burkhard balz : covid - 19 and cashless payments – has coronavirus changed europeans ’ love of cash? speech by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the sme europe, virtual event, 21 october 2020. * * * ladies and gentlemen, thank you very much for inviting me to this conference, and for giving me the opportunity to talk about a very virulent topic : the consequences of covid - 19 for payments. do you remember the term “ disruption ”? if i remember rightly, that was one of the biggest buzz words five years ago, when blockchain, fintech and platformication were the talk of the town. disruptive elements are still at play, of course, but we only really saw the true meaning of disruption this year. the threat of the pandemic forced people worldwide to totally change their day - to - day habits. many pleasurable activities that people had taken for granted suddenly became impossible : travelling to exciting places all over europe, going to nice restaurants, or meeting friends or family. public life as we knew it ground to a complete halt. this resulted in a dramatic economic downturn, with widespread insolvencies and unemployment cushioned, to a greater or lesser degree, by government support in many countries. this was truly “ disruptive ” in the worst possible sense of the word. however, there is a famous saying : every cloud has a silver lining. and indeed, we have observed some “ disruption ” in the positive sense of the term. the pandemic has facilitated and driven change. it has turned out to be a catalyst for digital transformation and thus an “ innovation accelerator ” for the economy. apart from getting used to face masks, for many people it was the first time they did their shopping online, the first time they had remote video conversations with colleagues, friends and family, and the first time they started to follow movie series via streaming services. this quantum leap in digitalisation has also seen a boom in cashless payments. on the one hand, this was a consequence of the uptick in online shopping. one indicator of this might be the rise in transactions which paypal registered worldwide in the second quarter of 2020 compared with the first quarter : its transactions increased from about 3. 26 billion to around 3. 74 billion. 1 the general decline in shopping activities makes these figures even more impressive. on the other hand, the shift

responsible for the area of payments, i am a member of this group. on 2 october, we published the first results of our analysis. 4 the main question to be asked is this : under what conditions might it become necessary to introduce cbdc for the general public, or a digital euro? a structural decline in demand for cash, general support for digital transformation, and potentially competing other offerings of digital money from bigtech firms or other central banks are mentioned as possible motives for issuing a digital euro. this brings me back to disruption. the debate on the digital euro has just started. my impression is that many stakeholders in the economy have only now begun to understand this thing called cbdc. banking sector players who run successful business models for cashless payments, especially, need to grasp what it means to issue a digital euro in the euro area. some challenges would need to be overcome in this regard, particularly concerning the potential impact on banking business, financial stability and the central bank balance sheet. whether we will issue a digital euro is something which has not yet been decided. i would like to mention the ongoing public consultation which is open until 12 january 2021. the aim of this consultation is to find out the opinions of individuals, companies and other stakeholders on the digital euro, which we need to take on board when reaching a decision about an imminent “ go ”, a “ no - go ” or a “ go later ”. considering what covid - 19 has taught us about real disruption, i think there needs to be a response to the growing demand in the economy for cheap, quick and convenient means of payment which can also be used in new payment situations, like machine - to - machine payments. the bundesbank is deeply engaged in the debate on cbdc. but we are also thinking about alternative solutions, which could avoid disruption and help overcome the existing challenges, reap the benefits of going digital, and support new payment use cases without introducing cbdc. one way could be to enhance conventional payment systems, both at a domestic and a global level. in this respect, we urge the market to develop a pan - european payment solution with full deployment of the new instant payments infrastructure. in addition, we believe that the roadmap developed by the financial stability board ( fsb ) provides an excellent plan to enhance crossborder payments. 5 in this respect, it also becomes clear that cbdc is not a panacea ; the challenges we face are multi - faceted, and we