Home » ECB Executive Board Member on European Payments in the Digital Age

ECB Executive Board Member on European Payments in the Digital Age

ECB Executive Board Member on European Payments in the Digital Age

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Speech by Fabio Panetta, Member of the Govt Board of the European Central Financial institution (ECB), on the ECB Convention “A brand new horizon for pan-European funds and digital euro.” Frankfurt am Principal, 22 October 2020.


Key factors:


It’s a nice pleasure for me to open this convention on the brand new horizon for European funds.

Funds are indispensable to our each day lives and to the functioning of our economies. They permit cash to fulfil its position as a reliable technique of change and thereby assist to keep up belief in our foreign money. As central bankers, now we have subsequently been tasked with making certain the graceful functioning of cost programs.

Funds are present process basic change, pushed by the digital revolution and its affect on the demand for brand new types of cost, the supply of modern cost providers and the response of public authorities. Central banks have a key stake within the digital transition of funds and are adapting their insurance policies to make sure that funds stay resilient, environment friendly and inclusive.

In my speech at the moment I need to tackle the transformation that’s going down within the funds panorama. The European market is registering vital progress because of the digital revolution. Nonetheless, the transition to a digital funds market could create inefficiencies and dangers that require an satisfactory response by European authorities, with a view to make sure that funds proceed to serve residents properly.

1. The altering funds panorama

Digital applied sciences are altering our economies.[1] They have an effect on the best way folks devour and the best way firms produce and promote items and providers. E-commerce gross sales, for instance, have doubled within the euro space over the previous six years and have jumped by one-third throughout the lockdown in contrast with precrisis ranges.[2]

Radical innovation and new gamers are shaping the market and have the potential to deliver extra alternative, effectivity and inclusion to funds. However an uncontrolled transition may result in extra complexity, greater focus, decrease requirements and diminished autonomy of European funds, producing dangers for shoppers and monetary stability.

Central banks have an inherent curiosity in accompanying the digital transition in order that funds stay secure, environment friendly and inclusive. They have to be alert and reply to 3 traits which can be shaping the funds panorama.

The primary development is the evolving preferences of European shoppers and companies. Whereas money remains to be the principle method folks make retail funds within the euro space, its position is diminishing.

Money more and more accounts for a smaller share of point-of-sale and person-to-person transactions within the euro space. By way of the amount of complete transactions, it declined from 79% in 2016 to 73% in 2019. And by way of the worth of transactions, it fell from 54% to 48%. The parallel growth of cashless transactions has been largely pushed by card funds, which have elevated from 19% to 24% by way of quantity and from 39% to 41% by way of worth.[3]

Turning to different retail funds by households, money is seldom used.[4] Playing cards and e-payment options dominate distant purchases[5], whereas direct debit and credit score transfers are the commonest method folks pay their payments.[6]

The development in direction of cashless funds has been accelerated by the pandemic. There was a surge in on-line funds by households and a shift in direction of contactless funds in outlets. About 41% of respondents to a current survey say they’ve diminished their use of money.[7] The overwhelming majority of them count on to proceed to pay much less with money after the pandemic is over.[8]

In opposition to this background, the Eurosystem has a duty to make sure that costless, risk-free cost choices stay obtainable to all. This contains making certain continued entry to money.

The second development we have to reply to is the evolving construction of the funds market, which dangers turning into each extra fragmented and extra concentrated in every phase.

On the one hand, the acceleration in direction of digital funds is including to the range of cost strategies. However it’s also rising market fragmentation and complexity. New fintech gamers improve potential competitors and innovation, however solely a fraction of their modern cost options are useable for the commonest transactions, corresponding to on-line, in outlets and peer to see. Furthermore, home card schemes are sometimes not useable in different Member States. The chance is that funds usually are not as easy, environment friendly and inexpensive as they might be.

Alternatively, there’s a threat of extreme focus and inadequate competitors in every market phase. Europe is already experiencing the dominance of a handful of cost service suppliers: PayPal dominates on-line funds, whereas Visa and Mastercard dealt with greater than two-thirds of card cost transactions in Europe in 2018.[9] Sooner or later, focus is perhaps exacerbated by the power of world know-how corporations – the so-called large tech corporations – to leverage their massive buyer bases and supply funds providers in Europe and globally, initially bundling them with their different merchandise and progressively extending them to broader use instances on-line and in outlets. Given the robust community results in funds, these corporations may purchase extreme market energy.

The Eurosystem should reply to those dangers by facilitating market entry and variety within the provide of cost providers, specifically by European gamers. This is able to foster competitors in all elements of the funds worth chain, making certain that Europe may be on the chopping fringe of innovation and effectivity, to the good thing about prospects.

The third development we have to think about is the elevated dangers that will be related to dependence on overseas cost devices and applied sciences.

Whereas openness to world competitors is essential to foster innovation, extreme dependency on overseas personal or public digital technique of cost and applied sciences may result in hostile results. These relate, for instance, to the possession of essential knowledge, or problems with traceability within the battle in opposition to cash laundering, terrorist financing and tax evasion. Additionally, a cost market that depends on know-how designed and managed elsewhere is probably not match to help our Single Market and single foreign money and might be susceptible to exterior disruption, corresponding to cyber threats. Furthermore, if the majority of deposits are denominated in overseas personal or public digital belongings, with weak hyperlinks to our foreign money, European financial and monetary sovereignty might be weakened.

