Retailers welcome digital euro as an alternative to costly card payments

In principle, the German Retail Association (Handelsverband Deutschland, HDE) supports the goals of the European Central Bank (ECB) and the EU Commission to introduce a digital euro. "Strengthening European sovereignty, protecting anonymity and promoting competition and innovation in payment transactions are key concerns that play an important role in day-to-day business between retailers and consumers," writes the lobby association with members such as Aldi, Lidl and Amazon in a recently published position paper. However, the main challenge is still cost planning.

The German retail sector carries out around 20 billion transactions every year. An efficiently designed digital euro could "optimize existing payment systems" and "create a basic infrastructure for innovative providers", says the HDE. It could also serve as the basis for standard payments in the digital space – "comparable to the role of cash in bricks-and-mortar retail".

Current non-cash payment systems such as debit or credit cards or purely online solutions such as PayPal fulfill their function, explains the association. However, they are associated with considerable costs for retailers. The market dominance of private providers means that retailers are confronted with constantly rising costs without being able to negotiate effectively. For end customers, the associated differences between the means of payment are often not transparent. Previous regulatory measures have not been able to break through this dominance.

"Discipline" payment providers

The HDE sees the digital euro as a real alternative. Especially for payments where no additional added value is required, it has the potential to "discipline established procedures". The prerequisite is a basic variant "that is free of charge for customers and works reliably".

The association considers an acceptance obligation for retailers, which the black-red coalition wants to introduce for non-cash means of payment in general, to be counterproductive. Almost every stationary store is already equipped with terminals. An obligation to accept the digital euro would affect almost all businesses, the HDE points out. In order to avoid high acceptance costs, retailers would "only have the option of withdrawing from all digital payment methods". This would not be realistic in practice, "as customers expect cashless payments". Otherwise, at least "a purely transaction-based merchant fee would have to be set as close to zero as possible" and "strict supervision of payment service providers would have to be ensured".

Offline capability is crucial

The current drafts for the digital euro provide for "the costs of the issuing side" to be borne by the acceptance point in a so-called four-party system, the lobby criticizes. This "interchange model" originates from the credit card business and has led to high costs for merchants for years. The latter would have to pay a fee to the customer's bank for each transaction – in addition to the fees for technical service providers and those for their own financial institution.

This approach must not be adopted for the digital euro under any circumstances, demands HDE Managing Director Stefan Genth. Such a cost system would be inefficient and lead to "competition for the highest fees".

The HDE therefore also considers offline capability to be necessary. Many non-cash payment methods are currently dependent on a stable internet connection. There are no alternatives in the event of failures. The ability to use the digital euro offline is therefore "of particular interest". A smartcard option is also important for consumers to be able to participate in digital payment transactions without a smartphone. The added value of the digital euro is controversial. Last year, for example, Bundesbank President Joachim Nagel spoke out in favor of its introduction.

(wpl)