Digital euro targets card giants

Europe's weakness in digital payments is simple: most of the rails are not European. Around 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). Malta is familiar with that position: when a customer taps a card in Il-Belt or pays online, the system behind the transaction is usually not Maltese and often not European. 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 is not a cryptocurrency. It is a euro, always worth one euro, backed by the central bank rather than by a private company (ECB). In practical terms, it would make the money in your wallet digital: public money held directly, not a deposit owed to you by a commercial bank.

Why no fallback means no control

Visa and Mastercard work well for consumers. The problem is not convenience. It is control. When payment traffic depends so heavily on foreign networks, Europe has limited power over the price, technical standards and resilience of its own digital payments. If those networks raise fees, change their terms or suffer outages, merchants and consumers have few alternatives.

Germany's girocard shows the gap clearly. It works inside Germany, but reaches foreign terminals only by using 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 smoothly across borders, and their combined position has weakened: 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 would create one technical standard so that any phone, card or terminal in the euro area can process payments directly. That would reduce the need to route transactions through American networks. Parliament's draft text would require most businesses that already accept digital payments to accept the digital euro, cap merchant fees, meaning the charges shops pay every time a customer taps a card, and make basic accounts free for users (European Parliament, EU Perspectives).

Banks stand to lose cheap funding

Consumers would get a free public payment option that works online and offline. For offline transactions, Parliament's text says payment data should stay on the device instead of passing through banks or payment processors (European Parliament). Merchants could gain if the new system brings fees down. Visa and Mastercard currently collect roughly €2 billion a year from European merchants in interchange and scheme fees, according to Le Monde (Le Monde).

Banks are in the most awkward position. They would distribute the digital euro and keep the customer relationship, but they could lose deposits. If people move money from ordinary bank balances into digital euro wallets, banks lose a cheap source of funding they now use to issue loans. That can feed into higher borrowing costs for households and businesses, including in small markets such as Malta where banking relationships remain unusually concentrated and personal.

The scale of that risk is disputed. 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 shift out of bank accounts (Marketscreener/Reuters). That is a scenario, not a forecast. But it explains why German banks have called the project a "state parallel offer" with no clear added value (Handelsblatt). The cost of building the system is also contested: the ECB estimates €4 billion to €5.8 billion over four years; banking-sector figures run as high as €18 billion to €30 billion (Marketscreener/Reuters).

The real test is adoption

The committee vote is only one step. Plenary approval, negotiations between Parliament and member states, and a final Council decision still have to follow. 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 and businesses will actually use it. A payment network that nobody chooses is sovereignty only in legal text. Adoption rates by country, the real cost for merchants after integration, and whether banks promote the product or quietly bury it will matter more than the regulation's language. Europe has correctly identified its dependence. Changing the habit, including in places like Malta where payment habits are already tied to global card networks and online services, is the harder part.