The digital euro – opportunities for corporates
The financial world is undergoing dynamic change, driven by digitalization and technological innovation. These developments have also fundamentally changed the way we pay, making it increasingly possible to do without paper money and coins. The planned introduction of the digital euro responds to the growing trend towards cashless payments and opens up new opportunities for businesses across Europe. The central bank currency is designed to be a secure, efficient and universally accessible digital alternative for payments throughout the euro area.
14. November 2024 | Reading time 5 minutes
Strengthening European payments
The Eurosystem, consisting of the European Central Bank (ECB) and the national central banks, is working intensively on the design of the digital euro, which will be introduced in 2027 at the earliest. One of the aims of this European central bank currency is to strengthen monetary union and the competitiveness of European companies.
The digital euro will offer corporates and private person a secure and simple additional payment option. Domestic and cross-border transactions will be processed quickly and cost-effectively, and acceptance problems with different payment methods and fee differences for transactions in European countries will be minimized. Today’s highly fragmented payments in Europe will be standardized with the planned introduction of the digital euro and the European Monetary Union will be strengthened.
Cashless payments popular with businesses
Cashless payments are already enabling companies to operate more efficiently and securely. It eliminates the need for change, cash transports and the time-consuming counting of daily takings, and minimizes the risk of theft and counterfeiting. Digital transactions can be tracked at any time, and processing is simple and cost-effective, even for high-volume transactions. Online payments are also beneficial for companies’ liquidity management, as they are processed quickly – sometimes even in real time.
The digital euro promises additional benefits for businesses:
- Strengthening European companies and trade through a single digital currency and payment processes
- An additional payment option for enterprises for both purchasing (B2B) and selling (B2C)
- Additional innovative products from banks that can offer new, customized services to their customers via the central bank’s digital platform
And there is another important strategic aspect: dependency on non-European payment service providers such as Mastercard, Apple Pay or Paypal could be reduced with a standardized European digital payment alternative.
Cash stays – flexibility increases
According to the current draft legislation, the digital euro will complement the existing cash system, allowing companies and private consumer to continue using cash while benefiting from the advantages of digital currency. This will give busnisses the opportunity to offer their customers another payment alternative and to respond to individual needs. The fact that cash remains in circulation is also an advantage in the event of a crisis, as it would still be available as a means of payment in the event of a prolonged power outage, for example.
As things stand today, the central bank accounts will have a per-user limit to prevent a “digital bank run” in the event of nervousness in the financial markets. However, it shall also be possible to use the accounts flexibly beyond these limits. The waterfall principle is expected to apply: Excess amounts are automatically settled via the current account held at a bank, which is directly linked to the central bank account.
The digital euro is intended as a complement to cash. Corporates can therefore continue to use cash and at the same time benefit from the advantages of the digital currency.
The role of banks
Banks will play a central role as financial intermediaries in the introduction and use of central bank money. They will support the opening of central bank accounts, the onboarding of customers and the know-your-customer process. This will further strengthen the relationship between businesses and their banks. Enterprises will also be able to benefit from tailor-made products that financial institutions can offer as an additional service on the digital euro platform.
Conclusion
The planned introduction of the digital euro will be an important step in the development of the European financial system. Businesses can benefit from efficient, secure payments and new, innovative products. Hamburgische Handelsbank will accompany its customers through all phases of the introduction of the digital euro and help them make the most of the central bank currency.
Our services for your company
We deal with both assets and liabilities for our clients, because both sides manifest a lived business relationship. Our high level of international expertise with our small European network in London, Luxembourg and Piraeus reflects both international standards and national particularities.
We manage interest rate and currency risks for you using tailor-made products. We will work with you to find the optimum solution. This allows you to hedge risks, improve your company’s liquidity and strengthen your balance sheet.
At the heart of your business payment transaction flows is an HCOB account with customized, international and muli-currency card solutions that together facilitate complex payment flows.
High-performance payment transactions are all about being able to execute transactions for tens of thousands of your customers simultaneously in various currencies, with fast processes in eBanking and modern subscription procedures via app.