European banks could face costs up to €30 billion due to the potential introduction of the digital euro.
Going Digital: The High Price Tag of a Digital Euro for European Banks
It's the talk of the financial town: the digital euro. But, according to a recent study by PwC, this digital transformation comes with a hefty price tag for European banks. The study claims that switching over for a select group of 19 banks could amount to over 2 billion euros, with potential eurozone-wide costs ranging between a staggering 18 and 30 billion euros, depending on the scenario.
Commissioned by the three European Credit Sector Associations (ECSAs), the PwC study delves into the costs associated with the digital euro. Central banks in the eurozone have been mulling over the idea of a digital version of their common currency for years. Introducing a digital euro would allow European central banks to challenge the dominance of private providers, primarily from the US such as PayPal, Mastercard, and Visa, in the European digital payments market.
But not everyone is on board. Most German banks and savings banks view the prospect of a digital euro with skepticism. They question the additional benefits it would provide over existing payment methods. Established systems like real-time transfers are more than capable of meeting speed and security requirements. Adding a parallel system could just mean extra costs and complexity without offering any discernible advantages for customers.
So, what would drive up these costs? Let's dive into the details. The study reveals that costs will pile up from updating mobile banking apps, web banking, and physical payment cards, as well as from adjusting payment terminals in retail. The ATM infrastructure, too, would require updating, with PwC estimating an average cost of around 9 million euros per bank just for this transition.
On top of these costs, introducing the digital euro could tie up nearly half of the specialist staff of the banks for several years, potentially hampering innovations in the payments sector due to a staffing shortage.
The European Central Bank has recently expressed satisfaction with the progress of the digital euro while reiterating its significance. However, they've also added some pressure on the European Union, as there remains no legal framework for the introduction of digital central bank money. So, let's keep our eyes peeled for the ongoing developments in this digital landscape.
The PwC study, commissioned by European Credit Sector Associations, reveals that the costs of transitioning to a digital euro could potentially be as high as 30 billion euros for banks in the eurozone, with individual banks facing costs of over 2 billion euros in updating their mobile banking apps, web banking, payment cards, payment terminals, and ATM infrastructure.
Moreover, the digital euro's introduction could tie up nearly half of the specialist staff of banks for several years, potentially hindering innovations in the banking-and-insurance industry due to a staffing shortage.
