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The European Central Bank has stepped up its challenge to US payment groups such as Visa and Mastercard by agreeing technology rules that will pave the way for the rollout of a digital version of the euro.
Europe’s top monetary authority this week signed contracts with three domestic organisations over rules that will ensure any European payments card can talk to any card reader in the bloc once a digital euro is introduced.
The central bank wants to ensure that a digital alternative to cash, which is supposed to become legal tender alongside coins and banknotes, will be rolled out by 2029 as it seeks to limit the dominance of US companies in European digital payments.
Currently two-thirds of card payments in the Eurozone are processed by international schemes, largely controlled by US companies, and many European countries lack any local alternative.
If the digital euro becomes legal tender, private payments firms will have to add the ECB-endorsed technology standards to card readers and other infrastructure, paving the way for widespread usage in the 21 countries that use the euro.
The ECB-approved card payment rules are intended to rival existing ones set by a group of six US firms including Visa and Mastercard that mean users are charged fees to use their standards. The European alternative will be free of charge for users.
Friday’s decision is a key move towards the rollout of the digital euro, although European lawmakers are still discussing the necessary legislation ahead of a critical vote on the issue in the European parliament this summer.
“The open digital euro standards will provide a European free alternative to current proprietary standards,” said ECB executive board member Piero Cipollone, vowing that the central bank will ensure that digital cash will work “with existing European standards that the private sector can also use”.
Europe’s current standards for card payments are defined by EMVCo, a California-based consortium overseen by the six US payment schemes American Express, Discover, JCB, Mastercard, UnionPay and Visa. European policymakers have opted for rules defined by the European Card Payment Cooperation (ECPC), nexo standards and the Berlin Group.
These were “open technical standards” that were already in use in some European countries, the ECB said. Germany’s Girocard and France’s Carte Bancaire, two large-scale national payments schemes, are already adopting the ECPC protocols.
While the European Commission and EU governments are fully backing the ECB’s plan for a digital euro, the idea is heavily contested in the European parliament, which needs to vote in favour to make it happen.
Leading European banks and payments providers are also sceptical as they claim that a digital euro would offer few additional benefits but could undermine private sector initiatives such as Wero, which also tries to rival Visa and Mastercard.
If the European parliament approves the legislation underpinning a digital euro this summer, it will then enter negotiations with EU member states ahead of a final agreement expected this year or in early 2027.
