Guest Article: Digital Euro – What Lies Ahead for Businesses?

The euro may soon undergo a significant transformation with the introduction of a digital version. This would profoundly change the way payments are made in Europe. But what does this mean for businesses? 

After a two-year investigation phase, the European Central Bank (ECB) has decided to technically and legally prepare for the digital euro. A final decision is yet to be made. Nevertheless, the digital euro could become reality before 2028, complementing traditional cash. For merchants, this means a possible expansion of the payment options they can offer their customers. 

How the Digital Euro Is to Be Implemented

The digital euro is intended to function much like cash, only without the physical notes and coins. Payments would likely be made via smartphone or chip card, without additional fees and with high standards of data protection. The digital euro would be suitable for transactions between individuals, in shops, online and even for government payments. It is set to be available for both online and offline use, in real time. 

Intermediaries, mostly banks, would be responsible for issuing the digital euro. Users could exchange cash for digital euros at ATMs and vice versa. Online payments with the digital euro would be directly linked to a bank account, whereas for offline use, funds would need to be loaded onto a special wallet in advance. 

The Digital Euro Is Efficient and Strengthens Europe

The digital euro aims to make payments, especially in international trade and on the internet, easier, faster, and more secure – throughout the entire eurozone. By contrast, everyday use of the girocard is still hampered by barriers: for instance, it cannot always be used seamlessly or free of charge in other European countries, let alone to withdraw cash. For online purchases, the girocard is often not accepted – typically one needs an additional debit or credit card, which usually means relying on US-based providers such as VISA or Mastercard. 

Furthermore, a digital euro would strengthen the strategic autonomy and monetary sovereignty of the eurozone, making Europe less dependent on non-European payment service providers like Visa or Mastercard, which currently dominate the market. At the same time, it would provide a platform that would make it easier for payment service providers within Europe to offer their own Europe-wide solutions. 

Additionally, a digital euro could facilitate financial innovations such as smart contracts and programmable money, supporting automated payments and finance processes. This would be particularly beneficial for microtransactions in the context of the Internet of Things or for autonomous interactions between machines, such as in the field of autonomous driving. 

What Are the Challenges of the Digital Euro?

Introducing a digital euro also brings challenges. Perhaps the most significant is convincing consumers of its added value. The digital euro will only be able to establish itself as a payment method if it is accepted as trustworthy. 

Trust mainly depends on three factors: the payment method must be secure, reliable, and preserve privacy. The European Central Bank has therefore made these factors key design features of the digital euro. 

First, the digital euro system must be especially well protected against cyberattacks and hacking. Second, a modern technical infrastructure is needed to ensure smooth transactions. If, as a consumer, you are repeatedly unable to pay with your debit or credit card due to technical problems, you will revert to using cash next time. For the digital euro, outages or malfunctions must be avoided at all costs. Third, the digital euro must not be suspected of collecting illegitimate data. The plan is that personal transaction details will only be known to the payer and the payee. The main challenge, therefore, will be to inform consumers about all protective measures in place. 

What Does This Mean for Businesses?

Introducing a digital euro could offer significant advantages for the retail sector. Currently, merchants incur costs when customers use digital payment methods. A digital euro system would represent a notable improvement over the fragmented payments landscape of today. Merchants would benefit from a shared infrastructure. The digital euro would be recognised throughout the eurozone, potentially simplifying commerce substantially by offering a unified and more cost-effective payment solution. 

Additionally, the digital euro would provide access to a broader target audience, enabling merchants to reach consumers instantly. In the medium term, this could result in higher conversion rates, positively affecting revenue and profitability, as consumers trust and recognise a payment instrument backed by the European Central Bank. 

Moreover, the digital euro would allow merchants to receive payments in real time without incurring additional fees. This could lower operating costs and improve liquidity, which, in the medium term, could also boost conversion rates. 

What Happens Next?

In autumn 2025, the ECB Governing Council will decide whether to proceed to the next preparation phase. Until then, the European Council and European Parliament must establish the legal framework and select potential providers for the required platform and infrastructure. Several pilot projects are also planned to ensure the digital euro meets both the requirements of the Eurosystem and the needs of consumers. 

While many details remain to be clarified, the digital euro could be ready for use in about four to five years. Businesses that adapt early could be among the first to benefit from a new, more efficient, and secure payments landscape. 

About the Author:

Panagiotis Kriaris is an experienced payments specialist and works as Commercial Director Business Development at Unzer. Unzer provides payment and commerce solutions for more than 90,000 merchants and organisations across Europe. The company employs staff in eight offices in Germany, Austria, Denmark, and Luxembourg.