A survey of European consumers has revealed interesting insights into their attitudes towards a digital euro. While awareness of the digital euro has significantly increased over the past two years, the willingness to adopt it has not grown at the same pace. This suggests that mere awareness does not automatically translate into adoption, highlighting the need for more effective communication.
In October 2023, the European Central Bank (ECB) launched a preparation phase to establish the necessary rules and infrastructure for potentially rolling out a central bank digital currency (CBDC) in the euro area.
According to ECB’s recently published research, clear and concise communication about the digital euro’s key features can positively influence consumers’ beliefs about digital payments, increasing their likelihood of adopting it. However, these effects are short-lived, with interest fading after three months.
Education is key
Additionally, financially literate and higher educated consumers are more likely to seek further information about the digital euro, while others remain hesitant due to a preference for existing payment methods.
The way people make payments has drastically changed over the last few years and will continue to evolve. Physical cash use for euro area retail payments declined from 79% in 2016 to 59% in 2022, while contactless cards and smart payments are on the rise. The COVID-19 pandemic seems to have accelerated this trend. In response, the majority of central banks across the world are now investigating or piloting CBDCs.
One of the challenges identified is the persistence of consumers’ payment habits. Despite learning about the digital euro, many consumers show a strong preference for existing payment methods they are accustomed to. This suggests that convincing consumers to switch to a new form of payment may require more than just raising awareness; it will need targeted and repeated communication efforts that address consumers’ entrenched preferences.
Testing the waters
Further findings indicate that consumers are likely to allocate only a small portion of a positive wealth shock, such as an unexpected €10,000, to the digital euro, with their overall liquid asset portfolios remaining largely unchanged.
Different holding limits on digital euro allocations, ranging from €1,000 to €10,000, also have minimal impact on consumers’ liquid asset composition. This suggests that even with favorable conditions, consumers may still prefer traditional liquid assets over the digital euro.
As central banks worldwide explore or pilot CBDCs in response to rapid digitalization in payments, the ECB’s findings underscore the importance of targeted and repeated communication to encourage broader adoption of the digital euro.
However, the strong preference for existing payment methods among many consumers presents a challenge for policymakers, necessitating further research and strategic efforts to promote the benefits of a digital euro. Additionally, addressing concerns about financial stability and the potential impact on traditional banking systems will be crucial in gaining consumer trust and acceptance for this new form of currency.
Shogun Lin
