Why the ECB Thinks Banks Can’t Survive Without the Digital Euro

The European Central Bank (ECB) argues that the digital euro is not a threat to banks but a strategic lifeline against big tech payment firms and stablecoins. Executive Board member Piero Cipollone and Supervisory Board Vice-Chair Frank Elderson published a joint blog post laying out the case. They framed the digital euro as a competitive tool that European banks urgently need. European Banks Are Losing Ground The two ECB officials painted a stark picture of European banking’s dependence on foreign payment infrastructure. According to the blog post, non-European card schemes currently process two-thirds of all euro area card transactions. That reliance runs even deeper in some countries. Thirteen out of 21 euro area nations depend entirely on international card schemes or mobile solutions for in-store payments. More than half have no domestic solution for e-commerce payments with wide acceptance. Meanwhile, a separate ECB working paper published earlier in March warned that stablecoin growth could drain retail deposits from European banks altogether. The ECB found that greater stablecoin interest is already linked to measurable declines in retail deposits, alongside reduced bank lending to businesses. Cipollone and Elderson argued that banks currently face a triple loss: With international card schemes, they lose fees. With big tech mobile payment solutions, they lose fees and data. With stablecoins, they risk losing fees, data, and stable retail deposits. Chart showing the digital euro compensation model versus a four-party card scheme How the Digital Euro Would Help Banks Compete The ECB designed the digital euro to place banks at the center of its distribution model. Banks would manage digital euro accounts and retain customer relationships and creditworthiness data. On the revenue side, the Eurosystem plans to eliminate scheme and processing fees entirely. Banks would receive compensation for services through a model the European Commission included in its pr...