The digital euro is edging from concept towards reality, and according to a report from Tieto, European banks now face pivotal choices over the next 12 to 18 months as they prepare for a new era of payments.
Tieto notes that alongside the continued evolution of instant payments, progress towards a digital euro has become a central topic among central banks, regulators and commercial banks across Europe in 2026.
First announced in 2021, the digital euro completed its preparation phase in 2025, covering a draft rulebook, user research and technical analysis. The European Commission (EC) proposed a draft regulation as early as 2023, which the European Parliament expects to adopt by the end of this year.
Should the regulation pass, a 12-month pilot involving selected banks and PSPs would begin in the second half of 2027 to troubleshoot governance, systems and functionality issues. Current plans point to a 2029 launch, although the final decision rests with the European Council and hinges on the success of the 2027-2028 pilot.
For banks, Tieto argues the opportunity lies in lower long-term payments infrastructure costs and greater scope for innovation. As a fully programmable currency, the digital euro could enable automatic refunds for cancelled services, loyalty schemes combined with payments, or embedded payments with invoicing in sectors such as utilities. It could also serve as a pan-euro-area acceptance platform, offering an alternative to tech wallets such as Apple Pay and non-bank options like PayPal.
The risks, however, are significant. While the EC proposes compensating banks for onboarding, systems maintenance, compliance and processing, it expects the banking sector to invest between €4bn and €5.8bn, roughly €1bn to €1.44bn annually over four years. Some banks fear the loss of payment fees, such as card interchange, as consumers shift to real-time payments via the digital euro.
Industry bodies such as the European Banking Federation urge banks to embrace the digital euro to protect their position as payments ecosystem providers. Sceptics point out that of the 146 countries and currency unions exploring a CBDC, around 77 have run pilots, yet only three retail CBDCs have launched. A key unresolved question, Tieto highlights, is what a digital euro adds beyond instant payments, particularly as value-add services such as Request-to-Pay and credit products emerge.
Tieto concludes that banks upgrading their tech architectures and planning digital euro services now will be best placed to turn the shift into a net positive, with the ECB expected to clarify technical specs, liability, funding and remuneration during H2 2026 and early 2027.
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