Digital euro inches closer to being a legal tender

By Steve UMIDHA

After 4 years of waiting, the digital euro – a project of the European Central Bank (ECB), mooted in July 2021, for the possible introduction of a central bank digital currency (CBDC), looks set to come to fruition after the ECB concluded a framework agreement to deliver the much-anticipated digital form of cash to everyone in the euro area.

Advancing the preparation of a digital euro, the ECB has announced the conclusion of the framework agreements for each of the five digital euro negotiated procurement procedures.

A cooperation between Giesecke+Devrient (G+D), partnering with Nexi and Capgemini, has since been picked as the first-ranked tenderer in the framework agreement to provide an end-to-end solution to make digital euro payments offline available to users and merchants across Europe.

The ability to pay offline, with no third-party involvement, is a key feature of the digital euro, which would ensure privacy and resilience as only cash does today.

Reuters reported today that the European Central Bank has so far picked a Portuguese startup focused on artificial intelligence (AI) to help prevent fraud in its planned digital euro currency.

The contract with Feedzai, worth up to 237.3 million euros ($278.69 million), is one of several announced by the ECB on Thursday to advance a project that it sees as key for the euro zone’s financial autonomy from the United States.

ECB said this year’s experiments with the private sector showed the digital euro – an electronic wallet backed by the central bank – could facilitate, for example, automated payments on public transport or certain reimbursements.

A digital euro, issued by the Eurosystem, would be a complement to banknotes and coins, intended to give citizens more freedom of choice when paying digitally in the future.

“Like cash, it would be available to everyone, at any time and anywhere, as a universally accessible means of payment in the euro area,” it noted in a statement.

From the outset, the ECB defined an offline capability as an essential criterion for data privacy and resilience, ensuring payment experiences even in environments without internet connection or power supply.

Money is stored directly on users’ devices, such as smartphones, cards, and other compatible devices, leveraging their secure elements.

Payments are settled locally between devices, providing a cash-like privacy as no payment details are recorded by banks, payment service providers, or central banks.

Following the completion of the negotiated public procurement procedure PRO-009494 Digital Euro Offline Solution, the ECB has now concluded a framework agreement in ranking for the development, implementation, and partial operation of the offline solution with a pan-European cooperation as the first-ranked tenderer, led by SecurityTech company G+D, partnering with payment service provider Nexi and global business and technology transformation partner Capgemini.

The development refers to the design, definition, and implementation of the component and its integration into the overall digital euro architecture.

Following the framework agreement conclusion, G+D and other successful tenderers will work with the ECB to finalize planning and timelines. Under the guidance of the ECB Governing Council and in line with EU legislation, this work will cover the design, integration, and development of the Digital Euro Service Platform (DESP).

The cooperation combines G+D’s SecurityTech expertise and global experience in public currencies, Capgemini’s leadership in technology consulting and digital transformation, and Nexi’s payment technology innovation leadership and POS expertise, ensuring integration into the existing infrastructure.

“We are proud to lead this pan-European cooperation, working together with our partners Nexi and Capgemini to bring the digital euro’s offline capabilities to life.

This milestone underscores our commitment to innovation and security in digital payment solutions while preserving the privacy and resilience that citizens expect from cash.

We are honored to partner with the European Central Bank in shaping the future of public money for generations to come,” comments Dr. Wolfram Seidemann, CEO of G+D Currency Technology.

“As we accelerate the digitization of payments across Europe, our ambition is to enable solutions that are not only innovative but also resilient.

We’re proud to contribute to the development of such an important part of the infrastructure for the digital euro, leveraging our strength and knowledge within acceptance technology, which will help ensure seamless payments, also in situations where the terminal is offline”, comments Renato Martini, Digital Banking Solutions Director of Nexi Group.

“As part of an exclusive team, Capgemini has been selected, in its role as partner of Giesecke+Devrient, to support the ECB in developing the key interfaces and testing the offline functionalities of the digital euro.

With in-depth development and testing expertise across various industries, we will ensure seamless implementation of the solutions.

This assignment strengthens Capgemini’s position as a leading partner for digital transformation in the financial sector. We look forward to working with our valued partners Giesecke+Devrient and Nexi to develop a secure, user-centric, and future-proof solution for European payments”, confirms Joachim von Puttkamer, Head of Capgemini’s Financial Services practice in Germany.