The Eurosystem has recently updated its retail payments strategy, reflecting a commitment to digital innovation and a more integrated European payments market. This strategic shift focuses on the development of a digital euro, instant payments, and enhanced cross-border payment solutions.
The Eurosystem’s Strategic Vision
- Initial Strategy Development: First formulated in 2019 and expanded in 2020, the Eurosystem’s retail payments strategy aims to create pan-European payment solutions, particularly at the point of interaction (POI), and strengthen the Single Euro Payments Area (SEPA) through instant payments.
- Adapting to Changing Dynamics: The strategy revision addresses the evolving challenges in the European payments market, influenced by events like the Covid-19 pandemic and geopolitical shifts, to maintain European sovereignty in the payments sector.
Digital Euro Development: A Core Priority
- Preparation Phase for Digital Euro: The Governing Council of the European Central Bank (ECB) has moved to the preparation phase of the digital euro project, following an investigation phase exploring design and distribution models. This phase aims to finalize a rulebook and select providers for developing a digital euro platform and infrastructure.
- Design and Features of Digital Euro: The digital euro is envisioned as a widely accessible, free-for-basic-use digital form of cash, offering high privacy standards and instant settlement capabilities. It’s designed for all digital payments in the euro area, both online and offline, filling a gap in the current digital payment landscape.
- Future Prospects: This preparation phase, starting in November 2023 and lasting two years, will involve testing and experimentation to meet user needs and Eurosystem requirements. The decision to issue a digital euro will depend on the completion of the EU’s legislative process and the findings of this phase.
Enhancing Payment Resilience and Efficiency
- Increasing Payment System Resilience: The updated strategy includes developing alternative payment solutions as a contingency plan to strengthen the resilience of retail payments in Europe. This approach will enable offline capabilities and ensure fallback options for payment service providers (PSPs) during network disruptions.
- Promoting Technological Advancements: The Eurosystem seeks to advance digital innovation for better cross-border payments, as demonstrated by initiatives like the European Instant Credit Transfer scheme. These efforts are directed toward improving both retail and wholesale payment systems.
Conclusion and Outlook
The Eurosystem’s updated retail payments strategy marks a significant step towards an integrated, innovative, and resilient European payments landscape. By focusing on the development of a digital euro and enhancing cross-border payment solutions, the strategy aligns with the broader objectives of financial inclusivity, digital transformation, and European market sovereignty. The successful implementation of these initiatives will likely reshape the future of payments in the euro area, fostering a more efficient, secure, and user-centric payment ecosystem.
