Digital euro targets Visa and Mastercard

Every tap of a card looks local. The shop is local, the bank account is local, the price is in euro. But much of the machinery underneath is not. About two-thirds of euro-area card transactions run through Visa and Mastercard (ECB, Journal of Competition Law & Economics). Thirteen of the euro area's 21 countries have no domestic card scheme that works at shop tills (Bundesbank).

That is the dependency the EU is trying to reduce. On 23 June, the European Parliament's economics committee voted to advance the digital euro regulation, sending the file towards a full plenary vote (European Parliament).

The digital euro would be electronic cash issued by the ECB, the European Central Bank that manages the euro, and distributed through ordinary banks. It would not be a cryptocurrency. It would be a euro, always worth one euro, backed by the central bank rather than a private company (ECB). In practical terms, it would turn the public money in your wallet into something you could hold and spend digitally, rather than leaving every digital payment to private bank deposits and card networks.

Why no fallback means no control

Visa and Mastercard do their job well. Payments move quickly, fraud is managed, and consumers rarely see the plumbing. The problem is not performance. The problem is control.

When digital payments run largely on foreign-owned networks, Europe has limited power over the price, technical standards and resilience of its own payments system. If fees rise, terms change or a network goes down, merchants and consumers have few alternatives.

Germany's girocard shows the gap clearly. It works inside Germany, but when it reaches foreign terminals it does so by relying on Visa or Mastercard infrastructure (Bundesbank). For cross-border card payments within the euro area, the share handled by non-European networks approaches 100%, according to ECB officials (Le Monde).

France has Cartes Bancaires, Italy has Bancomat, the Netherlands has iDEAL. None works seamlessly across borders. Their combined position has weakened too: international card schemes rose from roughly 56% of euro-area card payments in 2017 to about 61% in 2022 (Journal of Competition Law & Economics).

The digital euro is meant to create one technical standard so any phone, card or terminal in the euro area can process payments directly. Transactions would no longer need to be routed through American networks. Parliament's draft would require most businesses that already accept digital payments to accept the digital euro, cap merchant fees, meaning the charges shops pay when customers tap, and make basic accounts free for users (European Parliament, EU Perspectives).

Banks stand to lose cheap funding

For consumers, the offer would be a free public payment option that works online and offline. For offline transactions, Parliament's text says payment data would stay on the device instead of passing through banks or payment processors (European Parliament).

For merchants, the prize is lower cost. Visa and Mastercard currently collect roughly €2 billion a year from European merchants in interchange and scheme fees, according to Le Monde (Le Monde). If a public alternative forces fee competition, shops gain.

Banks face a more awkward bargain. They would distribute the digital euro and keep the customer relationship, but they could also lose deposits. If households and businesses move money from current accounts into digital euro wallets, banks lose a cheap source of funding they use to make loans. That can feed through into higher borrowing costs.

The scale of that risk is still contested. According to Reuters reporting, ECB simulations suggest that with a €3,000 holding cap per person, up to €699 billion, or 8.2% of euro-area household and business deposits, could move out of bank accounts (Marketscreener/Reuters). That is a scenario, not a forecast. It does explain why German banks have described the project as a "state parallel offer" with no clear added value (Handelsblatt).

The bill for building it is also disputed. The ECB puts the cost at €4 billion to €5.8 billion over four years. Banking-sector estimates run as high as €18 billion to €30 billion (Marketscreener/Reuters).

The real test is adoption

The committee vote is only one stage. The file still needs plenary approval, negotiations between Parliament and member states, and a final Council decision. The ECB has pointed to pilot transactions from mid-2027 and a possible first issuance in 2029 (ECB, EUNews).

The harder question is whether people will use it. A payment network that nobody routes money through gives Europe sovereignty on paper. What matters will be adoption by country, the real cost to merchants after integration, and whether banks promote the product or quietly leave it in the background.

Europe has diagnosed the dependency accurately. Changing the habit will be the harder job.