imaginima/iStock via Getty Images
A working paper from the National Bureau of Economic Research found “remarkably heterogeneous effects” when assessing the impact of the digital euro on the payment industry: stock prices of U.S. payment firms decline and those of European payment firms rise in response to positive developments regarding the central bank digital currency (CBDC).
First off, a CBDC is a digital form of a country’s fiat currency, issued and regulated by the central bank. Unlike cryptocurrencies, which are decentralized, a CBDC is centralized and represents a direct liability of the central bank, just like physical cash. It ultimately allows the public to make digital transactions using government-backed money.
The authors of the NBER paper analyzed how the potential introduction of a major CBDC, such as the digital euro, affects the valuations of payment firms. They did so using a database maintained by the Bank for International Settlements, which includes a set of speeches on the digital euro over the 2016-2022 period.
So, when central banks deliver positive speeches about the digital euro, a value-weighted index of European payment firms rises by 52 basis points on the day of the announcement, according to the paper. Conversely, a comparable index of U.S. payment firms falls by 19 bps.
“This net loss is consistent with the often-cited argument that the digital euro would make payment services less costly for the public and the anticipation of a corresponding drop in rents for the payment industry,” the authors wrote.
U.S. payment stocks: PayPal (NASDAQ:PYPL), Block (NYSE:SQ), Fiserv (NYSE:FI), Global Payments (NYSE:GPN), Paysafe (NYSE:PSFE), Shift4 Payments (NYSE:FOUR), Repay Holdings (NASDAQ:RPAY), Euronet Worldwide (NASDAQ:EEFT).
European payment stocks: Adyen (OTCPK:ADYEY) (OTCPK:ADYYF), Nexi (OTCPK:NEXPF) (OTCPK:NEXXY), CAB Payments (OTCPK:CABPF), Worldline (OTCPK:WWLNF) (OTCPK:WRDLY).
