Exploring CBDCs: key insights from new research and industry interviews

Worked on an international scale in different regions of the world, the Central Bank Digital Currency (CBDC) is a real protean subject. Considered both an asset of sovereignty and a tool of financial stability in a context of disintermediation and increased digitalisation, the CBDC is also analysed, within different countries like Brazil, as a tool of economic and digital inclusion.

Two approaches of CBDC exist in the world: ‘retail CBDC’, to be used by consumers, and ‘wholesale CBDC’, to be used by financial institutions. This innovation is giving rise to a lot of thoughts in the payments market. Thus, in Europe, the project of the digital euro is mobilising many professionals in the payments ecosystem, above all in the European Central Bank (ECB) and Eurosystem network. The idea of this project is to launch a digital version of the euro to be used by consumers to make payments both in online and offline contexts. An interesting project linked with the evolution of the uses in payments – acceleration of digital transactions and decrease of cash payments – and also with the goal of the European institution to reinforce the sovereignty in the field of payments and to ensure financial stability in a context of increased digitalisation. But, what about the position of the professionals in the market?

According to the white paper «CBDC: quels défis pour le secteur des paiements ?» published in September of 2024*, many questions remain important for the different stakeholders of the European payments market. First of all, there is a convergent position among the European banks about the necessity to ensure the protection of deposits and financial stability. It is interesting to see that in countries where there is a strong maturity in the field of digital payments, like Luxembourg for instance, there is generally a positive approach to digital euro. Concerning the fintechs and the technical actors, there is a strong interest to participate in the technical works about CBDC and to be a real contributor of the creation to the innovation. On the demand side, both retailers and corporate treasurers have many questions about the definition and the use cases to be addressed by this innovation. The same questions for the consumers’ associations, which show a certain interest in the digital euro in relation to the potential alternative in comparison with other tools that can be sometimes expensive like payment cards.

The way that the digital euro will play out can also be different in the diverse EU countries, despite a pan- European line imposed by the European institutions and above all ECB. Thus, it is interesting to see that many national ecosystems work about CBDC above all through the regulation side, and more specifically through the national central banks. Nevertheless, certain EU countries, like Portugal, aim at creating a real forum of discussion about this topic, integrating all the stakeholders of the market: the ‘Grupo de Contactos’ created by Banco de Portugal aims at integrating all the stakeholders of the market to debate about this topic. Another European country with an interesting approach is Italy, where the Italian banking association has developed for several years a pragmatic approach to CBDC, studying the potential use cases and the technical aspects.

According to many professionals in the payments ecosystem, CBDC in general and the digital euro in particular seem to be a promising innovation in many ways. Resilience, sovereignty, financial inclusion, and the evolution of cross-border transactions appear like many aspects that this innovation could address in a context of geopolitical and economic uncertainty. Nevertheless, the white paper «CBDC: quels défis pour le secteur des paiements?»* shows certain requirements, most of which have already been identified by the different stakeholders of the market:

• a necessary clarification of the concept, the definition, the business model, and the technological and functional contours of this innovation;

• the establishment of an open dialogue, integrating all the stakeholders of the market in order to carry out a complete impact study of this innovation, without forgetting the necessary analysis of the market needs and the added value of this innovation for a European payments ecosystem already rich in payment offers;

• an in-depth work on the support of European citizens, which must involve a commitment in terms of information, education, and awareness-raising of the market and the end-users;

• a necessary convergence between the digital euro and the other projects inherent to payment (instant payment, European digital identity…) so that this solution fits easily into a roadmap of the institutions and the stakeholders in place.

Last, but not least, it is important to not forget the issue of interoperability, both between the different CBDCs in the world and between the CBDC and the existing tools, in order to guarantee the effectiveness and sustainability of this innovation and the ecosystem as a whole.

*The white paper “CBDC: quels défis pour le secteur des paiements ? » has been published in September of 2024 by Partelya Consulting. If you want to receive it, contact Andréa Toucinho

About Andréa Toucinho

Expert in payments and innovative financial services, Andréa Toucinho is Director of Studies, Prospective and Training of Partelya Consulting, and Country Ambassador for France of European Women Payments Network (EWPN). Author of several publications about payments, she is a regular speaker at different events linked with the payments ecosystem in France and Europe.

About Partelya Consulting

Created in 2008, Partelya Consulting is a French consulting company specialised in payments and innovative financial services. Member of the French Association du Paiement, Partelya Consulting contributed to many projects linked with this ecosystem such as the implementation of new payments tools, compliance, or even strategic issues both for companies and big institutional actors.