Digital Euro: Banks Kept at Core of Payments

The European Central Bank (ECB) has outlined its strategy for the digital euro, emphasizing its commitment to maintaining the central role of commercial banks within the euro zone's payment infrastructure. This digital currency, envisioned as a direct central bank liability, is designed to mitigate concerns among banks that they might be sidelined by new digital payment forms.

ECB Executive Board Member Piero Cipollone highlighted that the digital euro's architecture will actively preserve banks' position in handling payments. He noted that banks face potential disintermediation risks from various private digital solutions, and the digital euro aims to counteract this trend. The initiative also seeks to bolster European payment schemes, such as Italy's Bancomat and Spain's Bizum, by making them more attractive to merchants.

To encourage the use of domestic payment networks, the digital euro will feature a cap on merchant fees. This cap will be set lower than those charged by international payment networks but higher than current domestic scheme fees. This tiered fee structure is intended to favor local payment systems, particularly in the 13 euro zone countries that currently rely heavily on international networks. The European Parliament recently gave its initial backing to the digital euro, signaling a strategic move towards enhancing Europe's economic security and financial autonomy.