ECB President: Europe Has Fallen Behind in the Digital Payments Race

European Central Bank President Christine Lagarde said a digital euro can place the region at the cutting edge of innovation but it may have fallen behind in the global competition for creating digital payment ecosystems.

Sep 11, 2020 at 6:00 a.m. UTC
Updated Sep 14, 2021 at 9:54 a.m. UTC

A European Central Bank (ECB) panel tasked with exploring a central bank digital currency (CBDC) is set to reveal its findings in the near future, followed by a public consultation, said ECB President Christine Lagarde.

Speaking at the Deutsche Bundesbank’s conference on banking and payments in the digital world Thursday, Lagarde addressed the competition to dominate payments on a global scale and considerations for a euro-zone retail CBDC.

Lagarde said a digital euro would allow the bloc to be at the cutting edge of innovation, but the lack of payments integration in Europe indicated that foreign providers have taken the lead. Economies around the world are looking into CBDCs and the creation of digital payment ecosystems, while China has become a leader in the space. 

“Europe has fallen behind in this competition,” Lagarde said. 

The ECB set up a task force in early 2020 to explore what a digital euro would look like. In May, ECB Executive Board member Yves Mersch told CoinDesk the task force was specifically looking into a retail CBDC (one that could be used by the public to purchase goods and services) as opposed to a wholesale currency (that can only be used by financial institutions). Lagarde confirmed this at Thursday’s event. 

“Digital wholesale money is not new, as banks have been able to access central bank money for decades. But new technology can be used to make settling financial transactions more efficient. It also opens the possibility of a retail CBDC, which would be very innovative in that it would be accessible to a wide audience,” Lagarde said. 

Retail CBDCs

According to Lagarde, a digital euro would be a complement to and not a substitute for cash. Europe will continue to ensure that all its citizens have access to banknotes at all times, Lagarde said, adding that the two combined would support financial inclusion and offer consumers a choice. 

The second consideration for introducing a digital euro is risk assessment, Lagarde said. In her view, if enough bank deposits are converted to digital euro, it will change the way the traditional banking sector supplies money to the economy as well as the way in which the ECB will have to implement monetary policy.  

“We need to ensure that a digital euro, in the event that it is introduced, is designed in a way that contains these risks," Lagarde said. 

Lastly, a digital euro would need to be designed to meet public demand for digital payments, without damaging private payment solutions, Lagarde added. 

Lagarde said central banks inspire more trust in people compared to commercial banks, referring to a recent survey by the Official Monetary and Financial Institutions Forum, and stood by a previous statement that the ECB will play an active role in the creation and issuance of a CBDC.

“It would have to embrace the respective strengths of both the Eurosystem and the private sector to ensure that the payments landscape remains competitive and innovative,” Lagarde said.

Europe still hasn’t made a decision on whether to introduce a digital euro, Lagarde said. But according to her, the findings of the task force are due soon, and the region will continue to explore the benefits, risks and operational challenges of a CBDC.


“We have a duty to play an active role in balancing the risks and benefits of innovation in payments, so that money continues to serve Europeans well,” Lagarde said.

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