The digital euro should be distributed via apps, digital and physical cards and other form factors that enable consumers to make both NFC and QR code in-store payments with the proposed central bank digital currency (CBDC), according to a European Central Bank (ECB) report.
The ECB’s third report on the investigative phase of the digital euro project also identifies how the CBDC could be integrated with payment service providers’ existing systems across a range of use cases, including the provision of core, optional and value-added services, and lays out the next steps it plans to take during the investigative phase.
“In order to ensure that all payers can pay with digital euro to all payees across the euro area, regardless of the intermediaries involved, it is crucial there is a harmonised and standardised technical interaction between payer and payee when the digital euro is used,” the report says.
QR and NFC
“For in-store payments (point-of-sale use case), both QR code and NFC contactless payments are envisaged.”
The report then notes that while “QR code-based payments could be more easily deployed” and “foster a new European infrastructure as an alternative to the existing card rails infrastructure”, NFC technology “provides a highly convenient end user experience which consumers in the euro area are already familiar with”.
“Furthermore, NFC is the only widespread technology which could facilitate the development of a convenient offline payment method by introducing a physical card for the digital euro — this could foster financial inclusion,” the report adds.
“Emerging technologies for payment initiation would be monitored and could be adopted at a later stage, if proven to provide benefits to end users.”
With regard to access, onboarding and cross-border payments made with the digital euro, the report also states that:
- End users could access and use the digital euro either through PSPs’ existing online banking/payment apps (integrated approach) or through a digital euro app provided by the Eurosystem […] The Eurosystem believes that PSPs, as defined in PSD2, would be best placed to distribute the digital euro.
- Onboarding should use established procedures for opening a payment account as much as possible, and should oblige PSPs to utilise available information as often as possible ie banks’ standard KYC processes.
- Supervised intermediaries could offer optional services to enhance the core product and improve users’ experience […] The development of value-added services will be left fully to the market.
- Initial cross-currency use cases could include P2P payments in CBDC with foreign exchange conversion and digital euro users purchasing goods and services from an online merchant outside the euro area with currency conversion (ie e-commerce) or in-store payments facilitating an omnichannel approach with currency conversion.
The ECB now plans to present “a high-level comprehensive design” for the digital euro “later in the spring” whilst continuing to analyse distribution options, develop a rulebook for the digital euro scheme and engage with stakeholders.
The bank’s governing council will then review the outcome of the investigation “in autumn 2023 and will decide, on this basis, whether to move on to a subsequent project phase”, the reports says.
The ECB set out a timeline for the digital euro rollout in March, unveiled a series of design and distribution options for the digital euro in January and revealed it is considering plans to develop a digital euro app that would enable consumers to make contactless and QR code-based payments that same month.