Digital Money Takes Over as Just 24% of Euro Payments Are in Cash, European Central Bank Says

The European Central Bank is now advancing its digitaleuro project, hoping to restore control over retail payments while enablinginnovation in both consumer and wholesale transactions. In a speech by Piero Cipollone, a Member of the ECB's executive board, the initiative reflects mounting concerns that Europe’s reliance on non-EU payment platforms threatens its financial independence and its ability to shape the future of money. The Decline of Cash and the Case for a Digital Euro The European Central Bank (ECB) has acknowledged avisible shift in consumer behaviour: while cash once served as the anchor ofeveryday transactions, its role is rapidly fading. In 2023, only 24% of retailpayments in the euro area were made using cash. Meanwhile, foreign digital payment services likePayPal, Apple Pay, and Alipay dominate much of the digital landscape, withalmost two-thirds of euro area card transactions processed by non-Europeanproviders. The digital euro would act as a secure, universallyaccepted currency in digital form. It would offer offline functionality,privacy similar to cash, and legal tender status. Cipollone emphasized thatconsumers want it, pointing to surveys showing growing interest across memberstates. The ECB sees the digital euro not just as a monetarytool, but as a way to rebalance the relationship between European merchants,banks, and foreign platforms. By introducing a digital euro, the ECB aims to supportEuropean payment providers in scaling their offerings across borders. Digitizing Wholesale Finance With DLT While retail payments have received most of the publicattention, the ECB is also preparing for sweeping changes in wholesale finance.Here, the focus is on integrating distributed ledger technology (DLT) andtokenisation into financial markets. The ECB’s existing systems—like TARGET2 andT2S—already settle the vast majority of wholesale transactions. However, newtechnologies offer opportunities to streamline trading, settlement, and custodyinto a single, 24/7 infrastructure. Tokenised assets and programmable money could enablenew business models and lower costs, especially for smaller marketparticipants. Last year, the ECB conducted a trial with 60 marketparticipants to settle wholesale transactions using DLT. Over €1.6 billion wasprocessed during the six-month test—more than any similar initiative globally. Cipollone stressed that building an efficient,resilient, and innovative financial ecosystem requires cooperation from acrossthe market. The ECB has begun work on a single rulebook for the digital euroand continues to engage stakeholders from banking, fintech, and merchantcommunities. The European Central Bank is now advancing its digitaleuro project, hoping to restore control over retail payments while enablinginnovation in both consumer and wholesale transactions. In a speech by Piero Cipollone, a Member of the ECB's executive board, the initiative reflects mounting concerns that Europe’s reliance on non-EU payment platforms threatens its financial independence and its ability to shape the future of money. The Decline of Cash and the Case for a Digital Euro The European Central Bank (ECB) has acknowledged avisible shift in consumer behaviour: while cash once served as the anchor ofeveryday transactions, its role is rapidly fading. In 2023, only 24% of retailpayments in the euro area were made using cash. Meanwhile, foreign digital payment services likePayPal, Apple Pay, and Alipay dominate much of the digital landscape, withalmost two-thirds of euro area card transactions processed by non-Europeanproviders. The digital euro would act as a secure, universallyaccepted currency in digital form. It would offer offline functionality,privacy similar to cash, and legal tender status. Cipollone emphasized thatconsumers want it, pointing to surveys showing growing interest across memberstates. The ECB sees the digital euro not just as a monetarytool, but as a way to rebalance the relationship between European merchants,banks, and foreign platforms. By introducing a digital euro, the ECB aims to supportEuropean payment providers in scaling their offerings across borders. Digitizing Wholesale Finance With DLT While retail payments have received most of the publicattention, the ECB is also preparing for sweeping changes in wholesale finance.Here, the focus is on integrating distributed ledger technology (DLT) andtokenisation into financial markets. The ECB’s existing systems—like TARGET2 andT2S—already settle the vast majority of wholesale transactions. However, newtechnologies offer opportunities to streamline trading, settlement, and custodyinto a single, 24/7 infrastructure. Tokenised assets and programmable money could enablenew business models and lower costs, especially for smaller marketparticipants. Last year, the ECB conducted a trial with 60 marketparticipants to settle wholesale transactions using DLT. Over €1.6 billion wasprocessed during the six-month test—more than any similar initiative globally. Cipollone stressed that building an efficient,resilient, and innovative financial ecosystem requires cooperation from acrossthe market. The ECB has begun work on a single rulebook for the digital euroand continues to engage stakeholders from banking, fintech, and merchantcommunities.