ECB Selects Amazon, Nexi, Others for Digital Euro Prototype Exercise

The European Central Bank (ECB), the apex bank of the 19 European Union countries that have adopted the euro, has selected five companies to participate in a digital euro payment prototyping exercise.

ECB in a statement published on Friday said it will partner with the companies to “develop potential user interfaces for the digital euro.”

The firms were chosen from a pool of 54 payment providers that responded to ECB’s expressions of interest call made in April.

The payment processors will each focus on specific payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term usage of the digital euro, ECB noted in the statement.

The five selected companies are American multinational technology firm, Amazon, Italy-based paytech company, Nexi, Spanish retail bank, CaixaBank, French multinational payments solution provider, Worldline, and the EBC-backed payment integration initiative, EPI.

The companies will test for the following, respectively: e-commerce payments, point-of-sale payments initiated by the payee, peer-to-peer online payments, peer-to-peer offline payments, and point-of-sale payments initiated by the payer.

ECB explained: “The aim of this prototyping exercise is to test how well the technology behind a digital euro integrates with prototypes developed by companies.

“Simulated transactions will be initiated using the front-end prototypes developed by the five companies and processed through the Eurosystem’s interface and back-end infrastructure.

The central bank pointed out that it has no plan to re-use the prototypes in the subsequent phases of the digital euro project.

The Digital Euro Project

On 2 October 2020, ECB published a report examining the possibility of issuing a central bank digital currency (CBDC) or digital euro for retail payments by businesses and citizens in the European Union.

In July last year, the Governing Council of the ECB followed up this report by launching a digital euro investigation project to be carried out in 24 months.

Additionally, ECB inaugurated a 30-member Digital Euro Market Advisory Group comprising of senior professionals from the retail payments industry.

The project was designed to address key issues regarding the design and distribution of a digital euro.

“A digital euro must be able to meet the needs of Europeans while at the same time helping to prevent illicit activities and avoiding any undesirable impact on financial stability and monetary policy,” the Governing Council explained.

ECB in the new statement said the prototyping exercise “is an important element” in this ongoing two-year investigative project.

The central bank noted that this phase of the project is expected to be completed during the first quarter of 2023.

According to the ECB President, Christine Lagarde, if the Eurosystem finally decides to start a formal CBDC project after the conclusion of the project, the central bank could launch a digital currency by 2025.

If finally issued, the digital euro is expected to complement cash deposits, create synergies with the payment industry and support the digitisation of the European economy.

In addition, it is expected to ensure access to central bank money, help avoid the risks of unregulated payment solutions and preempt the uptake of foreign currencies.