In a recent interview, Bundesbank board member Burkhard Balz spoke about his view on the need for a digital euro. In the wake of Russia’s disruption to EU energy supplies the European Central Bank (ECB) has many times said a central bank digital currency (CBDC) is needed because of the over reliance on US-based Visa and Mastercard for retail payments. Mr Balz included China in the equation during the interview with Süddeutsche Zeitung.
He noted that during the European Football Championships in Germany, in Frankfurt consumers could only pay at the stadium with Alipay or cash. That’s because Alipay was an event sponsor. “In the tourism sector, there are already many places that accept payments via Chinese payment providers,” he said. “Some food retailers also already accept these payment methods. This could continue in the future. We need to be prepared for this.”
We’d observe that this is because merchants are incentivized to support these solutions because they understandably want to cater to tourists. The introduction of a CBDC isn’t likely to have a significant impact here.
The interviewer asked what Europe must do? “We basically have to represent our positions and interests very clearly. Dealing with the USA and China is going to be rough. We need to buckle up,” said Mr Balz.
He’s referring to the central bank desire to provide a CBDC as an alternative payment option. The question is whether consumers care. They would if the other options suddenly became unavailable.
When asked why Europe doesn’t have its own Paypal, Mr Balz responded that “private banks in Europe have not done anything together to achieve this over the past 30 years.”
What about Wero?
However, the banks have started rolling out the pan-European digital wallet Wero. So far it’s supported by many banks in Belgium, France and Germany, with the Netherlands on the cards for 2025. Now, that’s not the whole of Europe yet, but it’s a start. Who knows, perhaps it might cover the entire union by the time the CBDC launches.
Mr Balz response was “Yes, but in Southern Europe and Scandinavia there are other payment service providers. For example, we do not have our own European payment system for e-commerce. There was no European response. The private sector has not yet provided one, so the central banks had to step in.” In fairness, it’s possible he may have added some positive comments about Wero that may not have been cut to make it concise.
There’s no question that it took Wero some time to get going. But it is progressing, so surely that’s a good thing? Otherwise, it reinforces the conflict of interest that’s not sufficiently discussed – the fact that central banks are both regulators and competitors when it comes to CBDC.
