2
What are the implications for banks?

^{Integrating the Digital Euro: operational requirements}

Financial institutions will need to integrate their systems with the Digital Euro infrastructure, requiring updates to their operational processes, customer interfaces, and compliance mechanisms.

It has implications along the whole client life cycle and the payment process, from on- and off-boarding, through initiation and pre-validation to settlement, monitoring and support services. In its currently discussed scope, banks will have to implement all liquidity, transaction and customer management related obligations with the Eurosystem being solely responsible for the final settlement.

Products and services

With the Digital Euro being central bank money, the launch has broad impact on existing products, processes and services. Banks should replicate today’s offering as Digital Euro and deposits cannot be held on the same accounts.

Linking accounts

The Digital Euro requires banks to link bank accounts with Digital Euro accounts and funds to pursue automated funding and defunding. This has broad implications on the banks’ bookkeeping.

Impact on business model

The Digital Euro is meant to be free of use for customers and only have low costs for merchants in accepting payments. A core element for business models is the integration of value-added services, enhancing business models and creating unique value propositions.

Customer life cycle

Financial institutions will need to redefine the customer life cycle to incorporate the Digital Euro. This includes enhancing user onboarding processes, providing education on Digital Euro usage and the communication about how it aligns with existing products and services, as well as ensuring ongoing support to foster customer engagement and loyalty.

Cash conversion

Banks will need to establish processes for converting physical cash or traditional account balances into Digital Euros. This includes implementing waterfall and reverse waterfall mechanisms to manage liquidity efficiently and automatically and works towards seamless client experience during transition of the various forms of money.

Compliance checks

Strong customer authentication (SCA, e.g., using the European Digital Identity (EUDI) wallet, which will become mandatory for acceptance), fraud detection, and transaction monitoring are essential to meet regulatory and security standards. Additionally, screening mechanisms should be integrated into workflows to prevent prohibited transactions and pursues compliance with EU regulations.

Transaction initiation and pre-authorization

Digital Euro transactions will follow similar steps to existing digital payment flows but require new and unique elements such as the DEAN (Digital Euro Account Number) that need to be checked. Within the preauthorization process, payment service providers should also implement other relevant checks such as the holding limits, account balance checks, blocks or perhaps even a VoP mechanism (Verification of Payee).

Acceptance solutions

Acceptance systems need to be upgraded to support Digital Euro transactions, including software updates for new form factors like QR codes. In other cases, new hardware may be required to cover certain use cases (e.g., offline payments).

_{^{Key takeaways}}

Holistic assessment and conceptualization:
A comprehensive approach is essential to understand how all payment solutions interact and complement each other within the portfolio.
Strategic positioning: Organizations must decide between a

Compliance-driven approach: minimal effort focused on meeting regulatory requirements.

Business case-driven approach: enhanced effort aimed at creating tangible value and competitive advantage. It can be a catalyst for the relevance of innovative value-added services to differentiate from competitors’ offerings and enhance customer loyalty.
Industry pressure and strategic imperatives: Financial institutions will face increasing pressure to reduce operational costs, generate new revenue streams and redefine payment strategies to align with evolving customer expectations.
Catalyst for innovation and differentiation:
This initiative can act as a catalyst for introducing innovative, value-added services that differentiate offerings from competitors and strengthen customer loyalty through enhanced experiences.
Easy portability: The ability to easily transfer Digital Euro holdings between accounts or institutions can significantly influence client behavior. It lowers switching costs, making it more attractive for customers to change banks, which could intensify competition seeing the Digital Euro wallet as a key component in banks’ product portfolios.

^{Integrating the Digital Euro: technical requirements}

Banks need to reassess their infrastructure and IT architecture to facilitate the integration of the Digital Euro. While the Euro system will likely operate and maintain the centralized platform including the access gateway and core components such as the Digital Euro Service Platform (DESP), banks need to update their systems and all client-facing applications. This includes evaluating IT systems, data management practices and compliance frameworks (e.g., frontends, software, ATMs etc.).

DESP connection

The Digital Euro Service Platform (DESP) is the backbone for the so-called retail CBDC, so banks could integrate with the DESP interfaces via the access gateway to connect to the settlement ledger and other core components such as tokenization services. This demands secure, real-time integrations for access management, liquidity, and transaction services, following the DESP back-end specifications.

