22 / 10 / 2020 on the edge of a new frontier : european payments in the digital age speech on the edge of a new frontier : european payments in the digital age keynote speech by fabio panetta, member of the executive board of the ecb, at the ecb conference “ a new horizon for pan - european payments and digital euro ” frankfurt am main, 22 october 2020 introduction it is a great pleasure for me to open this conference on the new horizon for european payments. payments are indispensable to our daily lives and to the functioning of our economies. they allow money to fulfil its role as a dependable means of exchange and thereby help to maintain trust in our currency. as central bankers, we have therefore been tasked with ensuring the smooth functioning of payment systems. payments are undergoing fundamental change, driven by the digital revolution and its impact on the demand for new forms of payment, the provision of innovative payment services and the response of public authorities. central banks have a key stake in the digital transition of payments and are adapting their policies to ensure that payments remain resilient, efficient and inclusive. in my speech today i want to address the transformation that is taking place in the payments landscape. the european market is registering significant progress due to the digital revolution. however, the transition to a digital payments market may create inefficiencies and risks that require an adequate response by european authorities, in order to ensure that payments continue to serve citizens well. the changing payments landscape digital technologies are changing our economies. [ 1 ] they affect the way people consume and the way companies produce and sell goods and services. e - commerce sales, for example, have doubled in the euro area over the past six years and have jumped by one - third during the lockdown compared with precrisis levels. radical innovation and new players are shaping the market and have the potential to bring more choice, efficiency and inclusion to payments. but an uncontrolled transition could lead to more complexity, higher concentration, lower standards and reduced autonomy of european payments, generating risks for consumers and financial stability. central banks have an inherent interest in accompanying the digital transition so that payments remain safe, efficient and inclusive. they must be alert and respond to three trends that are shaping the payments landscape. the first trend is the evolving preferences of european consumers and businesses. while cash is still the main way people make retail payments in the euro area, its role is diminishing. https : / / www.

their business performance because of the large financial legacy from the past. often these firms, in collaboration with financial institutions, can solve their problem by boldly eliminating unprofitable businesses and concentrating their managerial resources on core businesses. in this regard, it is mutually beneficial for both firms and financial institutions to promote a sufficient dialogue and reach a shared recognition about the present and future of the firms'management. to smoothly promote corporate revitalization, we need to improve and expand the market for loan asset liquidation, including npls. the expansion would help banks take npls off their balance sheets, but it would also invite a variety of investors with diversified risk preferences and expertise into the corporate revitalization business. if the market expands and prices for loan assets are formed efficiently, these prices will indicate the market's evaluation of corporate revitalization. vi. earnings power of financial institutions and a stronger capital position when the effective functioning of the financial system is finally restored, major banks will enjoy strong international competitiveness, and local banks will be able to provide new financial services for regional development. these benefits will only be possible with the strengthening of earnings power. to strengthen earnings power, individual financial institutions must form their own judgments on a number of issues. for example, how should they change their traditional practice for transactions? what kind of new businesses should they develop? how should they reorganize their business model? the bank would like to support the efforts of financial institutions toward this end by providing appropriate advice through on - site examinations and daily monitoring. in this process, financial institutions must ask themselves whether their capital position is sufficient to pursue a new business model, and if not, they of course need to boost their capital position. needless to say, financial institutions should raise capital in the markets. in the limited time before the complete removal of blanket deposit protection, however, some may not be able to do so sufficiently. in this case, fundamentally there are two options : either reducing their business scope in line with their existing capital position or accepting the public injection of capital. i think the latter option is desirable under the current conditions in japan. in other words, we should facilitate the process of restoring the effective functioning of the financial system through a new system of capital injection, which differs from the existing system that seeks to preempt crises. conclusion a number of developments indicate that the japanese economy is moving in a desirable direction, even though it continues to face severe conditions. i believe it is the competitive