The Eurosystem subsequently has a key position to play in making certain that modern cost options provided by new gamers profit European shoppers, whereas preserving European financial and monetary sovereignty.

2. The Eurosystem’s response to the altering funds panorama

Confronted with a altering funds panorama, the Eurosystem has put in place a complete technique to foster a aggressive market that’s able to responding to altering shopper preferences and is rooted within the EU framework and our single foreign money. I’ll briefly clarify the important parts of our cost technique.

Continued provision of money

Despite the discount in using money for funds, the demand for euro banknotes is rising at an annual fee of about 10%, and accelerated sharply on the onset of the pandemic-[10] In response to those developments, the Eurosystem is fastidiously planning its actions associated to the money provide chain – manufacturing, storage, distribution and recirculation – with a view to guarantee it stays resilient. We’re properly ready to make sure the continued availability of banknotes, together with in disaster conditions: our shares of money in every nation, at Eurosystem stage and for all banknote denominations, are constantly monitored, and situation analyses are used to anticipate any threat of depletion and react accordingly. We interact with banks and all stakeholders concerned within the distribution of banknotes to make sure acceptable service ranges, geographical protection and price insurance policies.

Wanting forward, now we have not too long ago launched our Money 2030 technique to make sure that banknotes stay broadly obtainable and accepted as a aggressive, dependable cost instrument and retailer of worth that may be owned and used immediately by all shoppers. We welcome the choice of the European Fee, within the context of its Retail Funds Technique for the EU, to reconvene the Euro Authorized Tender Skilled Group in 2021 to look at developments concerning the acceptance and availability of euro banknotes.

Retail funds technique

The Eurosystem’s retail funds technique goals to foster aggressive and modern funds by offering cutting-edge funds infrastructures and supporting pan-European options.

A basic element of our technique addresses the necessity for pan-European initiatives that enable shoppers and retailers to have easy accessibility to environment friendly funds. In 2019 the ECB’s Governing Council formulated 5 goals that any such initiative would wish to fulfil: pan-European attain and seamless buyer expertise; comfort and low value; security and safety; European model and governance; and world acceptance. We welcome initiatives by European gamers to create unified panEuropean cost options, supplied that they fulfil these goals.

The not too long ago launched European Funds Initiative seeks to exchange nationwide schemes for card, on-line and cell funds with a unified card and digital pockets that can be utilized throughout Europe.[11] To succeed, it might want to overcome the prevailing fragmentation of nationwide card schemes with a view to protecting the entire EU and providing a reputable various to world gamers. Different initiatives are within the pipeline, and we’ll assess whether or not they adjust to our 5 goals.

One other key aspect of our technique is the quick deployment of on the spot funds, which permit households and companies to get entry to their funds instantly – because the cost is accomplished – and in central financial institution cash, eliminating any monetary threat for both the payer or the payee. In 2018 the Eurosystem launched a robust platform for the continual settlement of on the spot funds (TARGET On the spot Cost Settlement, or TIPS), placing the euro space on the forefront of retail funds.[12] As a way to make on the spot funds obtainable to everybody in Europe, now we have not too long ago taken necessary steps to make sure panEuropean on the spot funds by the tip of 2021 through TIPS.[13]

We’ve got additionally up to date our retail funds technique to embrace the target of fostering competitors and an modern European ecosystem for funds. This contains actively supporting European fintech firms and selling using pan-European harmonised digital identification and signature programs in retail funds.

We’re cooperating intently with the European Fee. The truth is, the European Fee’s “Retail funds technique for the EU” enhances our personal technique by setting the stage for European laws to contribute to goals we share, corresponding to making on the spot funds the brand new regular and making crossborder funds simpler, quicker and cheaper.


On the root of our oversight exercise lies the precept of “identical enterprise, identical dangers, identical necessities”. Our new oversight framework for digital cost devices, schemes and preparations (PISA) can be launched for public session within the coming weeks and can lengthen this method to all related actors within the funds market, together with the massive tech corporations.

A correctly designed oversight framework is critical to ensure competitors and innovation within the funds market, whereas limiting the dangers that new merchandise and new gamers could generate. To keep away from regulatory arbitrage and guarantee a stage taking part in area, it’s essential that issuers and repair suppliers of great stablecoins are additionally regulated, supervised and overseen at European stage.

The European Fee’s legislative proposals on crypto-assets (MiCA) are an necessary step on this regard. Along with its proposal on digital operational resilience (DORA) and our revised oversight framework, they may tackle the broader dangers and threats posed by new merchandise and gamers. If new, probably systemic merchandise are launched earlier than these regulatory and oversight initiatives are accomplished, this might endanger the integrity of the European funds system.

Digital euro

The Eurosystem’s work on a digital euro is an perception into the way forward for retail funds. A digital euro would make digital central financial institution cash accessible to everybody. It might present entry to a easy, costless, risk-free and trusted digital technique of cost that’s accepted all through the euro space.

