Canada accepted the constraints; the UK didn't. Britain now finds itself in strategic limbo: alienated from Washington's transactional approach, locked out of European defense architecture.

Japan holds roughly $5 trillion in foreign assets, making it the world's largest creditor nation. The US alone accounts for approximately ¥342 trillion in bonds and equities, with Japan being the largest foreign holder of US Treasuries at over $1.1 trillion.

Japanese 30-year government bond yields have risen from below 1% (where they sat from 2019 through early 2024) to above 3%. This has collapsed the yield spread between developed market bonds and JGBs from 400 basis points to roughly 100, reducing the incentive to hold foreign assets for yield.