The Dream of the Digital Euro
During the initial founding phase of the European Payments Initiative (EPI), the participating banks were already discreetly counting on additional support from legislators and a supportive stance from central banks behind the scenes. After all, there are also lofty geopolitical goals at stake, because the infrastructure of the currency area is considered system relevant.
However, the idea being floated by some participants that the EPI wallet could be positioned as the exclusive partner of the European Central Bank (ECB) in the upcoming digital Euro is unrealistic. This is primarily because the central bank must ensure that the cash equivalent is accessible to all citizens to achieve the desired broad reach. This is at odds with the concept of a mandatory wallet that all citizens and banks would have to use to fulfill their intermediary role. When using their digital wallets, citizens should have a free choice.
Conflicts are inevitable
Furthermore, EPI lacks the necessary coverage for such an ambitious positioning. The 16 banks and financial service providers, including Deutsche Bank, DZ Bank, and the Sparkassen, are spread across only five countries. Moreover, the account-linked debit scheme is still in the process of development, much like the digital Euro itself. The investigative phase for the digital Euro has been completed, and now implementation details are being worked on, with hopes that the legislative process will be concluded by the European elections in June 2024. Only then can the ECB Council make its decision regarding the digital Euro.
In light of the prolonged rollout of the digital Euro, the EPI creators should first demonstrate that their tech platform meets the highest standards and present a transparent scaling strategy. Conflicts are inevitable in this process: no one is as entrenched in local merchant services as the German institutions connected to the Girocard system. This merchant services sector is a valuable strategic asset that banks cannot easily integrate into EPI. So when EPI CEO Martina Weimert speaks of merchant acceptance as an expansion stage for EPI, she hopefully has a plan for how Girocard fits into this picture.
As for the digital Euro, EPI should maintain its ambition. EPI is already among the ECB's partners, having been involved in the prototype. Building on this foundation is crucial.