The potential introduction of the digital euro aims, among others, at facilitating the digitalisation of the euro area payment systems. This chapter contributes to the above issue by providing a discussion of the challenges and opportunities arising from the use of a CBDC in the context of the existing retail payment systems in Europe. After introducing the reader to the existing retail payments landscape in the euro area, it presents the current and future trends in the payment methods of European consumers and companies, and the emergence of new technologies that shape digital retail payments. It then discusses the rationale behind the launch of digital euro as a means of payment, devoting particular attention to the prospective challenges, which mainly refer to privacy and security concerns, as well as the digital euro’s interaction with the informal economy and the degree of financial inclusion across Europe.