The European Central Bank (ECB) insists that the digital euro is not a threat to banks, but rather a strategic lifeline for big tech payments companies and stablecoins.
Board member Piero Cipollone and Supervisory Board Vice-Chairman Frank Elderson published a joint blog post summarizing the matter. They positioned the digital euro as a competitive tool that European banks urgently needed.
European banks are losing ground
Two ECB officials painted a clear picture of Europe’s banking industry’s dependence on overseas payments infrastructure.
According to this blog post, two-thirds of all card transactions in the euro area are currently processed through non-European card schemes.
In some countries, the dependence is even deeper. 13 out of 21 countries in the euro area rely entirely on international card schemes or mobile solutions for in-store payments. More than half do not have a widely accepted national solution for e-commerce payments.
Meanwhile, another ECB working paper published in early March warned that the growth of stablecoins could lead to a complete outflow of retail deposits from European banks.
The ECB found that increased interest in stablecoins is already associated with a measurable decline in retail deposits, alongside a decline in bank lending to businesses.
Cipollone and Elderson argued that banks are now facing triple losses.
- There are no fees when using an international card system.
- Big tech mobile payment solutions result in lost fees and data.
- With stablecoins, you risk losing fees, data, and stable retail deposits.
Graph showing digital euro compensation model and 4-party card scheme
How the digital euro will help banks compete
The ECB designed a digital euro to put banks at the center of the distribution model. Banks will manage digital euro accounts and retain customer relationship and creditworthiness data.
On the revenue side, the Eurosystem plans to completely abolish scheme fees and processing fees. Banks will receive compensation for their services through a model set out in the European Commission’s proposed digital euro regulation.
This blog also highlighted the key benefits of collaborative badges. European debit cards will now be accepted across Europe in conjunction with the digital euro, eliminating the need to rely on foreign card networks for cross-border use.
The ECB estimates the total investment cost for banks to be between 4 billion and 5.8 billion euros, or about 1 billion to 1.44 billion euros per year over four years.
This number is about one-fifth of the costs predicted by some external studies and about 3.4% of major banks’ annual IT upgrade budgets.
Trial operation scheduled for 2027
The Eurosystem plans to launch a pilot exercise in 2027 to test the digital euro infrastructure in real-world conditions.
If EU legislators adopt this regulation in 2026, initial trading could begin as early as mid-2027, and the complete system could be ready for first publication in 2029.
The ECB said it would help participating banks shape implementation options, including integrated approaches and cost management strategies.
The blog post also addressed financial stability concerns. The ECB’s own analysis, based on bank data, found that a digital euro would not undermine financial stability.
Restrictions on individual holdings, bans on corporate holdings, and lack of interest on digital euro balances could prevent destabilizing deposit outflows.
Whether European banks embrace the digital euro as an opportunity or resist it as a burden may depend on how quickly the EU parliament finalizes the regulations needed for the ECB to move forward.
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