24/7 availability and instant processing

Like Target Instant Payment Settlement (TIPS), the Digital Euro stack must operate continuously with immediate settlement, pushing banks to shift from batch to near‑real‑time processing across core, channels, fraud, and ops. Continuous monitoring, automated failover and on-call service structures become standard to maintain resilience and service levels.

Data management

Banks need robust master data management to provision Digital Euro Accounts and services, ensuring that client identifiers, aliases, and permissions stay consistent across channels. KYC remains comparable to today, but transaction data governance must reflect online vs. offline flows, retention boundaries, and privacy-preserving handling aligned with the European Central Bank (ECB) scheme guidance. New data flows should be implemented to pursue data exchange with the DESP and other intermediaries. Client information stays with banks and checks still need to be conducted as of today, but insights into certain transaction types can decrease.

Alias lookup

A centralized lookup server will store alternative identifiers (aliases/proxies) such as phone numbers or emails, enabling user-friendly payments without revealing full account numbers. Banks should integrate the alias mapping and resolution logic with their customer and account identifiers to strive for fast, accurate routing.

Offline issuance

With offline payments being a core feature, banks need capabilities to provision local storage devices, handle offline settlement artifacts and record transactions when connectivity resumes. These functions are new to most retail cores and require hardware security, device lifecycle management, and clear reconciliation processes between offline and online states.

Reporting obligations

Using the provided reporting interfaces, banks should align newly emerging reporting requirements with existing payments reporting frameworks, anticipating overlaps with instant payments reporting that become mandatory by April 2026. This implies harmonising schemas, schedules and control points across regulatory, AML/CFT and operational reporting.

Business and customer domain

Client apps and portals may need significant UX and functional updates, or complete redesigns depending on how operating models change. Beyond software, banks could assess and update physical form factors such as cards, acceptance terminals/solutions or TAN devices to strive for consistent Digital Euro experiences.

ATM operation

ATMs must support instant conversion between cash/commercial bank money and Digital Euro holdings, enforcing ECB-defined holding limits and account validations. This requires firmware changes, APIs to the DESP, and customer messaging on the device for funding/defunding and limit checks.

_{^{Key takeaways}}

Strategic initiative: The Digital Euro introduces a new payment rail that complements existing systems but requires deep integration with DESP, real-time processing capabilities, and compliance frameworks. Banks should treat this as a strategic infrastructure project rather than a simple add-on.
Extensive IT impact expected: Integration will affect core banking systems, data management, and client-facing applications, system redesigns and updates to support real time processing. This includes implementing new interfaces, updating apps, and ensuring interoperability with ECB components.
Hardware updates necessary: Physical infrastructure such as ATMs, PoS terminals, and authentication devices must be upgraded to support Digital Euro operations, including instant conversion and offline functionality. Firmware changes and new hardware form factors will be essential for seamless customer experience.
Data ownership model: Banks retain client data and conduct compliance checks as today, but new data flows to DESP and intermediaries will reduce visibility into certain transaction types. This shift requires clear governance on data exchange, privacy-preserving measures, and reporting obligations.
User experience transformation: Client apps, portals, and acceptance solutions need significant UX and functional updates to accommodate features like alias-based payments and offline transactions. Banks could pursue consistency across digital channels and physical touchpoints to maintain trust and usability.

^{Legislative framework: legal and regulatory requirements}

Implementing the Digital Euro requires banks to comply with the Digital Euro scheme rulebook.

Please note: The legislative framework is not finalized yet and the draft proposal has undergone several amendments over the past months. Depending on the outcome of the Trialogue, it is possible that the full set of requirements changes.

However, version 0.9 provides a comprehensive overview of requirements, indicating what scheme participants must comply with in the future. The aspects can inform different implementation scenarios that build the base for the banks’ assessments and preliminary studies.

The Digital Euro will operate within a comprehensive regulatory framework that builds on the EU’s digital finance strategy and is closely aligned with existing legislation, including the Payment Services Directive, anti-money laundering and counter-terrorist financing rules (Directive (EU) 2024/1640 and Regulation (EU) 2023/1113), and the General Data Protection Regulation (GDPR). It will also interact with regulations on cross-border payments and legal tender for cash, ensuring consistency across the single market.

