Patrick McConnell’s Post

Arthur Bedel 💳 ♻️, always enjoy reading your posts! Spot on with these trends! The shift towards real-time payments and regulatory-driven innovation is reshaping the financial landscape. For instance, the global real-time payments market is projected to reach $25.9 billion by 2023, according to MarketsandMarkets. This surge reflects the demand for instant, seamless transactions in both domestic and international contexts. However, an often-overlooked element is the cybersecurity implications of these rapid changes. As payment systems evolve, so does the sophistication of cyber threats. The FBI reported a 69% increase in cybercrime in 2020, emphasizing the need for robust security measures in tandem with these innovations. Indeed, as we eagerly await Part 4, it's crucial to consider the balance between innovation, interoperability, and security in the dynamic payments ecosystem

Thailand's central bank (BOT) has completed a pilot program for a retail Central Bank Digital Currency (BDC). This initiative aimed to assess the technology's potential for enhancing Thailand's payment infrastructure and enabling financial innovation. Key Findings: Successful Functionality: The pilot program demonstrated the feasibility of rCBDC as a payment infrastructure, supporting various retail transactions and programmable payments. Innovation Catalyst: rCBDC has the potential to drive financial innovation beyond the current system's capabilities, such as universal escrow and fraud response mechanisms. Open Infrastructure: The rCBDC system can be accessed by banks and non-bank financial service providers (FSPs). Alternative Payment Infrastructure: rCBDC could be a resilient backup to existing payment systems. Challenges and Future Considerations: Adoption: Encouraging user adoption and understanding the impact on FSP business models remain vital challenges. Value Proposition: Clarifying the value proposition of rCBDC for various stakeholders is essential for broader acceptance. Cautious Approach: The BOT does not immediately plan to issue rCBDC but will use the pilot's findings to inform future payment system developments. Implications for Firms: New Opportunities: rCBDC could create new avenues for financial innovation, enabling firms to develop novel products and services. Increased Competition: rCBDC could disrupt the existing payment landscape, forcing firms to adapt and innovate to remain competitive. Collaboration: Firms should actively engage with the BOT and participate in initiatives like the upcoming sandbox scheme to explore the potential of CBD and programmable payments. Technological Adaptation: Firms should invest in technologies supporting rCBDC transactions, such as interoperable wallets and payment platforms. Customer Education: Firms should proactively educate customers about CBD and its potential benefits to encourage adoption and usage. Looking Ahead: While the BOT is not rushing to issue rCBDC, the pilot program's success signals a significant step towards a more innovative and inclusive financial ecosystem in Thailand. By staying abreast of these developments and actively participating in the ongoing conversation, firms can position themselves to leverage the potential of rCBDC and thrive in the changing financial landscape. #BOT #rCBDC

Bank for International Settlements – BIS - Project Polaris: high-level design guide for offline payments Source: https://lnkd.in/gnVUVsNg #projectpolaris #offlinepayment #cbdc #emoney #design #guide #payments Credits: Beju Shah Ben Dovey Björn Segendorff Grímur Sigurðarson Hachem Hassan Sidney Lampart Susanne Bohman Zhijun William Zhang, Ph.D. Xin Zhang, PhD John Velissarios Vincent Mele Tim Richards Neil McEvoy Gary Munro Tim Allen Cecilia Skingsley Ross Leckow Codruta Boar Carmen Arias Sonja Davidovic Cristina Maria Lucia Picillo Daniel Eidan Jack Ho Karen Martin Andreas Adriano Alan Soughley Johanna Schreck Miki Kuusinen Tomer Mizrahi Axel Kristinsson Sigríður Dís Guðjónsdóttir Barbora Kalmaityte Holger H. Kjetil Watne Lasse Meholm Terje Åmås Henrik Axelsen Ian Vitek Veljko Andrijasevic Highlights: The deep-dive workshops reinforced many of the conclusions from the handbook: Providing offline payments with CBDC is an important requirement for many central banks. The drivers for offline payments with CBDC vary by jurisdiction. Some common motivations are supporting inclusion, offering cash-like features such as enhanced privacy, and increasing payment system resilience by providing an alternative option in the event of disruption. Design choices must consider requirements for the whole solution. An offline payment solution cannot be designed in isolation. Some of the core links between objectives, characteristics and design options are shown. There are likely to be more links than those shown. Trade-offs will exist between different requirements. To overcome this, central banks can take an iterative approach to design, exploring alternative ways to achieve their objectives The deep-dive workshops also provided several additional conclusions: The overall maturity of offline CBDC payment solutions is evolving: very few are in a live environment working at scale. Solution vendors face common challenges in demonstrating they can meet central banks’ requirements and ensuring that they have sufficient funding to continue their development. For offline payments with CBDC, central banks can be a driving force for collaboration and innovation. They need to understand their context, determine their objectives and use these to define their requirements. By taking a leading role, central banks can support solution vendors in overcoming the challenges discussed above and ensuring that solutions are based on their requirements, rather than on whatever technology is available. This should be an iterative conversation. Only with a clear set of requirements can a solution vendor meet the needs of central banks. At the same time, central banks need to form an understanding of existing technology options to see what is currently feasible and where gaps remain. 

