Italy proposes zero merchant fees for digital euro payments below €10

Italy has proposed removing merchant fees from digital euro payments worth less than €10, introducing a small-transaction exemption intended to prevent the European Union’s planned digital currency from increasing costs for small businesses.

One of the options under discussion would cap the merchant service charge at €0.02 per transaction. However, European negotiators are also considering reducing that amount to zero because the administrative cost of collecting such a limited fee could outweigh the revenue it generates.

The proposal remains under negotiation and has not been incorporated into final EU legislation. Representatives of the member states, the European Parliament and the European Commission are due to examine the issue during their next round of talks in Brussels on 10 September.

The initiative addresses one of the most contested parts of the digital euro framework: the compensation model that will determine who pays for processing transactions and how banks and other payment service providers recover their operating costs.

Basic digital euro services would be free for consumers. Merchants, however, could still be charged by the banks or payment companies that process their transactions, subject to limits established under EU law.

Italy’s proposal would create a separate treatment for purchases below €10, a segment that includes many everyday transactions conducted through cafés, bakeries, convenience stores, newsagents and other small retailers.

A proposed cap that could become zero

The current negotiating option would establish a maximum fee of €0.02 for low-value digital euro payments, particularly those received by small merchants.

EU officials are also considering a full exemption. A zero-fee structure could simplify the framework and reduce the risk that merchants reject or discourage the use of the digital euro for small purchases.

The measure would apply to the merchant service charge rather than the value of the product or any applicable tax. Consumers would continue paying the full purchase price, but the retailer would not lose part of the transaction to a processing fee.

According to documents reviewed by Euronews, the proposed arrangement would initially be temporary. This would allow the European Central Bank to collect information on transaction volumes, processing costs and merchant behaviour before recommending a longer-term pricing model.

The Council of the European Union’s current negotiating position envisages an initial period of at least five years during which digital euro charges would be capped by reference to comparable payment methods. After that transition, limits would be calculated using the actual costs of providing digital euro services.

Italy’s proposal would introduce an additional safeguard within that framework for the smallest transactions.

Small retailers face higher payment costs

The initiative responds to concerns that small companies could bear a disproportionate share of the cost of adopting the digital euro.

Unlike large retailers, small merchants process lower transaction volumes and possess less negotiating power when agreeing payment conditions with banks, acquiring companies and card networks.

ECB analysis cited in the negotiations indicates that smaller businesses can pay three to four times more in payment fees than larger merchants. This difference can have a greater effect on low-value purchases because fixed charges represent a larger percentage of the transaction.

A €0.10 processing charge, for example, has a limited effect on a major purchase but represents 2% of a €5 sale before the retailer accounts for the cost of goods, wages, rent and taxes.

European policymakers want to avoid reproducing this imbalance in a system that merchants may generally be required to accept because the digital euro is expected to receive legal-tender status.

The obligation would remain subject to exceptions, including provisions intended to prevent disproportionate compliance requirements for certain small businesses.

Who pays for the digital euro?

Removing merchant fees does not eliminate the underlying cost of providing the service. It changes how that cost is distributed.

Banks and other regulated payment service providers would be responsible for opening digital euro accounts, performing customer checks, offering payment interfaces and supporting users. They would therefore seek compensation for the infrastructure and operating expenses involved.

The ECB estimates that the European banking industry could spend between €4 billion and €6 billion over four years implementing the digital euro. The central bank has separately calculated that building the core system could cost the Eurosystem approximately €1.3 billion, followed by annual operating expenses of around €300 million.

Under the proposed framework, banks would be permitted to charge merchants within regulated limits. The Eurosystem itself would finance the central infrastructure and would not impose scheme or processing fees on payment providers.

A complete exemption for transactions below €10 would require the cost to be absorbed elsewhere in the system. Banks could recover part of it through charges on larger merchant payments, other commercial services or the broader efficiencies produced by shared European infrastructure.

The final model must therefore balance two competing objectives: making the digital euro economical enough for merchants to accept while giving banks sufficient incentive to distribute and support it.

A European alternative to foreign payment networks

The project has a strategic purpose in addition to its role as a payment instrument.

Many euro-area countries do not have a domestic card system capable of processing payments nationwide and across borders. European consumers and businesses consequently depend heavily on international networks, particularly the US-based Visa and Mastercard systems.

The digital euro would create a payment method issued by the ECB, processed through European infrastructure and accepted throughout the euro area.

It would be a digital form of central bank money rather than a cryptocurrency or a commercial bank deposit. One digital euro would always have the same value as one physical euro.

Users could make instant payments in shops, online or directly to other individuals. The system is also being designed with an offline function that would allow some transactions to proceed without an active internet connection.

The ECB says the digital currency would complement banknotes and coins rather than replace them. Cash would remain available as legal tender, while citizens would be free to decide whether to use the digital alternative.

Consumers would receive basic services free of charge

The distinction between consumer and merchant fees is central to the legislative proposal.

Individuals would not pay for basic services such as holding digital euros, making payments or receiving transfers. Banks and payment companies could nevertheless offer optional value-added products for a fee.

Users would access the system through their bank, another authorised payment provider or a common digital euro application. The currency would operate on centralised Eurosystem infrastructure and would not be based on the public blockchain model used by crypto-assets such as Bitcoin.

The project also contemplates limits on how much digital currency one person can hold. No final figure has been agreed, although the ECB has examined scenarios involving balances of up to €3,000 per person to assess potential effects on bank deposits and financial stability.

No final decision on issuance

The digital euro does not yet exist and its launch is not automatic.

The European Commission first proposed its legal framework in 2023. EU governments agreed on a Council negotiating position in December 2025, while the European Parliament subsequently advanced its own approach.

A final regulation must now be negotiated and approved by both institutions. Only after that process will the ECB decide whether to issue the currency.

The central bank aims to be technically prepared for a possible launch in 2029, provided the legislation is adopted by the end of 2026. A 12-month pilot involving 36 banks and non-bank payment providers is scheduled to begin during the second half of 2027.

Italy’s small-payment proposal will now form part of the closing negotiations.

Its importance extends beyond the €10 threshold. The debate will help determine whether the digital euro enters the market as a low-cost public payment option or reproduces the fee structure that already places smaller retailers at a disadvantage.

A zero-fee regime could encourage adoption among businesses and consumers. Its viability, however, will depend on whether European legislators can protect merchants while establishing a sustainable compensation model for the institutions expected to operate the system.