The Digital Euro proposal introduces the legal framework for both an online and an offline version of the Digital Euro. The amended draft proposal also introduces definitions, with the online Digital Euro being defined as “an account-based online payment system issued by the European Central Bank that requires a Digital Euro settlement infrastructure”¹, the offline Digital Euro is “a non-account-based, digital representation of cash issued by the European Central Bank that is digitally stored and accessible through an offline Digital Euro device, and that can be digitally and securely transferred to another offline Digital Euro device without the need for a centralized Digital Euro settlement infrastructure for final settlement of the transactions, and that can operate even if one or both offline Digital Euro devices temporarily or permanently have no internet connectivity”².

This distinction reflects two design goals: the offline version mimicking cash for privacy and resilience, enabling transactions without connectivity, and building the core use case for the Digital Euro and an online version supporting account-based payments integrated with a centralized settlement infrastructure.

¹See amended draft proposal (Digital Euro report), art. 2 (1) 1b.
²See amended draft proposal (Digital Euro report), art. 2 (1) 1a.

Mandatory distribution

The target operating model foresees payment service providers to distribute the Digital Euro mandatorily (like cash) and maintain respective infrastructure and interfaces.

Legal tender

Digital Euro payments must be accepted by merchants and third parties, due to its status as legal tender. The Digital Euro is always at par value with today’s forms of money (Euro deposits, cash).

Holding limits

Limits will be imposed to prevent the Digital Euro from becoming a store of value, with parameters set by European bodies to balance usability and financial stability.

Fees on Digital Euro payment services

Customer transactions should remain free of cost; merchant and inter-PSP fees should be proportionate and capped at the lower of actual costs or comparable digital payment fees.

Distribution outside Euro area

Cross-border distribution requires formal agreements between the EU and third countries, ensuring compliance with EU rules, AML/CFT standards, and ECB guidelines, with provisions for suspension if deficiencies arise.

Easy accessibility

The framework mandates that Digital Euro services remain broadly accessible, ensuring inclusion and usability across demographics and geographies.

Conditional payments

Supporting conditional payment should not compromise security or legal certainty. As this is considered a key feature for the Digital Euro’s usability and adoption, banks will have to implement the underlying logic and processes.

Interoperability with EUDI wallet

Digital Euro solutions and underlying processes must integrate with the European Digital Identity Wallet (EUDI-Wallet) to enable seamless identity verification and payment initiation.

General fraud detection and prevention mechanism

The ECB may operate or delegate a centralized fraud detection system for online transactions, complementing PSP obligations under PSD2. This implies that banks could undertake own actions to strive for adequate monitoring and prevention processes.

Privacy

Banks may process personal data only for clearly defined purposes such as enforcing account limits, executing transactions, fraud prevention, and meeting legal obligations, acting as data controllers or joint controllers. They should implement state-of-the-art technical and organizational measures to pursue privacy-preserving processing, including preventing direct identification of users and maintaining strict segregation of personal data.

AML

For offline transactions, PSPs cannot retain transaction data but should record funding/defunding details (amount, device ID, timestamp, account numbers) and share them with authorities upon request, while adhering to Commission-set limits to mitigate ML/TF risks.

_{^{Key takeaways}}

Mandatory distribution and legal tender status: Banks should treat the Digital Euro like cash, i.e. mandatory distribution and offerings for mandatory acceptance on merchant level.
Strong compliance and security layer: Requirements span AML/CFT, fraud detection, privacy under GDPR, and interoperability with EU identity frameworks, demanding robust governance and technical controls. While ITS and RTS providing implementation guidance are not available yet, banks should assess the legal and regulatory requirements and their implications early to pursue compliance from the start.
Operational limits and cost controls: Holding limits and capped fees aim to prevent systemic risks and strives for fairness, while maintaining free of costs access for customers. However, they might create new complexities for banks as processes must be streamlined with the specifications.
Cross-border and accessibility provisions: Distribution beyond the euro area hinges on formal agreements and supervisory equivalence, reinforcing the EU’s commitment to security and inclusivity. In this context, banks should assess their operations in alignment with the specifications.

