25 years on from the launch of the euro, we still do not have a European payment solution that enables people to pay digitally throughout the euro area for all day-to-day payments. The fragmentation of the payments market means that the euro area depends on the “kindness of strangers” for retail digital transactions. And we have hard data to demonstrate this. – said Piero Cipollone, Member of the Executive Board of the ECB, in an introductory statement at the Committee on Economic and Monetary Affairs of the European Parliament.
He continued: 15 out of 20 euro area countries do not currently have a domestic solution that is used significantly for digital payments in shops, and over half do not have a widely accepted domestic solution for e-commerce payments. Even those domestic card schemes that provide a European alternative in some countries still rely on non-European card schemes for cross-border transactions within the euro area. Today, international card schemes settle two-thirds of card-based transactions in the euro area.
So, we have a clear problem, to which the digital euro offers a clear solution. The digital euro will provide a digital form of cash that will complement the banknotes and coins we are familiar with, thereby ensuring that we can keep payments – both physical and digital – working at all times, without depending on decisions made outside Europe.
The digital euro will be a European digital payment solution built on European infrastructure – all the providers we have selected are EU nationals controlled by EU nationals. And it will ensure that the euro remains the single unit of account, protecting our monetary sovereignty even with the expansion of stablecoins – which are currently mostly denominated in foreign currencies – and unbacked crypto-assets.
The implications for banks
The digital euro will allow them to preserve their business models and enhance the payment services they can offer. From the outset, we have envisaged that the digital euro would be distributed through banks. This is because they play a key role in financing the euro area economy and in the transmission of monetary policy.
We have designed the digital euro in a way that ensures that banks will not be disintermediated. Like cash, digital euro holdings will not be remunerated. They will also be capped to avoid any risk of excessive deposit outflows, while a link to commercial bank accounts will ensure that people can pay and be paid seamlessly with digital euro, even for large amounts. Our recent technical assessments confirm that introducing the digital euro would not undermine financial stability.
What about the costs and benefits for banks’ payment business?
With international card schemes, banks lose fees. With big tech mobile payment solutions, they lose fees and data. And in the future, with stablecoins – which do not face holding limits – they would lose fees, data and stable retail deposits.
With the digital euro, however, the compensation model will ensure that banks benefit whenever a payment via one of these solutions is replaced by a digital euro transaction. This is because the Eurosystem will not charge scheme or settlement fees, creating savings that can be distributed among banks and merchants. Moreover, the digital euro will strengthen banks’ bargaining power vis-à-vis international card schemes.
In addition, the digital euro will allow banks to enhance and scale up their payment services at a reduced cost. It will provide an open acceptance network and standards that private European initiatives, such as Wero and the European Payments Alliance, can leverage to increase their commercial appeal and achieve pan-European reach. These providers will also be able to integrate the digital euro seamlessly into their existing payment solutions, for instance digital wallets, or co-badge it on physical cards.
Let me reiterate: there is no competition between public and private solutions. Rather, we envisage a mutually beneficial cooperation that makes Europe’s strategic autonomy in the retail payments market more achievable and credible.
On the cost side, we have found that the digital euro investment costs for banks are likely to be significantly lower than some external studies have suggested and correspond to approximately 3.4% of significant banks’ annual IT upgrade budgets over a period of four years. The total investment costs are expected to be broadly comparable to those estimated for the revised Payment Services Directive (PSD2), and well below those for the Single Euro Payments Area (SEPA).
Banking 4.0 – „how was the experience for you”
„To be honest I think that Sinaia, your conference, is much better then Davos.”
Many more interesting quotes in the video below:
