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I don’t write much about payments, but a number of developments in recent weeks – right up to the week before Christmas, in fact – caught my eye. First, because the numbers involved in the payments arena are enormous. But perhaps mainly because the changes that are being made to the payments architecture are being pushed ultimately to usher in the era of the digital euro, which could be a true game changer if it can be introduced quickly enough and with sufficiently compelling use cases.
Let’s start with some numbers. Retail non-cash payments in the European Union amounted to an estimated €665 billion ( US$783 billion ) per day in 2025, making for an annual total of around €240 trillion, and they generated as much as €350 billion in annual revenues for payment providers. This includes card payments, direct debits, credit transfers, and e-money ( digital money pre-loaded into accounts, cards, wallets, and apps ).
Wholesale payments, predominantly settled through T2 ( the Eurosystem’s real‑time gross settlement system ), amount to roughly €1.8 trillion per day. These include interbank transfers, money‑market transactions, monetary policy operations, and cash to settle securities purchases. As I mentioned, these are enormous numbers by any stretch.
Most of the retail fee take goes to banks, which continue to dominate the landscape. For how much longer and to what extent remain open questions, certainly over the medium-term horizon. Banks certainly won’t give up their dominance of payments easily or quickly, but alternatives have long been officially encouraged; alternatives that reduce the power of banks by lowering or removing entry barriers to non-bank payment service providers ( NB-PSPs ), including fintechs.
NB‑PSPs already participate widely in – and dominate – certain non‑central‑bank payments systems ( such as those run by card operators ), but the ECB’s move was momentous in that NB-PSPs now have a standardized access regime to central bank money for the purposes of making and settling payments
The European Central Bank ( ECB ) had pushed forward its vision for the future of payments at the start of 2025, giving NB-PSPs access to Eurosystem central bank accounts and central bank‑operated payments systems. In the EU, these comprise a suite of networks: the T2 system I mentioned above ( for high‑value payments settlements ), ECMS ( the Eurosystem Collateral Management System ), TIPS ( TARGET Instant Payment Settlement ), and T2S for central securities depositories to settle securities transactions. These are all so-called TARGET services – Trans-European Automated Real-Time Gross Settlement Express Transfer.
NB‑PSPs already participate widely in – and dominate – certain non‑central‑bank payments systems ( such as those run by card operators ), but the ECB’s move was momentous in that NB-PSPs now have a standardized access regime to central bank money for the purposes of making and settling payments. That means they will no longer have to participate via sponsor banks, correspondent banks or settlement intermediaries. The ECB move reset the basis of participation to a payments system based on the risk and related factors of the participants rather than the participants’ formal regulatory classification.
On December 18th, the ECB and the European Banking Authority ( EBA ) went a stage further towards operationalizing NB-PSP access by publishing a memorandum of understanding ( MoU ) with national supervisory authorities and national central banks in the European Economic Area around cooperation and information sharing. The MoU sets out a cooperation framework between the ECB, EBA and every national supervisory authority and central bank in the European Economic Area that underpins the legal right of non‑banks to access central bank payment systems.
It’s a practical roadmap that makes sure that information is uploaded immediately into the supervisory and central bank ecosystem when NB-PSPs want access to central‑bank payment systems, including information about withdrawals or suspensions of authorizations, governance failures, and breaches of anti-money-laundering and counter-terrorist financing regulations.
In an environment where an NB-PSP can be authorized by one EU country but operate throughout the bloc through a passporting regime, instantaneous notifications across the bloc are vital. As there is no central register of participants in the payments arena, the MoU seeks to reconcile the home supervisor-host central bank conundrum.
The digital euro is a quintessentially important building block of Europe’s financial sovereignty. Achieving economic and financial sovereignty has become vital in a world of geopolitical tectonic shifts
PSR/PSD3, then digital euro
The MoU came hot on the heels of the provisional political agreement reached by the European Parliament and the Council of the EU in late November to bolster legislation on payment services, specifically the Payment Services Regulation ( PSR ) and the third iteration of the Payment Services Directive ( PSD3 ). The aims of the regulation are to ensure fees and charges for payment services are transparent and to enhance a level playing field between banks and NB-PSPs. The PSR and the PSD3 still need to be formally adopted before they can come into force. That’s expected in the first half of 2026.
In the grand scheme of things, these are important steps towards de-fragmenting and harmonizing Europe’s payments architecture and building the plumbing for a future payments framework – including the eventual roll-out of the digital euro.
The digital euro is a quintessentially important building block of Europe’s financial sovereignty. Achieving economic and financial sovereignty has become vital in a world of geopolitical tectonic shifts. Europe has been dragging its feet in multiple areas of this narrative. In the area of payments, the EU needs to accelerate developments. When it comes to a digital currency, it needs to build a compelling use case, as I mentioned, or lose control to non-European providers or private bank-issued stablecoins.
For the digital euro to function, every participant in the payments chain will need to have direct access to the operating schematic. This will enhance the bank-like functionality of non-banks in the chain, while instantaneous information-sharing across the EU will fulfil a vital operational and supervisory gap.
We haven’t reached the final straight for the launch of a digital euro. That’s not expected until 2028 ( too late? ). But what these latest developments do is create the digital architecture that will be used when we do reach that point. Consider it part of the regulatory taxi-ing towards the runway.