^{Digital Euro scheme: functional requirements for scheme compliance}

Implementing the Digital Euro requires banks to comply with the Digital Euro scheme rulebook.

Please note: The scope of the latest version (v0.9) is subject to further refinement as part of the ongoing development process in the context of the Digital Euro project’s progress and the ongoing legislative discussions as well as any implications arising from amendments.

User identification

The rulebook introduces the Digital Euro Account Number (DEAN) as the primary identifier for accounts, complemented by aliases such as phone numbers or email addresses for user-friendly payments. Banks could pursue secure mapping between DEAN, aliases, and customer records, while implementing strong identification and authentication for all components involved in the payment flow. This includes validating devices, apps, and offline storage units to maintain integrity and prevent fraud across both online and offline transactions.

Authentication

The rulebook defines authentication standards for multiple scenarios, including onboarding via the Digital Euro app, PSP interfaces, and inclusion cases without smartphones. It mandates strong customer authentication aligned with PSD2 principles while ensuring accessibility for all user segments. Banks should implement flexible authentication flows that balance security, usability, and compliance.

Access management

Banks are responsible for managing the full lifecycle of Digital Euro Accounts, covering onboarding, account switching, and offboarding. Processes should be harmonized across PSPs to ensure consistency and prevent fragmentation. Compliance requires robust identity verification and secure data handling throughout these stages.

Liquidity management

The scheme enforces mechanisms for funding and defunding Digital Euro holdings, including waterfall and reverse waterfall processes to manage liquidity efficiently. Holding limits imposed by the ECB must be integrated into these flows to prevent excessive accumulation. Banks need automated systems to monitor and enforce these limits in real time.

Transaction management

Banks should support diverse payment use cases such as P2P, B2C, recurring payments, and standing orders. Pre-authorization and refund services are mandatory to pursue smooth transaction handling and consumer protection. These processes should align with standardized flows defined in the rulebook for interoperability.

Technical requirements

The rulebook specifies applicable standards and non-functional requirements like reliability, performance, and security. Banks should ensure their systems meet these benchmarks for distribution and acquiring services. Technical compliance is critical for interoperability and resilience across the ecosystem. For more information see the separate chapter on the technical requirements.

User experience

UX standards cover authentication, accessibility, branding, error handling, and support, with detailed rules for logos, colors, spacing, and sensory branding. Requirements apply to digital interfaces and physical objects like cards and devices. Banks should adapt their design and usability practices to meet these uniform standards.

Harmonized process flows and branding

Intermediaries should streamline onboarding, transaction processing, and support flows to deliver a consistent experience. Branding rules ensure uniformity across PSPs, reinforcing trust and recognizability. Banks need to align internal processes and customer touchpoints with these harmonized guidelines.

_{^{Key takeaways}}

Adherence: Strict compliance with the scheme rulebook is expected to be required; banks should implement all functional, technical, and UX requirements to participate in the Digital Euro ecosystem.
Scheme compliance: The rulebook sets a high bar for interoperability, security, and user experience, requiring banks to rethink processes, technology, and customer interfaces holistically.
Penalties: Subject to the final regulatory framework, non-compliance may lead to exclusion from the scheme or regulatory sanctions, impacting a bank’s ability to offer Digital Euro services and maintain competitiveness. In the context of the Digital Euro being legal tender and mandatory distribution for banks, this is not a feasible scenario for any European bank.

_{^{Remaining open points}}

The current version of the scheme rulebook leaves some key points open to be clarified in later iterations or by the legal framework, which is still in discussion. The following items will further inform the list of regulatory requirements and should be considered by all eligible payment service providers.

Holding limits: This entails the holding limit for individuals, for which amounts and determining procedures are yet to be defined.
Compliance mechanisms: Checks and procedures need further clarification, for example the AML examination in the case of offline P2P transfers.
Remuneration: The compensation and fee model for banks remains a highly discussed part, as the usage will be free for individuals and fees (e.g., for merchants) are likely to be capped at a lower number.
Others: Some requirements (such as risk management) and components are to be (further) outlined and developed — in alignment with the legislative proposal and the ongoing conceptualization on the technical design.