Money in transition: digitalisation and innovation in payments

Christine Lagarde, President of the European Central Bank (ECB), delivered the opening speech at the ECB conference titled “Money in transition: digitalisation and innovation in payments”.

She reflected on the historical context of European account settlement, from the fairs of Champagne to the euro, highlighting the ongoing evolution of financial infrastructure.

Lagarde identified two main challenges: technological changes, especially tokenisation, and geopolitical shifts affecting financial sovereignty. She emphasized that these challenges present opportunities for Europe to address fragmentation in capital markets and retail payments.

The ECB’s strategy includes advancing wholesale markets through tokenisation on shared ledgers, aiming to reduce transaction costs and increase efficiency. The ECB plans to settle tokenised transactions in central bank money via the Pontes project and develop a blueprint for a single European market in tokenised finance with the Appia project.

In retail payments, the digital euro is seen as a means to preserve access to public money and to break the cycle of dependence on international card schemes. The digital euro’s legal tender status and open standards could enable widespread acceptance and competition across Europe.

Regarding cross-border payments, the ECB is working to improve speed and reduce costs by interlinking instant payment systems, including connections to India’s UPI, South-East Asia’s Nexus, and Switzerland’s SIC IP. These efforts aim to enable Europeans to transfer money globally in seconds using their own infrastructure.

The conference also highlighted the importance of strengthening the euro’s international role through market integration and shared standards. The ECB calls for a common legal framework for digital assets to prevent fragmentation and support the transition into the tokenised age.

Lagarde concluded by emphasizing that Europe’s history of unified account settlement can be extended into the digital age, ensuring the integrity of the single currency and financial infrastructure.