With Wero as a central building block, a new comprehensive payment solution is now available in Europe. In this interview, Dr Joachim Schmalzl presents the strategy of the European Payments Initiative (EPI) responsible for this and sheds light on the future role of Wero in European payment transactions and in connection with the digital euro planned by the ECB.
Dr Schmalzl, e-commerce remains a challenging topic for the Savings Banks Finance Group: where do we currently stand with the help of the European Payment Initiative and its Wero wallet solution and where do we want to go?
Consumers are making cross-channel purchases and increasingly paying across national borders. Whether abroad, for example when travelling, or in international e-commerce. This change in payment transactions is not only dynamic, but has also accelerated. With our payment transaction strategy, we have set an important course in recent months and are well equipped for this dynamic.
The European Payments Initiative (EPI) plays a decisive role in this. Together with other European banks, we are developing a genuine European alternative to international payment transactions with Wero.
With the launch of peer-2-peer payments, we have laid the foundation for carrying out transactions in real time between two parties. E-commerce is basically about nothing else. Now we need to prepare the interfaces and systems required for the introduction in e-commerce. In other words: we have laid the foundations, now we are building the house.
How do you see the market opportunities for Wero, which has to hold its own against strong international payment providers such as Visa or PayPal?
Our aim is not to compete with our competitors, but to fulfil our customers’ payment transaction requirements. Particularly in the area of payment transactions, consumers make new decisions with every transaction. As Wero, unlike Paypal, is not only designed for e-commerce, there is a great opportunity here, as Wero is offered on all channels – online and stationary in retail stores.
»With Wero, we are developing a genuine European alternative to international payment transactions.«
Executive Member of the Board of the DSGV
The banks and Savings Banks that are part of the Wero initiative are already bringing 120 million people in Europe together financially in the first year. And more institutions are set to join.
This is an exciting situation for retailers, as Wero is not only cheaper, but also potentially offers access to everyone in Germany who banks online. And that is the majority.
As Wero is directly linked to the current account, no other application, no other account and no new onboarding process is required. Wero is an integral part of the account and can be used across all channels.
Why should a customer switch from a competitor to Wero?
Payment transactions should not be viewed one-dimensionally. After all, customers also have cash, a bank card and perhaps a credit card in their wallets. In view of the fact that banks, especially Savings Banks, enjoy a high level of trust, Wero, which is directly linked to the current account, is an attractive payment solution. And it will be a payment method for all transactions. As we all know, many roads lead to Rome. One of them is now Wero, and we are certain that this is one of the most attractive.
What kind of communication is planned to accompany the market launch of Wero?
The primary aim is to introduce Wero as a product. EPI has developed a catalogue of measures to make Wero widely known. In addition, each bank has planned its own communication measures, which of course also applies to the Savings Banks. For example, Savings Banks customers will be made aware of the launch of Wero within the Sparkasse app and there is a dedicated landing page at wero-wallet.eu. Of course, Wero is also marketed on social channels.
The EU and ECB want to introduce a digital euro in 2027. How do this digital currency and Savings Bank payment and / or EPI fit together?
The digital euro is still under development and the ECB has not yet finalised its design. Nevertheless, we are working to ensure that the digital euro is implemented in a way that benefits our customers. Wero will be introduced before the digital euro and will therefore also be available for use. What impact the digital euro will have on payment transactions and therefore also on Wero is still under discussion. However, there is nothing to be said against making the digital euro usable in Wero. EPI could also help to achieve the acceptance of the digital euro in retail. Even if the digital euro does not become part of the Wero network, there are many arguments in favour of using Wero for retailers.
And for good reason, because the digital euro only offers the simplest form of payment. Things like BNPL “buy now, pay later”, recurring payments, payment reservations, buyer protection, loyalty and much more are issues that the digital euro does not offer, but which are what make payment transactions interesting in the first place.
Nevertheless, an integral and complementary approach between the digital euro and EPI is desirable and worth striving for.
You take a critical view of the digital euro – why?
We take a critical view of the current plans for the digital euro. In principle, we fully
support any strengthening of European payment transactions and European sovereignty. In this
respect, the digital euro in the sense of digital central bank money is a good idea. The
implementation envisaged by the ECB to date would represent a not entirely uncritical
intervention in payment transactions. We are therefore in favour of more cooperation and see
ourselves as critically constructive towards the Eurosystem.
The design of the digital euro currently being considered by the ECB is so complex that the Savings Banks Finance Group – and the same is likely to apply to the other banking groups – will not be able to commission any new innovations or further developments of existing products and solutions in the strategic business area of payments over a longer period of time. This would only strengthen international competitors who do not have to worry about the digital euro during this time. Instead, we see opportunities in utilising existing European solutions and modern infrastructures as well as focusing on functionalities of a digital euro that actually generate added value.
Otherwise, there is a risk of a scenario in which a complex, expensive digital euro creates duplicate structures and is only in minimal demand. This ultimately weakens European sovereignty in payment transactions instead of strengthening it.
What conceptual reservations do banks generally have about the digital euro, or to put it another way: how would it have to be organised for it to work?
The attractiveness of the digital euro still needs to be significantly improved. In its current form, the implementation will merely provide consumers with another payment method with low market adoption in the already large range of various payment methods. At the same time, the aforementioned implementation and infrastructure costs for payment service providers and banks would be so high that the project would weaken the innovative capacity of the European financial sector. We are therefore in favour of making the digital euro equally attractive for all sides, i. e. consumers, retailers, payment service providers and banks. However, this still requires significant progress in areas such as the value proposition for end customers, pricing for retailers and the remuneration model for payment service providers and banks.
What role can the Savings Banks play in the digital euro and what are possible approaches to cooperation with the ECB?
Many of the success factors demanded by end customers for the digital euro, such as buyer
protection, bonus programmes and BNPL, can only be achieved in cooperation with the private
sector – without this, the digital euro will become a mere back-up solution. Accordingly, it is
in the interests of both the ECB and the banking industry to organise the digital euro in such a
way that it becomes a successful project for all sides.
In addition, the joint search for synergies with existing and newly created solutions and infrastructures such as EPI / Wero or eID, i.e. electronic identification, should be strengthened. Integrating the complementary strengths with EPI as a potential licence holder of the ECB would prevent expensive duplicate structures on the one hand and could ensure a high level of acceptance of the digital euro right from the market launch.
»There is nothing to stop making the digital euro usable in Wero as well.«
Executive Member of the Board of the DSGV
Do you also see advantages in the digital euro for people in general and for corporate customers in particular?
For private end customers, the digital euro would be a direct liability of the ECB and another legal tender alongside euro cash. In addition, certain core services – including account management, topping up and discharging as well as the execution of transactions – would be free of charge under the current draft law. Consumers would therefore also be able to pay in bricks-and-mortar shops and in e-commerce. The digital euro is not yet planned for corporate customers and their payments to each other, i. e. the so-called B2B usage.
With the introduction of the digital euro, do you expect cash to be abolished soon?
No. This is not to be expected and we as the Savings Banks Finance Group would not support this under any circumstances. The digital euro is intended to complement cash, not replace it. Nevertheless, the introduction of the digital euro can be seen in part as a reaction by central banks to changing customer needs and a decline in the need for physical cash. In terms of turnover, 30% of all payments are still made with cash. However, the demand for cash for transactions in Germany is decreasing. It therefore makes sense and is right for central banks to address such trends.
Cash supply also remains a core service for the Savings Banks. 90% of our customers only need just over six minutes on foot or by car to get to their nearest Sparkasse ATM. Three quarters of our customers need no more than four minutes and half of them only two and a half minutes to get to their nearest ATM.