ECB PRESIDENT - EUROPE NEEDS A DIGITAL EURO

Posted 11 September, 2020

The pandemic has changed the payments market

 

The coronavirus pandemic and the imposition of strict quarantine measures across Europe have fundamentally changed the payment services market worldwide, accelerating the digitalization of banking and payment systems. ECB President Christine Langrad stated this in her speech.

 

“Cash remains the most common form of small retail payments, according to a new ECB payment survey , with cash payments accounting for 73% of all physical retail payments in 2019. But almost half of consumers said they prefer to pay digitally, and this increased even more during the pandemic,” Langrad said.

 

A survey by a consulting firm in 17 European countries shows that the vast majority of consumers expect to continue using digital services as often as they do now, or even more often. In other words, the pandemic has served as a catalyst, accelerating the transition to the new digital normal.

In addition, Langrad focused on another problem of digital bank payments. She stressed that European payment service providers have lagged far behind the rest of the world.

 

“Ten European countries still have internal card schemes that do not accept cards from other member states, despite significant efforts to integrate payment networks in Europe. And only a fraction of the more than 230 innovative fintech solutions available last year could be used for all of the most common daily transactions - online, in-store and peer-to-peer,” Langrad said.

 

At the same time, digital currencies such as Libra can become a global means of payment and be used to pay for services and goods anywhere in the world. Given this fact, Langrad proposed to create and launch a digital euro.

 

Europe needs its own CBDC

 

A possible solution to the problems of the banking system could be the launch of its own digital currency - the digital euro, which will be freely used in digital payment systems of all EU countries. Langrad herself sees at least three benefits from the introduction of the digital euro.

 

First, the digital euro will be a supplement, not a replacement for fiat money, so every resident of the Eurozone will have a choice: pay in cash or pay with digital money. This initiative is in line with the European policy of respecting consumer preferences for payment methods.

 

Secondly, the ECB will gain control over the turnover of the digital euro. This is done in order to minimize possible risks associated with the massive transition of users to digital euro payments. If there is a bias in the countries towards the digital euro, then the ECB will take appropriate anti-crisis solutions to support the banking system.

 

Third, the digital euro must be designed to meet the population's demand for digital payments without discouraging or crowding out private payment solutions. It will need to capture the respective strengths of both the Eurozone and the private sector to ensure that the payments landscape remains competitive and innovative.

 

The final decision on the launch of the digital euro has not yet been made. At the moment, ECB staff are studying the possibility of implementing CBDC, as well as analyzing the benefits and risks.

 

Note that the possibility of implementing CBDC is also being considered in Japan, South Korea, and the United States. And in China and Venezuela, central bank digital currencies have already been put into circulation.

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