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CBDC: An Opportunity or a Solution in Search of a Problem? EMTECH March 27, 2023
CBDC: An Opportunity or a Solution in Search of a Problem?

CBDC is being explored in countries that account for 95% of global GDP. Eighteen of G20 member countries are already in the advanced stage of developing CBDCs. Jamaica, the Bahamas and Nigeria have already launched their own CBDC.

Despite these and other considerations, many payment service providers, particularly commercial banks, believe that CBDC will compete with the deposits and credit lines they offer to their customers, while others question the value of implementing CBDC due to the numerous alternative payment solutions available in their market. On the other hand, several active CBDC projects worldwide have taught us that CBDC is an opportunity for every country to upgrade the technology their central bank uses to provide sovereign currency and an inclusive and resilient financial market. This is a fundamental component of financial services for economies to grow and thrive. CBDC is therefore, not a solution in search of a problem,  it is indeed the coming next generation of infrastructure needed to replace the systems that were installed over 50 years ago, when payments apps didn’t exist. Given the rise of technologies such as APIs, blockchain, machine learning and cloud computing in financial services, a modern currency infrastructure must reflect that. 

In addition, from a government and central bank perspective, CBDC projects around  have proved CBDC can reduce the cost of government payments, provide a safe mode of exchange for day to day commerce through intermediaries, even when there will continue parallel forms of private money such as deposits and stablecoins, settle large crossborder payments much better than current systems. 

For financial service providers (FSPs), a variety of benefits can accrue from a CBDC-linked innovation, including:

  • Customer acquisition: CBDC will enable forward-thinking FSPs to target new customer segments with unique and tailored offerings. By providing CBDC-related services, you will be able to help un- and underbanked individuals create financial identities that can help build credit or insurance profiles whilst also promoting new customer opportunities/ segmentation. A fintech with access to CBDC system can expand to millions of more customers and new services to drive structural growth.
  • Product innovation: CBDC’s peer-to-peer nature, programmability, and atomic settlement will enable FSPs of all kinds to deliver new product that meets customers’ increasing payment demands and current ecosystem gaps which could boost top-line growth.
  • Cost-to-serve: CBDC will minimize the expenses of paper cash storage and administration, switching, and cash dispensing infrastructure like ATMs to boost profit margins and lower transaction fees that customers are charged.
  • Resilient payment rail: CBDC offers a more resilient payment infrastructure to meet customers’ needs for an always-on, always-performing payment infrastructure.
  • Participation of non-bank PSP: With the right technology and policy framework, CBDC has the potential to enable non-bank PSPs to directly engage in interbank payment systems on a level playing field. See the fintech model being proposed in Switzerland Fintech License.

In addition, experts believe that the ultimate effect of CBDCs on the financial system is largely positive: enabling financial inclusion, keeping a cap on fraud and reduction of money laundering, among others.

Beyond the intrinsic benefits of CBDCs, the real value comes from adoption, which hinges on central banks laying the right technological foundation for the core CBDC infrastructure and payment service providers creating innovative customer interfaces and solutions for use cases relevant to address existing domestic or cross-border payment and financial services gaps.

EMTECH CBDC Innovation Kit

We believe unlocking this opportunity with central banks and financial service providers is a win-win. That’s why as we continue our work with central banks, we launched the EMTECH CBDC Innovation Kit for FSPs who want to stay ahead of the CBDC innovation curve and tap into this new market opportunity. This kit provides payments service providers (commercial banks, payments service banks, and fintechs) early access to a robust CBDC simulator deployment to innovate with in order to uncover how CBDC integration will impact their solution stack and product offerings, allowing them to develop and test unique CBDC-linked use cases that can truly move the needle on customer acquisition, product innovation, revenue, and cost-to-serve. In addition, you will have advantage of our workshops to discuss various CBDC frameworks and business models.

FSPs will have an “early mover advantage” in staying ahead of the CBDC innovation curve ahead of the central bank’s readiness to issue a CBDC, whether they select EMTECH’s or not. Please book a meeting with our team today to learn more about the EMTECH CBDC Innovation Kit designed with deep central banking expertise.

We are truly excited at this means for you and your role is designing the future of finance.  Users need financial products that make their lives easy, solve their problems and save them money.  We believe a well designed modern digital cash infrastructure can help you do that.  Let the innovation soar!