A recent survey by BEUC, the European Consumer Organisation, conducted across 10 euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More area countries, highlights the enduring importance of cashMoney in physical form such as banknotes and coins. More and the challenges ahead for the digital euro’s adoption.
Consumer Priorities for Digital Payments
The survey reveals what consumers value most in digital payments:
- Security and reliability (55% of adults and 53% of teens) are top priorities.
- Ease of use (53%) and low or no fees (49%) are critical.
- Privacy (42%) and the ability to get refunds in case of fraud (44%) are highly valued.
- Universal acceptance (36%) is important, especially in countries like Germany, Portugal, and Austria.
Despite these preferences, 55% of respondents have experienced difficulties with digital payments, ranging from technical errors to security concerns. 22% of adults and 18% of teens reported being victims of fraud or security breaches in the past five years, underscoring the need for robust fraud prevention and dispute resolution mechanisms.
The Persistence of Cash
Cash remains deeply embedded in consumer habits:
- 85% of consumers believe cash should continue to be widely accepted without additional costs.
- 52% of adults and 46% of teens fear losing the ability to choose between paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More methods in the future.
- 49% of teens frequently use cash in physical stores, compared to 42% of adults. This attachment is partly driven by parental restrictions (42% of teens are not allowed to use digital payments) and a preference for traditional methods.
The survey reveals that cash is seen as a fallback option, particularly among older adults and those with lower digital literacy. However, younger consumers (18-34) are more open to digital alternatives, provided they are secure, easy to use, and free of charge.
Key Challenges for the Digital Euro
1. The Need for a Functioning Cash Ecosystem
For the digital euro to successfully mimic cash-like properties, it is imperative to ensure a functioning cash ecosystem. Cash provides anonymity, universal acceptance, and resilience—qualities that the digital euro must preserve. Without a thriving cash infrastructure, the digital euro risks failing to meet the needs of consumers who rely on these attributes.
2. Privacy Concerns
- 81% of adults and 72% of teens are concerned about privacy violations.
- Consumers are more willing to share data for fraud prevention (42% of adults, 47% of teens) than for commercial purposes (26% of adults, 33% of teens).
- The ECB’s proposal includes offline functionality to mimic cash-like privacy, but questions remain about how this will be implemented without compromising security or usability.
3. Usability and Accessibility
- 55% of adults and 51% of teens have faced difficulties with digital payments, such as declined transactions, lack of skills, or technical issues.
- 39% of adults and 46% of teens have helped others make digital payments, often due to a lack of digital skills.
- The digital euro must be inclusive, offering in-person support and accessibility features for people with disabilities or low digital literacy.
4. Communication and the Shift in Central Bank Neutrality
The need for communication on the digital euro also changes the context of the traditional neutrality of central banks toward payments. Historically, central banks have maintained a neutral stance, allowing market forces to influence the use of different payment instruments. However, by actively promoting the digital euro, the ECB will also need to actively promote cash. This is essential to ensure that the digital euro does not inadvertently undermine cash’s role in the economy but rather complements it as a public good.
- 58% of adults and 49% of teens have heard of the digital euro, but only 11% of adults and 9% of teens feel informed about it.
- Awareness is highest among digitally literate men and lowest among those with low digital literacy in rural areas.
- The ECB and policymakers must clearly communicate that the digital euro is public moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More, unlike cryptocurrency or stablecoins.
Policy Recommendations
To address these challenges, BEUC propose several measures:
- Enhance privacy for both online and offline transactions, ensuring compliance with GDPR.
- Guarantee free basic services, aligning with consumer expectations that digital payments should be cost-free.
- Prioritize ease of use, integrating the digital euro into existing payment apps and ensuring compatibility with smartphones and potential smart cards.
- Strengthen fraud protection, including clear refund procedures and dispute resolution mechanisms.
- Ensure universal acceptance, mandating that merchants accept the digital euro alongside cash and other payment methods.
- Target communication efforts toward groups with lower awareness, such as teens and adults with low digital literacy.
Geopolitical and Economic Context
The digital euro is also a response to geopolitical risks, such as reliance on non-European payment systems (e.g., Visa, Mastercard). By creating a pan-European payment solution, the ECB aims to:
- Reduce dependence on foreign infrastructure.
- Improve resilience in case of disruptions (e.g., cyberattacks, political sanctions).
- Foster innovation in digital payments, such as conditional payments (e.g., paying for a train ticket only upon arrival).
However, the digital euro’s success depends on consumer trust. If it fails to deliver on privacy, security, and usability, uptake may be limited, as seen in other central bank digital currency (CBDC)A digital payment instrument, denominated in the national unit of account, and a direct liability of the central bank, like banknotes. A general purpose CBDC can be used by the public for day-to-day payments like cash. More projects (e.g. Nigeria, Bahamas, ECCB).
The Road Ahead
The digital euro is still in the preparation phase, with legislative discussions ongoing in the European Parliament and Council. Key decisions include:
- Holding limits to prevent the digital euro from becoming a store of valueOne of the functions of money or more generally of any asset that can be saved and exchanged at a later time without loss of its purchasing power. See also Precautionary Holdings. More.
- Compensation models for banks and payment service providers.
- Offline functionality to ensure accessibility for all consumers.
The ECB emphasizes that the digital euro will not replace cash but will offer a public, secure, and efficient alternative to private digital payments. Its success will depend on balancing innovation with consumer protection, ensuring that the digital euro meets the needs of all Europeans—from tech-savvy teens to cash-reliant older adults.
The adption of the digital euro hinges on addressing consumer concerns about privacy, security, and usability. For the digital euro to truly replicate the strengths of cash, it must coexist with a thriving physical cash infrastructure. Cash remains a critical fallback and a trusted payment methodSee Payment instrument. More, especially in scenarios where digital systems may fail or where users value the privacy and tangibility of physical money. Without a strong cash ecosystem, the digital euro risks losing the very qualities that make cash indispensable.
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