Digital euro designed to protect banks, says ECB policymaker

The digital euro will be designed to ensure it protects European card schemes and keep banks at the core of the euro zone payments system, a senior European Central Bank policymaker said on Wednesday.

As a currency managed directly by the ECB through accounts users will open with the central bank, the digital euro project has sparked fears among banks they will lose their role in handling payments.

Digitalisation of payments has reduced the role of cash, the only form of central bank money currently existing, prompting the ECB to opt to issue a central bank digital currency to compete with private forms of money.

ECB Executive Board Member Piero Cipollone said that changes in the payments industry meant that banks ran that risk regardless of the digital euro, which would actually help them.

Speaking to the steering committee of Italy’s banking association ABI, Cipollone said the digital euro meant to “preserve the central position of banks in payments”.

“Banks could lose their role in payments not just because of stablecoins but also due to other private solutions,” he said.

Banks would not just lose revenues but, more importantly, access to the payments data of their customers, information which they need to offer them other more profitable services.

HIGHER FEES?

The ECB also wants to protect European payments schemes, such as Italy’s Bancomat card scheme, or Spain’s Bizum peer-to-peer scheme, Cipollone said.

To boost their role, the digital euro system will be structured in a way that it will still be cheaper for shopowners to use those networks, he added.

“The cap on the fee that merchants will pay on the digital euro network will be lower than what the international payments network, normally the costlier, charge, but higher than what domestic payments scheme, normally the cheapest, charge,” Cipollone said.

Only eight of the 21 euro zone members have a national payments scheme, with the others relying entirely on international networks.

“The digital euro will effectively favour domestic payments schemes,” he added.

Fraying transatlantic ties have prompted the ECB to brand as a strategic risk the fact that more than three quarters of transactions in Europe take place through international payments schemes such as Visa (V.N) or Mastercard (MA.N).

After stalling for two years the ECB’s law proposal which it needs to pass to allow the central bank to issue the digital currency, the European parliament this month gave its first major backing to the digital euro.

In December, the EU Council had done the same by declaring the project key for Europe’s economic security and it would be “available to the general public and businesses to make payments anytime and anywhere in the euro area”.