The digital euro will have lower costs than traditional systems such as Visa and Mastercard, and will help financial institutions face the challenges of the future. These are the predictions of the Italian member of the executive board of the European Central Bank, Piero Cipollone. The achievement of this objective also passes through a fundamental reason according to the member of the board of the ECB: “We are not a profit-making organization, therefore we will not impose commission costs on commercial operators and this, by definition, will reduce the costs of the entire system”.
The common digital currency
“We need a strong digital payment system. We can achieve this by bringing central bank money into the digital age with the introduction of the digital euro: a form of digital cash, issued by the central bank and available to everyone in the euro area,” Cipollone said during a hearing in the European Parliament’s Economic Affairs Committee. The digital euro is a sort of community bitcoin, a cryptocurrency that will be issued directly by the Frankfurt institution and will be placed alongside traditional banknotes. And the difference with physical money? It lies in the system of guarantees with the digital euro that would be entirely guaranteed by the ECB making deposits much safer than traditional deposits from banking institutions.
What is digital currency?
At the moment 70% of all European online payments are intermediated by non-European companies such as Visa or Mastercard, to whom we have to pay a fee and in general all digital transactions that we do with a debit card or a mobile phone, must always be done through a financial institution or a Pos, a physical terminal that involves the payment of a commission by the merchant. We cannot transfer euros directly into another person’s account as we could do by giving them cash that would go from ours to their pocket, and we have to ask our bank to transfer the money for us.
The digital euro is coming to say goodbye to the costs of POS, bank transfers and current accounts
Digital money, on the other hand, does not need banks to act as intermediaries. This money can be stored in a cloud via a mobile device or computer and transferred instantly to the cloud of another person or company, as if sending an email. With the digital euro, the ECB would be the guarantor of the security of this process.
Developments for banks and consumers
The digital euro “could help banks retain their customers in the face of growing competition in payments,” while also opening up “new revenue streams for banks,” Cipollone said. He continued: “If you compare the digital euro with services like PayPal or Apple Pay, the benefits for banks become even clearer. For example, banks earn nothing if people top up their PayPal wallet via direct debit. And with Apple Pay, banks effectively have to pay a fee just to allow their cards to be used in Apple Wallet. A digital euro would also open up a new revenue stream, allowing banks to provide value-added services to their customers.”
Therefore, the banker notes, “the digital euro would mean that European payment service providers could offer their customers the convenience of using their product anywhere in the euro area, just like international card companies. It would also strengthen the negotiating position of banks vis-à-vis these companies. Finally, banks and other payment service providers would be responsible for distributing the digital euro, thus acting as a single point of contact for digital euro users.”
Anti-evasion tool according to the M5s
For the head of the 5 Star Movement delegation to the European Parliament, Pasquale Tridico, the digital euro will also be “an important tool to reduce tax evasion, which drains enormous resources, equal to 825 billion euros per year according to some estimates, from the public coffers of European countries”. Tax and social security evasion “is a threat to the very survival of the European welfare system and we must therefore fight it with every possible tool”, added the former president of INPS.
