What could the e-euro mean for retailers and consumers?

05/03/2025

by Jennifer Meyer

The European Central Bank is pushing ahead with the introduction of the digital euro. A digital currency – issued by a central bank – promises independence from private payment providers, more security for consumers and an adaptation to the increasingly cashless life in Europe. But while the debate about regulation and technology continues, one key question remains unanswered: What does the digital euro mean for the retail sector?

A money that is not intended to replace any – and yet could change everything

The digital euro is not intended to replace cash, but to complement it. This is what the European Central Bank emphasizes. However, the history of money teaches us that new means of payment rarely remain just a supplement. If they become established, they can create new habits, change existing business models and shift economic power relations.

The digital euro could be a profound change – not just for payment transactions, but for the entire financial system. And right in the middle of it all is the retail sector, which decides with every transaction whether a new currency has a future or not.

What is the digital euro?

The digital euro is a planned digital central bank money issued by the European Central Bank (ECB). It is intended to serve as a supplement to cash and offer consumers and companies a secure, state-guaranteed digital payment option. While conventional digital payments are processed via commercial banks or private providers such as Visa, Mastercard and PayPal, the digital euro would be a direct liability of the ECB – comparable to a digital banknote.

How does the digital euro differ from existing payment methods?

At first glance, the digital euro appears to be just another cashless payment method. But the difference lies in its structure:

Direct link to the ECB: While bank balances are considered liabilities of private commercial banks, the digital euro is central bank money that is directly backed by the ECB.
High security: In the event of a banking crisis or a payment default, the balance in the digital euro would be safer.
Increased privacy: While private payment providers often store data on transactions, the digital euro should offer greater protection of financial privacy - at least for smaller amounts.
Offline use: In contrast to existing digital payment methods, the digital euro will also be usable for transactions without an Internet connection.

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How can the digital euro be used?

The digital euro would be available to consumers via an electronic wallet managed by their bank or another authorized payment service provider. An individual holding limit of up to 3,000 euros is being discussed in order to prevent a massive shift of capital from commercial banks to the ECB.

For companies and retailers, the digital euro would function as an additional payment method. As it would be a legal tender, retailers would generally have to accept it – similar to cash.

Retail as the testing ground for a major experiment

A new normality has long since established itself in consumers' everyday lives: Card payments, mobile payments, online shopping - often with providers from the USA. Apple Pay and Google Pay dominate, while Visa and Mastercard act as indispensable bridges. PayPal is also an integral part of digital payment transactions and has established itself as the standard solution for online transactions. The question is not whether the digital euro fits into this landscape, but whether it can hold its own against the established players.

For retailers, the situation is more pragmatic. Payment processing is a cost factor, and every new method first requires adaptation. Checkouts have to be updated, customers informed and processes revised. But there are arguments in favor of the digital euro – especially for smaller retailers.

Advantages – or the hope of an alternative

A hand holds a transparent smartphone showing a virtual euro coin and various app icons; copyright: Adobe Express

A central promise of the digital euro is the reduction of transaction costs. While banks and payment service providers charge fees for every card payment, direct processing via the ECB could be cheaper. In theory. In practice, it is not yet clear how the digital euro will be integrated into the payment system. Who will manage it? Will there be fees? And how will billing work in detail?

Another argument is security. While private payment providers are threatened by cyber attacks, a state-guaranteed digital currency could be more stable. Especially in times of crisis, it would be an advantage for merchants if customers could use a means of payment that does not depend on the solvency of private banks.

And finally, there is data protection. While every card payment leaves traces and commercial providers have developed business models from this, the digital euro promises more anonymous use – at least for certain transaction sizes.

The downsides: Who could lose out if the digital euro comes?

However, not everyone sees the new currency as a relief. Banks could be weakened if customers shift funds from their accounts into the digital euro. This in turn could have an impact on lending.

Large payment service providers also have little interest in losing market share to state competition. The introduction of the digital euro could therefore encounter resistance – regulatory, political and technological.

For retailers themselves, the key question remains whether customers have any incentive at all to switch to the digital euro. Many seem satisfied with the existing payment options. If the digital euro does not offer a clear advantage, it could remain a theoretical option – one that retailers would have to integrate into their systems without it necessarily being used.

The ECB tower with the euro symbol in the foreground, taken from below; Copyright: Unsplash/Mika Baumeister

What is the current status of the digital euro project?

After a two-year investigation phase, the ECB initiated a further preparatory phase in November 2023. A tendering process is currently underway to select suitable technology partners for the development of system components such as the digital wallet, payment processing and security management. The final decision on the introduction of the digital euro is not expected to be made before 2026. If the ECB Governing Council agrees, it could be introduced in 2027 or 2028 at the earliest.

Whether the digital euro will actually play a role in retail payments depends on several factors. The ECB can issue it, but it cannot force anyone to use it. Its success will depend on whether retailers and customers see it as a real alternative to existing payment methods.

Sources: ECB, Tagesschau (German)