Card payments feel fast, convenient, and free. However, that impression is misleading: Behind every transaction lies a complex and largely opaque system of fees that businesses ultimately pass on to all customers – regardless of how they actually pay. The digital euro could offer a remedy.
The payments ecosystem: same prices, different costs
For individuals, modern payments fall into three main categories: point-of-sale transactions, online payments, and peer-to-peer transfers. Across all three, there is a clear trend towards digital solutions. At physical stores, both cash and digital methods are in use. While cash remains common in Germany, its use is declining, as card payments and mobile wallets such as Apple Pay and Google Pay gain ground. For quick transfers between individuals, payment providers like PayPal have become standard.
The growth in online retail has been particularly dynamic: Transaction volumes using cards, bank transfers, and online payment systems have risen sharply in recent years. New players such as PayPal and Klarna have entered the market. Yet, while the final price for customers remains the same, the costs of different payment methods can vary significantly.
In principle, every payment method generates transaction costs for merchants. In Germany, credit card payments amount to around 1.33% of the transaction cost on average, while debit cards are significantly cheaper (about 0.36%). Figure 1 shows a simplified overview of the transaction costs for various payment methods in Germany, based on an analysis by the German Council of Economic Experts from 2024. However, the fees are not transparently visible. The presentation is therefore based in part on estimates and averages; the Bundesbank arrives at slightly different results.
Figure 1: Transaction costs for digital payment transactions
Source: German Council of Economic Experts (2024), Fig. 68. Simplified representation.
Germany’s Girocard is a widely used domestic debit card system for in-store payments with relatively low transaction costs. However, it cannot be used online. A typical Girocard transaction involves an authorization fee of up to 0.2% of the transaction value, paid to the issuing bank, plus about 0.05% to network operators, for a total of roughly 0.24%.
The invisible infrastructure behind every payment
For other debit or credit cards, there are three types of fees: the interchange fee, the card scheme fee, and the total fee (see Figure 2). The interchange fee is paid by the merchant’s bank to the customer’s bank and is capped in the EU at 0.3% for credit cards and 0.2% for debit cards.
International credit cards and business cards are exempt from this regulation, which is why their average interchange fee in Germany is approximately 0.36%. In addition, both the merchant bank and the customer’s bank pay a fee to the card network; in Germany, this is typically around 0.1% of the transaction amount.
Finally, the merchant bank charges the merchants a total fee, in which various cost components are bundled. The total fee therefore comprises the interchange fee, the fees for the use of the card system, and, in addition, a fee from the merchant bank averaging 0.06%.
Figure 2: Breakdown of fees for card payments
In online retail, it is possible to pay via SEPA transfers, which incur virtually no transaction fees. This is because SEPA payments are processed through a standardized, largely publicly organized payment infrastructure between banks within the European Union with no additional intermediaries involved. Finally, online retailers can process payments through payment service providers. These providers handle the entire payment process and support various payment methods, including direct debits, bank transfers, credit and debit card payments, transactions using prepaid balances and credit, and installment payments (“Buy Now, Pay Later”).
For example, PayPal’s standard fee structure in 2025 consisted of a flat fee of 0.35 euros per transaction and a 2.49% fee on the payment amount. However, the actual fee amount depends heavily on factors such as the type of transaction, the payment method, and the geographic context. Additional surcharges may apply for cross-border payments or currency conversions. Furthermore, the fees actually paid often differ from the published standard terms, for example, due to individual agreements. Consequently, PayPal’s fee structure is relatively complex and cannot be represented by a single rate due to numerous exceptions and distinctions.
High returns driven by market power
Payment markets are shaped by strong network effects: a payment method is only attractive if many people use it. Customers want to pay everywhere, and merchants prefer widely accepted systems. This creates a self-reinforcing dynamic in which large providers become more attractive simply because they are large.
This dynamic leads to a few large providers establishing themselves and dominating the market – a situation known as an oligopoly. It is particularly difficult for new providers to enter the market because they would first have to simultaneously win over many merchants and customers. Established companies, on the other hand, benefit from their size and can secure their strong market position in the long term.
