Since the first euros went into circulation over twenty years ago, few global developments have come close to the game-changing effect the single currency has had on the way people pay and get paid across borders.
After decades of negotiations and political maneuvering, EU citizens in 11 countries went overnight from having to deal with 11 separate currencies if they wanted to engage in cross-border trade to having just a single, united monetary system.
At the time, the euro was the most mobile currency the continent had ever known. In the intervening years, expectations have been raised, and the bar for mobility is higher than ever.
In 1999, a mobile currency mostly meant that a paper note could be carried from Spain to Belgium and still function as legal tender. But after two decades of digital transformation, people don’t just expect their euros to move — they expect them to move instantly.
As part of efforts to update the Eurosystem, since 2020, the European Central Bank (ECB) has been leading talks and consultations on the future of the euro and plans for the introduction of a digital euro.
Of course, for many in the eurozone, the EU’s favored currency already feels very digital. Even discounting the contemporary growth of eCommerce in recent years, from Amsterdam to Lisbon, Portugal, digital payment methods are on the rise as people turn from paper and plastic to phones and mobile wallets.
But absent SEPA-wide legislation, the story of the euro’s digitization has been one of workarounds and creative solutions. In bank vaults up and down the continent, immobile stacks of euro notes continue to play an oversized role in the financial ecosystem.
In the ongoing discussion surrounding the eurozone’s transition to digital currency, security is also proving paramount.
When PYMNTS surveyed consumers about sharing their bank account details with third parties to process payments, 51% said they do not believe their connection is very secure, and 60% said they worry about the theft of their money.
Get the study: Money Mobility Playbook
However, when the ECB carried out a survey of the digital euro, it found that respondents prioritized functionality over security.
According to the ECB, consumers want to be able to make purchases using a digital wallet independent of the platforms or devices involved in those transactions. Survey respondents ranked this feature as more important than biometric authentication for digital payments. Contactless payment was found to be the highest priority, followed by instant transfers.
Read more: The Money Mobility Tracker June/July
In an interview in the PYMNTS June/July Money Mobility Tracker, Drew Edwards, CEO of Ingo, summarized the issue precisely: “The unfortunate reality for most providers is that consumers kind of expect to have their cake and eat it too. Customers expect a robust money mobility experience — money that can be sent or received anytime, anywhere, instantly — at no risk to themselves. They are often not willing to compromise on either.”
Stability and Security
Just as the original euro project only worked because it opened up all commerce within the member countries to the same monetary system, so its digital heir will only work if it is fully integrated into the ecology of contemporary payments.
As PYMNTS explored in a recent series on the EU’s digital transformation, payment preferences are by no means homogeneous across the eurozone.
See Part 1: Benchmarking the EU’s Digital Engagement: Spain
See Part 2: Benchmarking the EU’s Digital Engagement: the Netherlands
See Part 3: Benchmarking the EU’s Digital Engagement: Germany
See Part 4: Benchmarking the EU’s Digital Engagement: Italy
See Part 5: Benchmarking the EU’s Digital Engagement: France
What’s more, despite the best intentions of the SEPA project, the rails that are meant to move euros from A to B are not gliding as smoothly as they could be.
Read more: What’s the Holdup With SEPA Instant Payments?
The good news for banks and payment processors is that the technology exists to make money both more mobile and more secure in a single sweep.
Distributed ledgers of the blockchain variety are widely expected to be at the core of the coming digital currency revolution. Central banks like the ECB are looking to leverage the same technology as decentralized cryptocurrencies in central bank digital currencies (CBDC) like the digital euro.
In fact, the ECB has made no secret of the fact that it perceives the rise of cryptocurrencies, especially stablecoins, as a direct threat to the established, central bank-led system.
In short, the ECB recognizes that privately administered technologies have bested them in terms of speed, convenience and efficiency. But it also insists that the sovereign currency is ultimately more stable, reliable and trustworthy.
The ECB may well be able to bring the euro into the digital age in a way that brings all the stability and security of a centrally issued currency, but it will also have to be interoperable with existing payment norms and privately owned technologies if it is to meet the mobility requirements of the modern consumer.
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