At the Merchant Payments Ecosystem 2024 conference in Berlin, Evelien Witlox from the European Central Bank (ECB) delivered a keynote on the potential of a digital euro.
Witlox highlighted the advantages of a digital euro, emphasizing that it would serve as a complement to cash in Europe. The digital euro aims to enhance strategic autonomy by reducing reliance on non-European payment providers, while also delivering a secure transaction option for people in Europe.
According to Witlox, the digital euro is being designed for both online and offline use and will incorporate features to ensure privacy and resilience against fraud, thereby securing transactions. She noted, “We will create a solution that is future-proof and state-of-the-art, focusing on efficient payments across three use cases: peer-to-peer transactions, in-store purchases, and e-commerce payments. This will give consumers in the euro area confidence that they can make purchases with high conversion rates. Moreover, the digital euro ensures instant settlement, meaning funds will transfer from payer to payee immediately, providing instant proof of payment.”
Discussing the project’s future, Witlox mentioned that project teams have engaged with market stakeholders, the European Retail Payments Board, civil organizations, and central banks to shape the design of the digital euro. The initiative has been in preparation since November 2023, with the next phase expected to commence in 2025.
During a panel discussion on the digital euro’s potential, experts including Witlox, David Birch from CHYP, Michael Salmony from ETPPA, and Fredrik Rydbeck from Sveriges Riksbank, shared insights moderated by Nilixa Devlukia, founder of Payments Solved.
Salmony expressed optimism about the benefits of an EU Central Bank Digital Currency (CBDC), such as the creation of a unified payments scheme that is cost-effective, instant, and reversible. However, he raised concerns about the necessity of a state-driven solution when various private initiatives are also emerging. He emphasized the importance of utilizing APIs and data in fintech-enabled payment processes.
Rydbeck, representing a central bank’s perspective, highlighted the need to avoid introducing additional risks. He commented on the challenges central banks face in launching consumer products of this scale, noting that their operational constraints differ significantly from those of fintechs and startups.
Birch echoed Salmony’s comments about competition while also stressing the necessity of addressing economic and social issues regarding inclusion and sustainability as the digital euro develops. He indicated that central banks need to deepen their understanding of digital currencies to effectively roll them out, ensuring consumers know how to utilize them.
Witlox suggested a phased approach for the digital euro’s launch, allowing the market to adjust and helping the public understand its features better.
Salmony elaborated on the exciting prospects of offline payments with CBDCs, envisioning seamless money transfers across Europe regardless of banking affiliations. He pointed out that existing market solutions have not adequately addressed this need and saw potential for introducing a modernized form of money.
As the dialogue transitioned to digital identity, various panelists underscored its critical role in preventing fraud and ensuring secure transactions. Rydbeck agreed, noting that the success of digital payments hinges on smooth and secure authentication processes. Salmony added that addressing identity theft and payment fraud should have been a priority from the outset, as the current focus on digital identity is somewhat delayed.