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The European Central Bank (ECB) has announced that it will collaborate with five companies, which range from big tech to EU banking institutions, to develop potential user interfaces for the digital euro as the project veers forward.
Together with the ECB, selected companies have been given the task of focusing on different use cases for the eurozone’s central bank digital currency (CBDC) project, the digital euro.
Amazon will be taking the reins on e-commerce payments.
This is a surprising move, considering the EU’s unsubtle lack of enthusiasm for the rise of US bigtech firms in the trading bloc. However, it also makes sense given its pan-European reach.
Amazon has established marketplaces in six European countries (Germany, France, Spain, Italy, the Netherlands and the UK) that can reach up to 28 countries across the trading bloc.
Commenting on the ECB's latest move, Alex Pawlowski, blockchain officer at Fab City Hamburg, said it is clear from the prototyping exercise that the ECB has employed aims to determine how well digital Euro technology will integrate with company-developed prototypes and with the end customer.
"In my opinion, it is pretty evident the ECB is getting serious about piloting a digital euro," he said. "For that reason, they invited key players from the industry to assist in the development of user interfaces, drawing from experts in different capabilities, from peer-to-peer online payments, to point of sale payments and e-commerce payments."
Beyond Amazon, the ECB has also made space for Nexi. The Italy-based company, which has been gradually establishing itself as a European fintech giant following mergers with Sia and Nets, has been tasked with developing point of sale payments initiated by the payee.
Nexi had first announced in 2021 that it was working on the digital euro design.
Meanwhile, the European Payments Initiative (EPI), still very much in development, will be taking a lead on point of sale payments initiated by the payer. This could potentially include direct debit or request to pay type payments.
Considering the EPI’s year of negative headlines, including a concession on issuing cards and the departure of several founding members such as Commerzbank, this shows that the EU’s political establishment are still banking on the market-led project taking off.
Meanwhile, peer-to-peer online payments are being managed by Spanish CaixaBank, while Worldline is taking a lead on peer-to-peer offline payments.
The firms were chosen from a pool of 54 frontend providers, who responded to an ECB call-out in April this year.
The prototyping exercise is a component in the ongoing two-year investigation phase of the digital euro project.
It is expected to be completed in the first quarter of 2023 when the ECB will also publish its findings.
The debate rages on
The debate, however, over what it means to have a digital euro is far from going stale. Central bankers and other stakeholders continue to share their thoughts on what the best method forward for the eurozone is.
“The first reason is to do with strategic sovereignty in European payments,” Burkhard Balz, member of the executive board at the Bundesbank, said in a speech to the CashCon conference in September.
European payment service providers have so far not developed any simple, SEPA-wide solution for retail outlets, e-commerce or small, straightforward person-to-person payments, he explained. “Instead, users often have to use international card systems and applications offered by big tech firms.”
“These firms leverage the reach of their platforms and often set their own rules and standards, making them able to restrict third-party use and access rights,” Balz suggested. “This puts competition and efficiency in the world of payments at risk.”
This month, members of the EU’s consultative body, the European Economic and Social Committee (EESC), also shared their thoughts on the prospect of a digital euro.
“In my view, the digital euro should be designed to serve as a means of payment and not a store of value,” said Antonio Garcia del Riego, who sits on the committee, echoing concerns in the financial industry that it could be viewed as a safer store of value by consumers than private banks.
The committee member, whose CV touts the OECD and Santander, did however call for the digital euro to be “ambitious in its design”.
“It should include advanced features to ensure that it is competitive, future proof, and drives payment innovation.
His fellow committee member, Kęstutis Kupšys, who heads up the Lithuanian Consumers Alliance, however, argued that private banks should not be responsible for the digital euro’s rollout, as he branded it a “very promising alternative to private money”.
“Are we including financial intermediaries because we are afraid of something that central banks cannot achieve, or are we just giving away some sort of business opportunity?” he asked.
Reasons given by the ECB include not wanting to be responsible for the infrastructure, as well as issues such as potential bank runs.
He also took issue with the risk of privacy being removed from citizens’ payments. “There is a constant plea for KYC processes. Know your client, they say!
“Well, if I have banknotes in my wallet, and I have coins in my wallet, then I don’t ask anyone to authorise my ownership of those euro coins or zloty coins,” he quipped.
This is a citizen right, he said, adding that he is questioning the “eternal wish” to control everything.
Jan Ceyssens, who heads up the European Commission’s digital finance unit, warned that a digital euro has far reaching regulatory implications when it comes to privacy and anti-money laundering matters, but also the very introduction of a digital euro.
“It is a big choice that needs to be based on broad public support and have a solid democratic base as well,” he said.
Ceyssens updated that the European Commission is focusing on the general policy initiatives of a digital euro and what it should achieve, as well as the regulatory framework.
“The project, in the end, needs to meet the needs of companies, employees and of citizens.”
