The Digital Euro project: Fostering innovation in a digital age

The Digital Euro would be a digital representation of physical cash to be issued by the ECB. Unlike cryptocurrencies such as Bitcoin, it would be a digital currency backed by the central bank, meaning a liability to the ECB.

The ECB's exploration of the Digital Euro reflects a broader trend among central banks worldwide to adapt to the digital age. Digital currencies offer 24/7 access and provide the opportunity to serve the vast global populations with limited or no access to conventional banks. As such, the Digital Euro would hold the potential to facilitate instant, borderless transactions, thereby reducing reliance on traditional or non-European payment methods.

"It's important to note that digital currencies existed before CBDCs (Central Bank Digital Currencies) but did not concern the central bank," says Clement Jozwiak, Chief Product Officer, Financial Services. " Whilst we worked on this before wider industry interest, since 2020, we have been more closely aligned with the evolution of the ECB's work in this area." Since late 2023, the ECB has been progressing with the preparation phase for the Digital Euro, collaborating closely with industry experts and financial players such as Worldline to gather insights and data and lay the foundations for digital success. “But at this stage, the Digital Euro remains hypothetical as its implementation depends also on the future decision from the European Parliament and Council”.

What does this mean for the financial world?

Introducing the Digital Euro presents challenges and opportunities for commercial banks. On the one hand, the banking sector perceives the introduction of the Digital Euro as a potential risk in terms of deposits and possible disintermediation. We have already seen this with the rise of cryptocurrencies and the shaking of the financial status quo. On the other hand, commercial banks could also leverage the Digital Euro to innovate their services, offering new value-added solutions and strengthening customer relationships.

One key advantage of the Digital Euro would be to enhance financial inclusion. By providing a secure and accessible means of monetary transaction, the Digital Euro would empower underserved populations. While a Digital Euro is not intended to replace physical currency, it could act as a more accessible means for individuals and businesses to engage in the digital world

From Worldline's perspective, the Digital Euro represents a catalyst for innovation and collaboration within the payments ecosystem. As a payment industry leader, Worldline  has been strongly involved along the ECB to shape the potential future Digital Euro ensuring every stakeholder can benefit from it. To further explore the Digital Euro, Worldline was selected in 2022 to develop a prototype on the offline use case.

The development of the Digital Euro is set to empower payment providers and banks to expand and develop their solutions, services, and differentiators further. “The ECB should help to ensure both the public sector and the private sector are going in the same direction. It is about collaboration; partnership will be the key to succeed.” says Clement Jozwiak

The above discussion was related to Retail Digital Euro, meaning a Digital Euro for end consumers. But there is also the Wholesale Digital Euro that is of major importance for European payments which is a currency issued by a Central Bank in digital form, to be used exclusively by central banks, commercial banks or other financial institutions to settle transactions involving tokenised assets. "There is a larger consensus in the market with regards to Wholesale CBDCs in terms of benefits for the payment ecosystem," says Clement Jozwiak.

Uncertainty and opportunity

Questions remain, and the future is uncertain. Time will tell what the true potential of projects such as the Digital Euro will have on the financial landscape. Development and successful deployment require careful planning and the navigation of numerous European regulatory frameworks. 

"The question of adoption by end consumers remain open to this day. Finding the right use cases to demonstrate the value for the consumers will be the key. Consumers are one of the most important factor to consider when looking at payment method adoption. " says Clement Jozwiak. “On top of that, another key factor is to have a fair business model, to succeed for a payment method " says Clement Jozwiak.

The foundations are here even though a lot of uncertainties remains. Only a close collaboration between the ECB, the EU legislative bodies and private sector would allow the Digital Euro to be a success and set the conditions for innovation in the payment industry. The Digital Euro would have the potential to deeply transform the European payment landscape with a more inclusive, efficient, and resilient financial ecosystem. From Worldline's perspective, we stand ready to shape the future of payments in collaboration with the ECB and our partners across the financial world, fitting perfectly into our business, which is based on the connection between the banking and retail worlds by acting on both processing and acceptance.