'eliminating the need to hold funds' could be a big issue for payment providers. With this model how can they make CBDCs commercially viable unless they charge high fees to compensate for the inability to collect interest? Separating the operational provision of CBDC services from liquidity provision may reduce settlement risk (although there are other ways to mitigate it), but at scale it looks a non-starter commercially. Also, privacy and surveillance are only one aspect of CBDC risk. Loss of control over funds is another big risk - an Access Enabler is a gateway to funds and could easily be used as an Access Disabler or blanket blocker i.e. the risk of financial exclusion in contrast to the goal of financial inclusion so often used to justify CBDCs. There needs to be a focus on commercially viable business models using CBDCs that have cast iron solutions to their risks - this is best driven by the private sector.
14 Sep 2023 13:54 Read comment
Confirmation of Payee is a sending bank check but is advisory and the sending bank has no details of the beneficiary account at another bank other than on the CoP database. With the banks I use, you can ignore the CoP warnings and send the payment without getting a match; and often, especially for business accounts, you get "unable to verify account, proceed anyway?". It is a step in the right direction but it is hardly a bullet-proof solution, particularly since some banks and PSPs have not implemented CoP. Whereas the receiving bank has detailed knowledge of the beneficiary account - account holder name, KYC history, usage history etc and is in a much better position to identify fraud and take action if there is a mismatch between the beneficiary name on the payment and the name on the beneficiary account. The receiving bank is also in a better position to identify suspicious transactions in the event a legitimate account is taken over by fraudsters.
17 Aug 2023 14:58 Read comment
This the second CHAPS/RTGS outage in nine years, which actually is a fairly good record. Resilient payment infrastructures though tend to impede or constrain change/innovation as there is a little need/impetus to change.
Card and ATM switches are an example, some are so resilient they have run continuously for decades and banks/processors are reluctant to replace them hindering their ability to innovate.
A little known issue with the current BoE RTGS system is that there are very few windows available each year to on-board non-banks for settlement accounts to participate directly in the Faster Payments system, thus limiting the number of non-bank direct participants and the innovation they bring using instant payments.
This should change with the introduction of the new BoE RTGS next year and we should see the number of non-banks with BoE settlement accounts accelerate.
Hopefully this latest incident with the old RTGS will spur the BoE into keeping to their current implementation schedule for the new RTGS or even accelearting it rather than, out of caution, causing it to be delayed still further.
17 Aug 2023 11:15 Read comment
How does reimbursing fraud victims prevent fraud? It is more likely to increase it. Much more focus is needed on preventing fraud, starting with regulation to force banks to check the beneficiary on an incoming payment matches the name on the beneficiary bank account. Sounds obvious, but it is neither a legal requirement in the UK nor a standard banking practice. Who/what is preventing this obvious measure?
16 Aug 2023 22:05 Read comment
Great points and good to see Barclays taking this initiative.
As a start, they and the other UK banks should publish the names of the tech companies where scams originate with statistics they have on their number and nature. It will raise awareness with the public and encourage the tech companies to take action.
11 Aug 2023 08:32 Read comment
Pix is a shining example of how instant account-to-account payments have a far superior and up-to-date product/market fit than cards - same goes for UPI in India. Both were implemented in relatively short time frames and gained huge traction immediately. However, cards are far more profitable for banks which is why in countries such as the UK, Australia, USA, Canada and the Nordics initiatives to implement or upgrade real-time a2a payment systems are delayed continuosly or slow to get traction. Behind the scenes foot-dragging seems to be the order of the day in these countries which is a shame and a huge detriment to their economies and consumers.
26 Jul 2023 13:12 Read comment
yet another review of the future of UK payments... and what does 'looking at mobile payments' mean (as if they are some sort of new phenomenon)?
I suggest there should be less 'looking' and 'reviewing' and more doing - innovation waits for no-one, especially in these days of fast technology adoption.
11 Jul 2023 14:05 Read comment
The fact that there is even a discussion about an artificial limit for holding a retail CBDC indicates a deep flaw in the thinking and design behind it. Its intended purpose is for use by tens of millions of people, how can it be that a handful of officials know how the population will use it and can determine how to limit its use? How would we even know when we are using a CBDC or a bank deposit? They are both digital. Central banks should concentrate on providing wholesale CBDCs that the private sector can collateralise to provide innovative solutions whose success will be decided by the market.
07 Jul 2023 08:51 Read comment
It is clear that the BIS is the driving force behind the proliferation of CBDC projects at central banks around the world. The BIS intention is clear, as stated in a speech by the general manager two years ago: "A key difference with a CBDC (to cash) is that the central bank will have absolute control on the rules and regulations that determine the use of that expression of central bank liability. And also, we will have the technology to enforce that."
It is unclear how this fits in with the BIS mission to 'support central banks' pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks.'
With CBDCs central banks are straying outside settlement of wholesale payments and into retail payments where they have no expertise and no remit (generally) to operate.
The risks are mounting that CBDCs will become a fait-accomplit without the consent in national populaces, or even awareness, for their money usage to be subject to rules and regulations under the the 'absolute control' of unelected, obscure entities such as the BIS and the central banks it influences.
Projects such as Rosalind are no doubt well-intentioned by those running them but there are some big risks and issues - surveillance, privacy, freedom to name a few that need to be addressed and resolved before central banks are allowed to issue CBDCs or even continue these projects (justified as 'responsible innovation' a somewhat uneasy phrase used by the BIS). Rosalind is a likeable but manipulative scheming Shakespeare character (As you Like It). What comes next - Project Ganymede (something in disguise such as carbon credits) then Project Orlando (a marriage such as CBDC plus digital id)?
The risks are very high.
16 Jun 2023 13:32 Read comment
Another centralised real-time payment system facing ongoing delays to add to the list. The technology and its implementation are proven, but the challenge is these type of systems are prone to go at the pace of the slowest participant; and there are many vested-interest reasons why a participant may want to delay - industry politics, internal priorities, internal capacity to change, lucrative legacy business models under threat, liquidity management, competition etc.
This is possibly the cause in Canada, maybe there are other reasons, but Pix in Brazil has shown what can be achieved when all participants pull together with strong direction (from the central bank in this case) and an absence of much legacy technology and business processes to change/protect.
14 Jun 2023 17:43 Read comment
EBAday
Eugene DanilkisCo-Founder at Mambu
Tatiana RozoumCo-founder at Fintecture
Richard PappCo-founder at FLIT Invest
Philipp PieperCo-founder at Swarm Markets GmbH
Dmitry PanovCo-founder at Whillet - BaaS for embedded finance
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