The attainable issuance of a digital euro alongside money can be pushed by the identical goals I’ve already outlined: responding to evolving shopper preferences, fostering a aggressive funds market and preserving European autonomy.

A digital euro would each form and promote the digitalisation of funds, in flip supporting the digitalisation and modernisation of the European economic system. If correctly designed, it might enable banks to construct new enterprise fashions and supply their prospects cheaper and modern providers. It might improve privateness in digital funds due to the involvement of the central financial institution, which – in contrast to personal suppliers of cost providers – has no business pursuits associated to shopper knowledge.

A digital euro may turn into crucial in plenty of situations. For instance, if folks would turn into reluctant to make use of money, if different digital cost strategies may turn into unavailable owing to pure disasters, or if overseas digital technique of funds threatened to largely displace home cash.

However introducing a digital euro may pose challenges. Some are technical, corresponding to cyber dangers and the safety of privateness. Others are associated to the attainable affect on the exercise of banks, on monetary stability and on financial coverage. A correctly designed digital euro would wish to handle such dangers. We’ve got began to discover acceptable methods, for instance in relation to the remuneration of digital euro holdings[14] and the safety of privateness.[15]

Because the issuer of our foreign money, the Eurosystem is fastidiously analyzing the financial, technological, societal and strategic implications of the attainable issuance of a digital euro. We’ve got not too long ago printed our Report on a digital euro, and began a public session.[16] We are going to fastidiously look at the suggestions we obtain, in order that if and when developments round us make it crucial, we can be able to situation a digital euro that meets the wants of Europeans.


European authorities have to be attentive and prepared to answer the continuing transformation of the European funds panorama. They need to make sure that digital funds are underpinned by a aggressive and modern market able to assembly shopper demand, whereas preserving European sovereignty.

To achieve these goals, the Eurosystem has set out a complete technique based mostly on complementary parts, which vary from the supply of money to the promotion of pan-European cost options, the quick deployment of on the spot funds in the whole euro space, the introduction of a brand new complete oversight framework embracing new merchandise and gamers, and the preparation for the attainable issuance of a digital euro. Our motion on these fronts, in shut cooperation with the European Fee and different European establishments, will assist to foster a resilient and modern European funds market that may strengthen confidence and belief within the euro.


[1] Anderton, R., Jarvis, V., Labhard, V., Morgan, J., Petroulakis, F. and Vivian, L. (2020), “Nearly in all places? Digitalisation and the euro space and EU economies: Diploma, results, and key points”, Occasional Paper Collection, No 244, ECB, June.
[2] Supply: Eurostat.
[3] Amongst different technique of cost, which account for the rest, the share of credit score transfers, direct debits and e-money has elevated, whereas the share of cheques has declined. See ECB (2020), Research on the cost attitudes of shoppers within the euro space (SPACE), forthcoming.
[4] Money is used for about 4% of distant purchases and 11% of invoice funds by way of quantity; 3% and 6% respectively by way of worth. Distant purchases embrace web, phone and mail order purchases.
[5] Roughly one-half and one-quarter, respectively, by way of each quantity and worth.
[6] 41% and 20%, respectively, by way of quantity; 37% and 29%, respectively, by way of worth.
[7] ECB (2020), Affect of the pandemic on money traits (IMPACT), forthcoming; Allensbach-Umfrage zum Bezahlen in Deutschland 2020 (Initiative Deutsche Zahlungssysteme).
[8] When trying on the total universe of retail transactions, whether or not they’re made on the bodily level of sale or on-line and whether or not they’re made by personal people, companies or the general public sector, the transformation of cost behaviour is much more hanging. Whereas money continues for use within the majority of retail funds, it accounts in worth for comparable quantities to playing cards and cheques, that are all dwarfed by cost devices which can be primarily used for distant funds, corresponding to credit score transfers (accounting for roughly 90% of all retail funds in worth in 2019) and direct debits.
[9] Up from 52.5% in 2009.
[10] Panetta, F. (2020), “Past financial coverage – defending the continuity and security of funds throughout the coronavirus disaster”, The ECB Weblog, 28 April.
[11] ECB (2020), “ECB welcomes initiative to launch new European cost resolution”.
[12] Sweden has not too long ago joined TIPS (see ECB (2020), “Sweden joins ECB’s on the spot funds settlement platform”) and the Federal Reserve is taking steps to construct an on the spot funds infrastructure, FedNow (see Brainard, L. (2020), “The Way forward for Retail Funds in the USA”, speech on the FedNow Service Webinar, 6 August).
[13] ECB (2020), “ECB takes steps to make sure pan-European attain of on the spot funds”.
[14] See Bindseil, U. and Panetta, F. (2020), “Central financial institution digital foreign money remuneration in a world with low or detrimental nominal rates of interest”, VoxEU, October.
[15] See ECB and Financial institution of Japan (2020), “Balancing confidentiality and auditability in a distributed ledger setting”, Venture Stella, February; and ECB (2019), “Exploring anonymity in central financial institution digital currencies”, In Focus, No 4, December.
[16] ECB (2020), Report on a digital euro, Frankfurt am Principal.

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