07 February 2024

ECB: The Eurosystem policy response to developments in retail payments

Retail payments are undergoing profound changes that are reshaping the European payments landscape. Digitalisation is playing a major role in this, with a trend towards the increased use of cashless payment instruments, instantaneity and a truly seamless payment experience.

Numerous innovative payment solutions are being developed and offered. These are made possible through the use of new technology and are further characterised by the need to enhance global and cross-border use cases, as well as the consideration that solutions can be rolled out globally.^[1] These trends and developments are not only driven by existing players in the payments market. The payments business also attracts start-up firms, as well as established firms that are new to payments.

Developments in retail payments require multi-faceted actions from a Eurosystem perspective to ensure a safe, integrated, innovative and competitive euro retail payments market, with continued access to public money. The Eurosystem – the European Central Bank and the national central banks of those EU Member States that have adopted the euro – has a mandate to promote the smooth functioning of the payment system from a holistic perspective. From the perspective of retail payments, the smooth functioning of the payment system means ensuring that, in their tangible interaction with the euro, people and businesses are able to make safe and efficient payments and thus their trust in the currency is maintained. To this end, the Eurosystem is responsible for issuing public money, currently in the form of cash, which may possibly be complemented by a digital version, i.e. a digital euro. In addition, the Eurosystem can act: (i) as a catalyst for change, promoting efficiency in the field of retail payments; (ii) as overseer, setting retail payment standards and rules and ensuring compliance; and (iii) as an operator, having the possibility to set up public infrastructures. The trends at work in the retail payments landscape have the potential to bring benefits to consumers and businesses alike. However, they also carry risk and will require the Eurosystem to take action in its different capacities.

This article looks at the changing retail payments ecosystem (Section 2), before turning to the Eurosystem’s multi-faceted policy response (Section 3) and providing perspectives on the way ahead (Section 4)....

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