Introducing a digital euro for use in retail payments involves three considerations, President of the European Central Bank (ECB) Christine Lagarde explained
The COVID-19 global pandemic has accelerated the already present trend towards digitalization and led consumers to adopt digital payments in increasing numbers, President of the European Central Bank (ECB) Christine Lagarde said.
Speaking at an online conference hosted by Deutsche Bundesbank on September 10, Lagarde explained that, “As our lives have suddenly gone digital, so have our payments: there has been a surge in online payments and a shift towards contactless payments in shops”.
Lagarde spoke extensively about the two emerging trends in global payments — changes in consumer preferences and competition to dominate payments on a global scale.
She explained that residents of the EU have embraced digitalization, with e-commerce sales increasing roughly 20% between February and June, even as total retail sales declined by 1.2%.
The volume of online payments had experienced “double-digit growth rates” since the start of the outbreak, she added
“A vast majority of consumers expect to continue to use digital services as often as they do now or even more often,” the President stated.
Lagarde then explained how Europe had fallen behind countries like China in dominating the payments system on a global scale. Lack of payment integration in Europe has led users to turn towards foreign providers who, though subject to strict regulations in the continent, may alter the nature of risk users are exposed to.
An increase in protectionist policies and already well-established firms entering the digital payments industry have also put Europe on the backfoot, she said.
These issues have complicated the process of combating illicit activities and ensuring operational resilience, she added. Lagarde also highlighted an unlikely scenario where digital wallets with weak links to the sovereign currency could undermine monetary sovereignty.
Lagarde spoke about introducing a digital euro in the Eurosystem. Central Bank Digital Currency or CBDC can make financial transactions more efficient and make it accessible to a wide audience, she said. Introducing a digital euro for use in retail payments involves three considerations, she added.
“The first is maintaining access to central bank money. The Eurosystem will continue to ensure that all citizens have access to banknotes at all times. The second consideration for introducing a digital euro is that it could create risks that need to be carefully assessed. The third consideration is that a digital euro would need to be designed to meet the public’s demand for digital payments, without discouraging or crowding out private payment solutions,” she explained.
Lagarde added that no decision has been made so far with regards to introducing a digital euro.
Written by Harshini Nag