Comprehensive Payments Strategy

Central bank money is a safe and trusted settlement asset in both retail and wholesale markets. As the digital economy grows and, with it, digital payments, the role of central bank money in the payment system must be preserved to ensure continued trust and stability. Supporting digital as well as physical central bank money secures the monetary anchor of a two-tiered monetary system, and therefore the singleness of money throughout the euro area.

Strengthening strategic autonomy and monetary sovereignty of the euro area is actively supported by the launch of new infrastructure. Particular emphasis is placed on reducing dependence on non-European payment infrastructure and schemes, with a view to strengthening European sovereignty in critical payment services and containing the risks that stem from geopolitical or technological dependences. 

The Eurosystem envisages an integrated, competitive and innovative payments market that benefits consumers and businesses. Its pivotal aim is to develop pan-European payment solutions that cover all relevant use cases and receive broad acceptance, to improve efficiency, reduce transaction costs and enhance user 
experience. At the same time, payment infrastructures and services need to evolve in order to support new technologies and to ensure private sector innovation. It is estimated that fostering a more integrated and efficient ecosystem, especially for wholesale transactions, would support the achievement of the broader goals of the European Commission's savings and investments union.

The effective introduction of new forms of digital money, in conjunction with efficient, secure and integrated euro payment systems, can play a supportive role in reinforcing the international role of the euro. This would bring tangible benefits, including lowering borrowing costs, reducing exposure to currency fluctuations and providing insulation from sanctions and coercive measures. 

Tokenisation can alter the structure of the payments ecosystem by introducing new ways to represent, transfer and settle value through programmable platforms that improve efficiency and transparency. However, in a system based on both public and private money, the process described above does not replace existing forms of money, but instead influences both their interoperability as settlement assets and their supporting infrastructures. 

In a tokenised ecosystem, tokenised central bank money is the foundational settlement layer and plays a critical role in preserving the singleness of money. In this ecosystem, tokenised private settlement assets (tokenised deposits-stablecoins) will be complementary and will not replace central bank money in its core role. Thus, they must be EU-governed, euro-denominated and properly designed and regulated to support innovation while ensuring monetary sovereignty and financial stability.

The development of a single European market for tokenised, euro-denominated settlement assets based on EU infrastructure is integral to combining technological innovation with financial sovereignty and resilience and can help to ensure a sufficient degree of strategic autonomy in payments.

Combining DLT and tokenisation is considered critical for modernising financial markets, as it enables the integration of the issuance, transfer and settlement of financial instruments within a single, programmable and automated environment. In this way, the complexity of existing structures is reduced, the efficiency of transactions is enhanced and the ground is laid for new forms of digital settlement infrastructures at the European level.

To this end, the ECB Governing Council approved a dual-track strategy:

• Short-term track (Pontes) to pilot link between distributed ledger technology platforms and TARGET Services by end-2026.
• Long-term track (Appia) to shape future-ready, innovative, integrated financial ecosystems.

The Eurosystem also explores further upgrades to the existing TARGET infrastructure, including the extension of T2 system’s operating hours and enhancing operational resilience, so as to address the needs of an increasingly real-time economy, while contributing to the EU’s objectives of competitiveness, financial stability and strategic autonomy.

 

Challenges in B2B payments mirror the broader developments across the entire payments ecosystem. Particular emphasis is placed on adopting common data exchange standards, benefiting from ISO 20022, rolling out the legal entity identifier (LEI) and further automating processes (straight-through processing), with a view to optimising liquidity management. However, strong dependence on payment providers, paired with a lack of standardisation among ERP companies, APIs and B2B platforms, also creates frictions and hinders the full leverage of technology.

At the same time, offering instant payments across the EU, alongside electronic invoices, creates opportunities for improving B2B payments. The Eurosystem continues to invest in TIPS and is working to expand interlinking to other fast payment systems and extend access to non-bank payment services providers. 

Taking advantage of the economies of scale of instant payments via TIPS requires payment service providers to better respond to the needs of businesses, through improved services, greater standardisation, increased transparency and the development of innovative solutions for instant B2B payments.

The digital euro is a digital form of cash that would be universally accepted for use across the euro area (in retail or person-to-person transactions) in both physical and digital environments. It would be free for basic use as a public good and embed the highest privacy and data protection standards. The digital euro and the pan-European private solutions are complementary innovations. The Eurosystem seeks to foster a resilient, integrated, innovative and competitive euro retail payments market with EU-governed, pan-European, market-led solutions for retail payments at the point of interaction (POI).

Through new DLT-based technological infrastructure and the Eurosystem’s interoperability solutions, automated cross-currency payment-versus-payment (PvP) transactions between different central banks are being explored and supported, thus reducing the cost and time of cross-border flows. The relative actions are in line with the G20 roadmap for 
faster, cheaper, more transparent and more inclusive cross-border payments, by both expanding the interoperability of instant payment systems and taking advantage of the opportunities stemming from tokenisation and DLT.