The European Central Bank (ECB) has issued a report stating that the digital euro should be distributed through a range of form factors including apps, physical and digital cards, and other means that enable both NFC and QR code in-store payments. Digital Euro NFC and QR
The report, which is the third on the investigative phase of the digital euro project, also highlights how the central bank digital currency (CBDC) could be integrated with existing payment service providers (PSPs) across a range of use cases, providing core, optional and value-added services. The report emphasizes that standardization in technical interaction between payers and payees is crucial for the successful adoption of the digital euro across the euro area.
Digital Euro to Offer NFC and QR Payments, Enhance Financial Inclusion
In-store payments with the digital euro could be enabled using both NFC contactless payments and QR code-based payments, with the latter envisaged to foster a new European infrastructure. The report also notes that NFC technology provides a highly convenient end-user experience, familiar to consumers in the euro area. Additionally, NFC is the only widespread technology that could facilitate the development of a convenient offline payment method, which could foster financial inclusion. Emerging technologies for payment initiation would be monitored and could be adopted at a later stage, if proven to provide benefits to end-users.
The report further mentions that end-users could access and use the digital euro either through PSPs’ existing online banking/payment apps or through a digital euro app provided by the Eurosystem. The Eurosystem believes that PSPs, as defined in PSD2, would be best placed to distribute the digital euro. Onboarding should use established procedures for opening a payment account as much as possible and oblige PSPs to utilize available information as often as possible. The development of value-added services will be left fully to the market.
ECB Plans Comprehensive Design for Digital Euro Amid Global CBDC Developments Digital Euro NFC and QR
The ECB plans to present a high-level comprehensive design for the digital euro later in the spring and continue to analyze distribution options, develop a rulebook for the digital euro scheme, and engage with stakeholders. The governing council will review the investigation’s outcome in autumn 2023 and decide, on this basis, whether to move on to a subsequent project phase. Digital Euro NFC and QR
The ECB’s approach to the digital euro is in line with other central banks worldwide, including the People’s Bank of China, which is already piloting its digital yuan, and the Bank of Japan and the US Federal Reserve, which are both currently conducting research on the viability of their own CBDCs. However, while the digital euro project is in its investigative phase, China is already piloting its digital yuan in several cities and has even conducted transactions on e-commerce platforms such as Alibaba and JD.com. The ECB’s measured approach could be attributed to the complexities of integrating a digital currency with existing PSPs’ systems, which could pose potential security and technical risks.
As the ECB continues to analyze distribution options and develop a rulebook for the digital euro scheme, it remains to be seen how the project will progress and how it will compare to other CBDC developments globally.
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