The launch of the digital Euro represents not just a technological breakthrough but also a fundamental change in the way financial transactions are carried out and understood in the rapidly changing world of financial technology.

In this in-depth interview, we discuss the implications of this change with Professor Doctor Alexander Schroff, Publicis Sapient's Financial Services Lead.

"A comprehensive reevaluation of traditional banking practices and structures is necessary, heralding a new era where traditional financial institutions must adapt, or risk becoming obsolete," according to Schroff, regarding the digital Euro.

The digital Euro: Bringing about an international financial future

The digital Euro, says Schroff, "promises a financial ecosystem where transactions are seamless, instantaneous, and secure."

The digital Euro may, in fact, stand for unrestricted mobility and easily available, private payments for all.

"The traditional role of banks in mediating transactions faces a radical upheaval as central banks embrace digital currencies," says Schroff.

"Banks are being challenged to rethink their role in the digital economy as the introduction of the digital Euro signals a departure from the reliance on intermediaries in the financial process."

Digital currencies as a progression in banking

As Schroff points out, the function of the digital Euro is also anticipated to have a profound effect on banks.

"The banking industry has long provided stability and confidence, acting as the cornerstone of financial transactions. But as digital currencies like the Euro gain traction, the conventional role of banks as middlemen in financial transactions is drastically changing.

"Banks will need to improve not only their digital financial services but also their customer experience (CX), security, and support.

"This shift presents unprecedented opportunities for innovation and disruption within the industry, while also challenging established banking norms."

It is true that accepting and embracing decentralization and redefining what financial trust looks like are important aspects of the move toward adopting the digital Euro.

According to Schroff, the introduction of the digital Euro signifies a shift away from the financial process's reliance on middlemen, posing a challenge for banks to reconsider their role in the digital economy. Thus, the digital Euro allows for a plethora of innovative payment system possibilities.

In order for banks to remain relevant, they will have to make investments in cutting-edge technologies, which will encourage competition and ultimately benefit customers.

"Banks will be forced to redefine their service offerings and move toward a more customer-centric approach as a result of the emergence of decentralised finance (DeFi) platforms and smart contracts."

CBDCs: Central banks' function
In fact, it appears that central banks will also be impacted by digital currencies in the form of CBDCs.

The usual function of banks in mediating transactions confronts a fundamental upheaval as central banks adopt digital currencies, often known as Central Bank Digital Currencies, or CBDC.

The banking industry has come to be seen as the foundation of confidence and stability in the financial system over time.

The introduction of the digital Euro, however, presents a serious threat to the status quo, requiring banks to change quickly in the digital landscape or risk being outdated in a world that is becoming more linked.

“The banks that can integrate digitisation across the whole banking experience will be able to provide seamless banking experiences which cooperate with the incorporation of the digital Euro, building reliability and trust with customers.”

With the digital Euro set to hit the market amid the digital revolution in today’s financial world, Schroff believes it will be just a catalyst for further evolution. 

He concludes: “Banks must now navigate uncharted waters, embracing technological advancements and reimagining their roles in this digital era, or risk being left behind in the wake of the transformative wave reshaping the financial landscape.”