Digital Euro Could Be Europe's UPI, Merchants Say

March 15, 2024
Merchants support a fast, innovative and low-cost pan-European payment method, a group of trade bodies have said, as they look to emulate Pix in Brazil and the Unified Payments Interface (UPI) in India.

Merchants support a fast, innovative, and low-cost pan-European payment method, a group of trade bodies have said, as they look to emulate Pix in Brazil and the Unified Payments Interface (UPI) in India. 

A balanced digital euro project is an opportunity to secure fairer competition across the EU’s single market while reducing dependency on foreign payment actors and supporting EU competitiveness on the global stage, merchant lobbyists have said, throwing their support behind the project. 

In a new joint statement signed by EuroCommerce, Ecommerce Europe, HOTREC, IATA, Independent Retail Europe and SME United, the trade associations have said the digital euro has the potential to transform European payments, increasing efficiency, promoting innovation and positioning Europe at the forefront of payment technology.

“The digital euro has great potential for retailers if the conditions are set right from the beginning,” said Alexis Waravka, director of digital and competitiveness at Independent Retail Europe. 

“A competitive pricing model will offer retailers the possibility to decrease payment costs by offering innovative and cheaper payment options,” he said. “This will benefit consumers indirectly through lower overall prices. Faster settlement also increases liquidities, which are always tight for retailers who operate on low margins.”

Vixio has understood for some time that merchant lobbyists in Brussels have been keen to make themselves known to policymakers in the European Commission and the European Central Bank (ECB) when it comes to the EU’s central bank digital currency (CBDC) project. 

"We want to change the tone of the debate and share a more positive point of view, considering the negative sentiment from the banks and politicians,” said Atze Faas, payments advisor at EuroCommerce. 

Faas pointed out that there has been a lot of negativity from some MEPs. 

For example, Michiel Hoogeveen said during a debate last month that the ECB is “scared” to answer “what problem the digital euro is solving”.

Meanwhile, fellow lawmaker Paul Tang said that the use case for a digital euro is something that the European Parliament “sometimes struggles with”.

“They don't seem to get it,” Faas told Vixio. “What the digital euro does is bring back balance between commercial and central bank money. As people move away from cash, more transactions are happening through commercial money."

Further, Faas said that he thought banks benefit from having to manage less cash over the recent years. “Would they rather the share of cash increases again to previous levels or manage a digital equivalent of cash at a much lower cost?”

In their report, the associations, under the banner of Merchant Payments Coalition Europe, say the digital euro should build on successful examples such as the UPI in India and the Pix instant payment platform in Brazil. 

The position paper points out that these two solutions operate without interchange fees, have no shortage of consumer wallet offerings and have achieved remarkably high adoption, all while avoiding unnecessary fees on merchants, promoting innovation and ensuring widespread consumer adoption. 

"Banks don't get interchange from cash payments, so why would they get it for digital euro?” Faas said. 

The merchants have also rubbished privacy concerns, which have stemmed from some critics of CBDCs. 

In their paper, the merchants suggest that the integration of self-custody wallets, where the users can manage the keys to sign transactions themselves, will mean enhanced online privacy for consumers and merchants.

"The privacy concerns I feel are a false narrative, and forgive me, but I sometimes have to chuckle,” said Faas. 

“What would you prefer, for a largely democratic government organisation to have oversight over payments, or a private company from the US with their security services in the background?"

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