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Digital euro: the ECB proposes the creation of a payment “app”

Posted on Jan 30, 2023 at 5:19 p.m.Updated on Jan 30, 2023 at 5:35 p.m.

The last option considered by the European Central Bank (ECB) to implement the digital euro could directly compete with the pan-European payment project EPI (for “European Payment Initiative”). And the banks do not hide their dissatisfaction.

Last week, Fabio Panetta, member of the Executive Board of the ECB, spoke to the Committee on Economic and Monetary Affairs of the European Parliament about the possibility of creating an application allowing you to pay in digital euros as you pay in cash.

“The Eurosystem is considering a new digital euro application, which would only include basic payment functionalities,” he explained. It would thus allow European users to pay in digital euros.

For a use equivalent to that of cash

With the aim of financial inclusion, this digital central bank currency made available to individuals would be accessible, via commercial banks, whether or not the user is a bank customer.

The ECB is considering a basic application that can be used either to pay or to exchange money with someone, as one would with banknotes. The user’s digital euro account would be separated from their traditional deposit account and limited in terms of amount. However, it would still be managed on a daily basis by commercial banks.

However, this idea worries the banking sector, because it could shake up the pan-European payment project (EPI) that around fifteen establishments on the Old Continent are trying to put in place. “We are very clearly in a frontally competing project of EPI”, estimates a banker.

This project was originally intended to compete with the Americans Visa and Mastercard by creating a card payment system, but it has revised its ambitions downward. He now aims to create an electronic wallet geared towards instant payment. A niche that an application as described by the ECB could directly threaten. EPI, for its part, prefers to put things into perspective: “It is not because it is a digital solution that would work with an app that it would be head-on competition with EPI, assures a spokesperson. It should be noted, for example, that EPI would be able to integrate the digital euro”.

Banks opposed to the digital euro

If EPI displays its confidence, it is also that the project is progressing, according to our information. In particular on the project consisting in relying on the technical solutions proposed by the Dutch iDeal on the one hand and Payconiq, present in Belgium, on the other. The next meeting should be held in February. The French market, for its part, is already beginning to consider migrating its Paylib system to EPI.

Beyond the competition made to EPI, “the banks are upwind against this digital euro project, explains a banker. The way it is being conducted is a kind of institutional heist of the ECB”.

More measured, the French Banking Federation (FBF) does not hide its hostility on the merits to the digital euro. “It is worth asking what would be the use of a central bank digital currency for customers, she asks. Does the digital euro as a commercial bank currency respond to a usage argument? Has a security argument? To date, we have not found one that would justify its implementation in Europe”.

The opponents still have time to work out their arguments: the digital euro is still only under study. Its creation must first be decided by the European institutions. The development phase will not occur before 2027.




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