EU Seeks Digital Euro as Alternative to US Payment Giants

Europe's dependence on US-based payment systems is seen as a risk by EU leaders, who are exploring alternatives to reduce their reliance. The European Central Bank (ECB) is pushing for approval of the digital euro, which would allow for electronic payments within the EU without using foreign infrastructure.

The ECB warns that this dependence leaves Europe exposed to political pressure or sudden disruption, citing an example from Russia where US sanctions forced Visa and Mastercard to shut down their services. This led to ordinary citizens being unable to access funds or buy goods.

Card network fees have risen sharply in recent years, with US giants Visa and Mastercard accounting for 61% of card payments in the euro area. The ECB aims to strengthen competition and help businesses and consumers save money by introducing direct payments between bank accounts.

The digital euro will be an electronic form of currency issued and guaranteed by the ECB, complementing cash and existing banking services. It will allow both online and offline payments, with commercial banks and payment service providers offering digital euro services to their customers. Merchants are expected to pay lower fees than they currently face for card transactions.

The pilot programme for the digital euro is set to start in 2027, involving 36 payment service providers to test the future currency. The final phase of negotiations between the European Parliament and governments on how the digital euro will operate is under way, with approval expected by the end of this year.