The strength of this market position is evident in the profits of the dominant providers: payment service providers generate significantly higher returns than traditional banks. Between 2000 and 2022, average returns on equity were approximately 4.3% in the U.S. and 2.3% in the euro area, while banks achieved returns of only 0.9% and 0.2%, respectively.
But who ends up paying?
For customers, the differences between payment methods and fee structures are generally unclear. Merchants initially bear these costs but pass them on via total prices. Since these fees are rarely visible, they have little influence on consumers’ payment choices.
This leads to a questionable outcome: cross-subsidization. Customers using low-cost methods, such as Girocard, indirectly bear the higher costs of more expensive options such as credit cards, which are built into retail prices.
The question of how a transaction is processed is therefore neither neutral nor purely technical. It determines merchants’ actual revenue, has an indirect impact on pricing, and favors oligopolistic market structures in which dominant players achieve excess returns.
How could the digital euro help?
The digital euro addresses this issue by making payment infrastructures more affordable and providing them as public infrastructure rather than through a private oligopoly. Unlike Germany, many European countries lack a domestic payment system and depend entirely on private, often non-European, providers. This creates not only high costs but also strategic vulnerabilities in an increasingly fragmented and geopolitically tense world.
As a publicly provided payment infrastructure, the digital euro could play a role in local payments and online commerce, similar to SEPA for bank transfers. Banks and payment providers could use the infrastructure to process transactions and offer competitive, customer-friendly payment services.
Why private payment alternatives fall short
This also makes the digital euro preferable to private initiatives such as Wero, a digital European payment system developed by a consortium of banks and providers. Wero promises to connect existing account-to-account systems via an interoperable hub, thereby enabling cross-border transactions. In the future, it is intended to be widely available for both online payments and in-person purchases, thereby competing with established market players such as Visa, Mastercard, and PayPal.
As welcome as this is, the new private-sector solution falls short of a publicly provided one in three key respects. First, the digital euro offers legal certainty. European lawmakers can require merchants above a certain size or with a certain level of revenue to accept the digital euro and ensure that all citizens have access to it, regardless of whether their bank supports the payment method. Second, Wero carries the risk of new oligopolistic competition with high returns, barriers to new market entrants, and low innovation. And third, a private-sector solution can never fulfill the dimension of geostrategic sovereignty that comes with the digital euro.
The digital euro contributes to greater transparency and fair competition
What appears to many as a free and seamless payment process in everyday life can, in reality, involve significant costs. However, these costs remain largely invisible, resulting in more expensive payment methods being subsidized by cheaper ones. The cost of digital payments is thus not only high but also opaque and unevenly distributed.
Greater transparency into fee structures could help consumers make more informed decisions and foster fair competition among payment service providers. Otherwise, little will change in existing market structures, and dominant payment providers will continue to generate high returns due to strong network effects.
The digital euro offers a starting point here: As a publicly provided payment infrastructure, it could not only reduce costs but also enhance traceability. It would create a foundation for offering payment services efficiently, competitively, and potentially more transparently, without today’s reliance on a few dominant providers. The digital euro is therefore more than just another form of payment: it is Europe’s opportunity to build a secure, cost-effective digital payment infrastructure.
Denise Rößler is Financial Economist at the SAFE Policy Center.
Vincent Lindner is Co-Head of the SAFE Policy Center.
This blog post first appeared here: Lindner, Vincent & Denise Rößler (2026): Der Preis des Bezahlens: Wie Visa, Mastercard und Co. Europas Zahlungsverkehr prägen – und was sich mit dem digitalen Euro ändern kann. In: eFin-Blog. https://zevedi.de/efinblog-der-preis-des-bezahlens-wie-visa-mastercard-und-co-europas-zahlungsverkehr-pragen-und-was-sich-mit-dem-digitalen-euro-andern-kann/ [13.05.2026]. https://doi.org/10.83253/c4ym-6q64.
Blog entries represent the authors’ personal opinion and do not necessarily reflect the views of the Leibniz Institute for Financial Research SAFE or its staff.
