As Fabio Panetta, member of the Executive Board of the ECB, suggested at the last Annual Congress of the European Economic Association in Milan, “the market for payments is two-sided”. In this sense, the success of the digital euro would largely depend on its adoption not only by consumers but also by merchants.
Much of the discussion so far around the digital euro has focused on the first group of stakeholders, which has led to vibrant policy and academic debates on privacy issues, security factors, safety of funds or accessibility matters. However, less attention has been given to merchants’ willingness to support this new means of payment.
As is clear, the design of the digital euro needs to add value to the current state of play of retail payments, satisfying preferences across merchants. According to the BIS and the ECB, when considering what payment instrument to accept, the merchant is primarily concerned with the cost of acceptance (onboarding and ongoing), the ease of use, and the integration with existing payment systems. These concerns become even more critical for small merchants where the use of electronic payment instruments is still lagging.
The latter has materialized in Nigeria during the deployment of its CBDC, the eNaira. According to local sources, only 80 merchants signed up to accept the CBDC (Nigeria’s population exceeds 200M). In order to address this low uptake, the Nigerian Central Bank approved a rewards scheme for end users and merchants, in order to foster their willingness to accept the eNaira. These rewards include providing merchants with the required promotional materials and subsidizing the current Merchant Service Charge by 50%.
Obviously, Nigeria and the Eurozone do not represent comparable economies. However, the experience of countries at an advanced level of CBDC implementation can help the ECB to anticipate merchant requirements.
Widespread merchant acceptance should be seen as a basic element of success for CBDC adoption. In this sense, before orienting the discussions towards creating exceptions to digital euro as legal tender (and thus exempting some merchants from accepting the CBDC), the Euro area should focus on paving the way and making the acceptance of the digital euro more appealing to merchants, with specific measures encouraging its use.
It is expected that these topics will be further discussed during the High Level Conference organized jointly by the European Commission and the European Central Bank in November, where representatives of the European Central Bank will reflect on the future legislative framework enabling the digital euro not only for citizens but also for businesses.
About the author - María Saenz de Buruaga is a Senior Consultant at Monitor Deloitte.
European Central Bank, 2021, “Central Bank Digital Currency: functional scope, pricing and controls”, https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op286~9d472374ea.en.pdf
European Central Bank, 2022, “The digital economy, privacy and CBDC”, https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2662~fa8429a967.en.pdf
Bank for International Settlements, 2021, “Central Bank Digital Currencies: user needs and adoption”, https://www.bis.org/publ/othp42_user_needs.pdf
Bank for International Settlements, 2022, “CBDCs in emerging economies”, https://www.bis.org/publ/bppdf/bispap123.pdf
This article was prepared by the author. The views expressed in this article are the author’s own and do not necessarily reflect the views of the Digital Euro Association.
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