CBDC Retail Payments: Design Choices, Benefits and Bank Costs

Why central bank money is going digital

For the public, central bank money has always meant cash: a direct claim on the central bank, settled instantly, no permission required. Everything else — cards, transfers, wallet apps — runs on commercial bank deposits and private rails that clear and settle in the background.

A retail CBDC changes that split. It is central bank money in digital form, held and spent by households and firms. US policy draws the definition narrowly: "a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank" (Executive Order 14178, Federal Register, 31 January 2025).

Making the public a direct counterparty of the central bank is the single decision that drives every benefit and every cost that follows.

The design fork: account-based or token-based

Most projects lean on one of two technology models, and the choice decides who pays for what.

Few projects are purely one or the other. European legislators describe the digital euro's offline mode as "a tokenised form of cash" that settles device to device without a network, alongside an online component that works much like a digital transfer (European Parliament Legislative Train). The BIS notes that envisioned use cases and design features "vary across jurisdictions" — that variety is deliberate, not a sign of an unfinished standard (BIS Papers No 159).

The digital euro is explicitly intermediated — "two-tier" in industry language. The ECB would issue the currency and run the core settlement infrastructure; banks and payment service providers would distribute the wallet, onboard users and handle customer service (European Commission proposal, COM(2023) 369; ECB, digital euro). Central banks are not building consumer apps.

Where the projects actually stand

• The BIS 2024 survey, published in 2025, found that "of the 93 central banks surveyed, 91% (85) were exploring either a retail CBDC, a wholesale CBDC or both," with wholesale work generally at a more advanced stage than retail. More than one in three jurisdictions had stepped up CBDC work in response to stablecoin and crypto developments (BIS Papers No 159).
• The Atlantic Council's CBDC tracker (last updated May 2026) counts 146 countries and currency unions — representing over 98% of global GDP — exploring a CBDC, with 41 CBDC pilot projects worldwide. Three countries have fully launched a retail CBDC: the Bahamas, Jamaica and Nigeria (Atlantic Council CBDC Tracker).
• The euro area. The ECB completed its digital euro preparation phase in October 2025 and moved to a readiness phase. Its press release states that "[u]nder the assumption that European co-legislators will adopt the Regulation … in the course of 2026, a pilot exercise and initial transactions could take place as of mid-2027," with the Eurosystem "ready for a potential first issuance of the digital euro during 2029." The same release puts development costs at around €1.3 billion to first issuance and annual operating costs at roughly €320 million per year from 2029 (ECB, 30 October 2025). The ECB stresses that the decision on whether and when to issue can only be taken once the legislation is adopted.
• Nigeria is the cautionary case. IMF staff assessed the eNaira's first year and found usage remained very low, with the overwhelming majority of wallets inactive in any given week (IMF Working Paper 2023/104). Issuing a currency is not the same as getting it used.

What consumers could gain

• Free or low-cost basic use. The Commission's proposal requires that mandatory digital euro payment services for consumers be provided free of charge, with distributors able to charge only for optional or value-added services (COM(2023) 369).
• One scheme instead of fragmented national wallets, which reduces friction for people who cross borders within a currency area.
• Offline resilience: a payment route that keeps working when the network or a terminal connection fails.
• Less dependence on card rails and their fee structure. Under the EU's Interchange Fee Regulation, interchange on consumer debit cards is capped at 0.2% and on credit cards at 0.3% of the transaction value, and part of that fee flows back to the card issuer — a revenue stream a central-bank transfer does not create (Regulation (EU) 2015/751).

The caveat is acceptance. A wallet few merchants take adds a step rather than removing one, and merchant obligations are still being negotiated in the EU legislative process (European Parliament Legislative Train). Benefits are conditional, not automatic.

The operational bill for banks and fintechs

Deposit funding and financial stability

If households can hold central bank money directly, deposits can move faster in a stress episode. That is why the Commission's proposal lets the ECB set quantitative limits on the digital euro's use as a store of value, with the co-legislators negotiating an overall ceiling on those limits (COM(2023) 369). The currency is designed as a means of payment, not a place to park savings. Banks still carry the planning cost — liquidity buffers, deposit-base assumptions, and stress testing against a substitution channel that did not previously exist.

