Citing European banking and government sources, media reports say twenty European banks are working on setting up a pan-European payment system to challenge the dominance of Visa, Mastercard and technology companies such as Google and PayPal. 

The banks have reportedly been working on the project jokingly code-named PEPSI (Pan European Payment System Initiative) for a few months, four sources involved in the project told AFP.

In a sign of the sensitive nature of the discussions, none of the big banking groups contacted by AFP would speak openly about the plans.

But several sources said only banks in the Eurozone were involved and that most French and German banks were on board.

According to AFP, a French banking source close to the subject said the idea came from the European Central Bank, which has been pushing for a euro-denominated instant-payment system to handle all types of cashless payments, whether by card, transfer, direct debit or mobile.

This is reportedly not the first time European banks have tried to launch a European payments system, following the Monnet card project launched in 2012 which never took off.

This time the banks are "ready to invest", a banking expert involved in the project told AFP.

The banks are expected to make a final decision in December on whether to press ahead with it.