This paper provides a data-driven analysis of retail payment behaviour in the euro area, with the aim of informing debate on a possible holding limit for a digital euro. Using data from the European Central Bank (ECB) SPACE 2024 study and the ECB Data Portal, it compares average transaction values for cash, debit cards and e-money across member states, and examines how each payment method is used in everyday practice. The findings reveal that cash usage, while declining in frequency, remains important in retail payments. The average cash transaction value stands at €13.50, but consumers still carry an average of €59 in their wallets and withdraw nearly an average €195 per ATM transaction. This suggests that cash is used both for small purchases and as a form of backup liquidity. There remain significant differences between countries, reflecting cultural preferences and differing levels of digital payment adoption. Importantly, the data show no clear link between cash usage patterns and the size of the shadow economy. Debit cards are the dominant retail payment instrument, with average transaction values falling to €34.82 in 2024, underscoring their increasing importance for everyday spending. Analysis by merchant category highlights a clear split between frequent, low-value payments (such as groceries and restaurants) and less frequent, high-value purchases (such as travel and durable goods). E-money plays a limited role. More than 85 per cent of euro-area e-money transactions take place in just two countries, reflecting market structure rather than widespread consumer use. Finally, the paper shows that changes in payment habits tend to be slow, and that if private instant-payment solutions spread widely before a digital euro is introduced, it is unclear whether a digital euro would replace existing payments. This article is also included in the Business & Management Collection which can be accessed at http://hstalks/business.

The global wholesale foreign exchange (FX) regime constitutes the world’s largest financial market. The key to its continuing growth and success lies in its ability to adapt to change while ensuring effective settlement risk mitigation and efficient liquidity optimisation arrangements like netting that are crucial to the smooth turnover of US$9.5tn daily. This paper explores several of the current transformative trends taking hold in the FX market, such as emerging technologies and new business needs. This paper also examines their potential impact and some of the challenges they face, with a particular focus on liquidity optimisation. This article is also included in the Business & Management Collection which can be accessed at http://hstalks/business.

A new frontier for payments is emerging where the ‘traditional’ world of machine-to-machine and automated payments intersects with the rapidly evolving world of artificial intelligence (AI). As the bots evolve from simple chatbots to intelligent agents, known as Agentic AI, they will evolve from machines (in the most general sense) under our control into robots capable of making their own decisions and, by implication, their own payments. This is where we see an emerging demand for robot-to-robot (R2R) payments and the commensurate need for a strategic response from the payments sector to meet this need. While early experiments in machine payments have used existing mechanisms (eg blockchain and payment cards) it is not clear that these mechanisms can satisfy the needs of the emerging sector. This paper extends a taxonomy of payment types to include AI and looks at the specific needs of the R2R subsector. It presents some of the opportunities for FinTechs to create new products and services to complement the offerings of the ‘traditional’ players at the intersection of AI, machine payments and financial services. It concludes that the smart wallet (ie a digital wallet that can be operated by a robot) will be the central orchestration mechanism. We see the potential for a new payments infrastructure emerging to both re-energise past propositions (eg micropayments) and create entirely new ones (supply-chain currencies). New transactions and new trade mean new prosperity. With the right governance in place, the payments industry can explore this entirely new frontier to the great benefit of the economy as a whole.

This paper examines how fraudsters misuse the banking infrastructure to their benefit, particularly through methods like authorised push payment fraud and the exploitation of the direct debit infrastructure. Banks, payment service providers/merchant acquirers, scheme owners and clearinghouses each have a role to play as critical players in combating this type of fraud, but too little has been done so far. To tackle this growing threat, the paper outlines actionable changes, ranging from enhanced regulatory frameworks to tailored merchant strategies. These changes can be made by each player to address and reduce the gaps in the banking infrastructure and the relevant payment types going forward, providing a roadmap for a more secure payments ecosystem.

This paper describes key trends in the payments markets (namely, declining use of cash, digitisation, the growth of payment fraud, and geopolitical tensions) and how these translate into risks, both perceived and real. The paper then describes how the European Union (EU) legislator is addressing these risks, for example, through the proposed EU Payment Services Regulation and the Instant Payments Regulation, which will introduce such measures as conditional reversal of liability for authorised push payment fraud and confirmation of payee services to enhance fraud prevention and protect consumers, along with efforts to increase the availability and acceptance of cash in order to preserve financial inclusion for vulnerable groups that rely on cash payments. The paper also discusses how the proposed digital euro would function as a backup for payment systems during disruptions, as well as a solution to counter the potential dominance of a third-country central bank digital currency or stablecoin. The paper discusses how many of the legislative measures will require private sector entities to invest in capabilities they would not otherwise invest of their own accord and to cooperate in order to accomplish the public goals set forth by the EU legislator. Put differently, the product development agenda for payment service providers over the coming years will, to a large extent, be driven by the legislator rather than businesses. Some of the required investments will probably be lossmaking, while others could be profitable but may cannibalise existing business. The legislative developments will, therefore, require the identification of both risks and commercial opportunities.

The European Commission (EC) is advancing the data economy through a series of regulatory reforms aimed at giving customers control of their data and fostering innovation in third-party contexts. While the costs of developing existing banking infrastructures and creating open application programming interfaces have largely fallen on banks, third-party service providers have benefitted from new revenue streams and increased customer relevance. As a result, banks risk disintermediation with some customer segments. The impending Financial Data Access (FiDA) regulation is set to expand these dynamics by extending the range of financial data made accessible for third parties. Simultaneously, the entry into force of the Electronic Identification Authentication and Trust Services 2.0 (eIDAS2) introduces a digital wallet that allows consumers and businesses to share their identity credentials in online customer journeys, offering banks the potential to engage more effectively in the data economy. The key question is whether the new reforms will encourage banks to seek opportunities beyond compliance; more so than with the Revised Payment Services Directive (PSD2) and open banking. This paper analyses the opportunities arising from FiDA, eIDAS2 and the Data Acts, providing strategic considerations for banks navigating the data economy. It emphasises that banks are ideally positioned to become data custodians by offering customers tools for the secure and reliable exchange of data-driven digital transactions across all sectors. Ultimately, this approach will unlock new value and enhance the relevance of banks in the data economy.

While central banks’ objectives for issuing central bank digital currencies (CBDCs) are increasingly clear, many observers continue to raise questions regarding the usefulness of CBDCs for the broader population. This question is particularly relevant for Asia-Pacific economies where the payment infrastructure is generally both efficient and resilient, and digital payments have been widely adopted. As this paper will argue, ensuring the adoption of CBDCs in Asia-Pacific requires a ‘future-proof’ solution that is sufficiently flexible to adapt to advances in payments technology. In addition, any solution will have to replicate the underlying benefits of physical cash, such as offline availability, while addressing concerns around transaction privacy.

This paper analyses the massive growth in digital payments in India since 2010. In addition to discussing the various factors that have contributed to this, most notably the introduction of the Unified Payment Interface (UPI), the paper also highlights some of the challenges facing the UPI, and how these might be addressed. By way of comparison, the paper also analyses a similarly successful system, namely Brazil’s PIX. As many developing nations are now investigating UPI-like solutions and hoping for similar results, this paper sets out to improve understanding about digital payment infrastructure and the factors that have driven the successful growth of digital payments and the UPI in India in order to support such nations to determine the appropriate strategy going forward.