The cost stack

• Core integration: connecting core banking, payment hubs and ledgers to a new scheme's messaging and settlement flows.
• Identity and compliance: onboarding, transaction monitoring and sanctions screening, including rule sets for offline payments where full visibility is impossible by design.
• Merchant acceptance: onboarding, terminals, QR flows, refunds and reconciliation.
• Disputes: central-bank transfers are generally treated as final, so chargeback-style protection and complaint handling need new processes rather than an adapted card workflow.
• Resilience: a central ledger concentrates operational risk in a way a network of private rails does not.
• Hardware: offline token designs depend on secure elements and device-side anti-double-spending checks.

Where the revenue goes

Card payments route part of the merchant fee back to the issuer, subject to the caps set out in Regulation (EU) 2015/751. A central-bank transfer settles in central bank money and does not generate that revenue stream, which is why distributor compensation is one of the most contested parts of the EU framework (European Parliament Legislative Train).

For fintechs, the opportunity sits in the surrounding layers: wallet front ends, merchant acceptance tooling, routing and reconciliation logic, identity checks and offline hardware. The threat is compression at the base of the stack if basic payments become free.

Wholesale CBDCs and cross-border plumbing

Wholesale projects are further along than retail ones, according to the BIS survey. The goal is a tokenised settlement asset for interbank flows, with programmability that conventional reserves do not offer (BIS Papers No 159). Cross-border work connects to tokenised instruments whose redemption and custody mechanics already carry risks investors are learning to price.

The US position, and why it matters elsewhere

In the US, the federal position is settled for now. Executive Order 14178 bars agencies from taking "any action to establish, issue, or promote a central bank digital currency" and states that "any ongoing plans or initiatives at any agency related to the creation of a CBDC within the jurisdiction of the United States shall be immediately terminated" (Federal Register). The EU has a legislative file and a timetable; several emerging economies list financial inclusion among their stated drivers (BIS Papers No 159). None of these models generalises: availability, rules and tax treatment differ by jurisdiction.

Risks and costs

• Privacy against compliance. Offline payments settle device to device, so full transaction monitoring is not possible by design — which is why the Commission's proposal adds dedicated anti-money-laundering rules for offline transactions rather than relying on the monitoring used online (COM(2023) 369).
• Financial stability. Deposit substitution in a stress event is the core systemic concern behind holding limits and non-remuneration.
• Concentration. A single central ledger or platform is a single point of failure and a political target.
• Public cost. Building and running the infrastructure falls on the central bank — ultimately the taxpayer — while the private cost falls on distributors.
• Adoption risk. Nigeria shows that low acceptance, limited merchant coverage and available alternatives can leave a live CBDC barely used.
• Competition with private rails. CBDCs compete for the same transactions as stablecoins, which face their own reserve and redemption rules, and as existing instant payment schemes.
• Merchant investment. Terminals, software and staff training are real costs with no guaranteed transaction-volume payoff.
• Holding limits. Caps protect banks but also limit how useful the tool is for larger payments or savings.
• Unfinished rules. Compensation, merchant obligations and liability for failed offline payments are still open, which makes budgeting for institutions speculative.

Bottom line

Retail CBDCs are an infrastructure project, not a product launch. Three countries run live retail CBDCs, a few dozen run pilots, and the euro's earliest realistic issuance date is 2029 and depends on legislation that is not yet adopted (ECB; Atlantic Council).

For investors and finance professionals tracking macro-level payment shifts, the near-term signals sit in framework documents rather than wallets: the EU legislative timetable, the annual BIS survey, how distributor compensation and holding-limit methodology are settled, and whether merchant acceptance is mandated or voluntary. On our research watchlist are the schemes' rulebooks and the compensation models attached to them — because that is where the cost of a retail CBDC is actually allocated, years before anyone holds one.