SWIFT + CBDC - #SWIFT, the global provider of financial messaging services, has announced its plans to interlink with Central Bank Digital Currencies (#CBDCs) to revolutionize cross-border transactions. - The interlinking solution offered by SWIFT aims to streamline the process of transacting with CBDCs, making it seamless and efficient for financial institutions. - This move is a significant step towards the widespread adoption of CBDCs, as it addresses one of the major challenges of #cross-#border transactions - #interoperability. - Currently, cross-border transactions involve #multiple #intermediaries, high costs, and lengthy settlement times. - SWIFT's interlinking solution for CBDCs will eliminate these pain points, making transactions faster, cost-effective, and more secure. - The interlinking solution leverages SWIFT's existing network, which is trusted by banks and financial institutions worldwide. This ensures the seamless integration of CBDCs into the existing financial infrastructure, accelerating their adoption and usage. - By enabling interoperability between different CBDCs, SWIFT's interlinking solution opens up endless possibilities for cross-border transactions. Financial institutions will be able to transact directly with each other using different CBDCs, eliminating the need for intermediaries and reducing costs. - Additionally, SWIFT's interlinking solution provides enhanced transparency and traceability to cross-border transactions. This is crucial for regulators, as it allows for better monitoring and compliance with global financial regulations. - The introduction of CBDCs and SWIFT's interlinking solution also has potential benefits for end-users. Individuals and businesses will benefit from faster and more cost-effective cross-border payments, enabling smoother international trade and economic growth. - SWIFT's initiative is gaining traction in the industry, with several use cases already identified. Central banks, financial institutions, and technology companies are actively exploring the integration of CBDCs with SWIFT's interlinking solution to unlock the potential of seamless cross-border transactions. - The collaboration between SWIFT and central banks around the world marks a significant milestone in the evolution of global payment systems. It sets the stage for a future where CBDCs become the norm, transforming the way cross-border transactions are conducted. - Overall, SWIFT's interlinking solution for CBDCs is cutting-edge, bringing about a complete change in the cross-border transaction process. It addresses the challenges of interoperability, reduces costs, improves transparency, and enables faster and more secure transactions. The adoption of this solution will pave the way for a new era of #global #payments powered by #CBDCs.

The Bank of Japan (BoJ) has conducted a pilot program for Central Bank Digital Currency (CBDC) since April 2023. The program has two pillars:  developing and testing a CBDC system and the CBDC Forum for discussions with private businesses. System Development and Experimentation The system for the pilot program is broader than previous Proofs of Concept, covering everything from endpoint devices (like smartphone apps) to the central system. It aims to handle a higher transaction load and incorporate additional functions like scheduled transfers, debit transfers, and balance/transaction inquiries. Experiments are being conducted both on the system itself (performance tests) and through desktop, simulations to explore various aspects of the CBDC, including: The system does not implement various functions, such as account opening/closing, recurring payments, and account holdings limits. Interoperability with external systems: to ensure seamless integration with existing financial infrastructure. External connection interfaces: examining how the CBDC system interacts with intermediaries and service providers. Offline payments: exploring the feasibility and scalability of offline CBDC transactions. Privacy-enhancing technologies: investigating technologies to protect user privacy while complying with legal and regulatory requirements. Non-functional aspects: exploring system reliability, scalability, and security measures. CBDC Forum The CBDC Forum facilitates discussions between the BoJ and private businesses on various topics related to retail payments and CBDC implementation. Additional working groups are planned to address the conversion between CBDC and other payment instruments, operational processes, and cash/CBDC conversion. Implications for Firms Preparedness for CBDC Integration: Firms should be aware of the BoJ's ongoing efforts and the potential introduction of CBDC in Japan. They should assess how a CBDC might impact their business models and operations and explore potential integration strategies. Participation in CBDC Ecosystem: Firms with expertise in relevant areas (e.g., payment systems, technology, cybersecurity) may have opportunities to participate in the development and implementation of a CBDC ecosystem in Japan. This could involve collaborating with the BoJ, providing services or solutions, or participating in the CBDC Forum. Regulatory Compliance: Firms should monitor regulatory developments related to CBDC and ensure their operations and services comply with any future regulations or guidelines that may be introduced. Customer Engagement: Firms should consider how a CBDC might impact their customers' needs and preferences and how they can leverage a CBDC to enhance their products and services. Overall, the BoJ's pilot program demonstrates a commitment to exploring CBDC's potential in Japan, and firms should proactively prepare for its possible introduction. #boj #cbdc

Hello connections, Starting this month, I've started to look more carefully at the daily headlines in payments, and have been providing a few with my thoughts to my IBM colleagues. I thought you might be interested as well, so here is what I shared yesterday. I'll provide today's thoughts in another post. It seems that almost every week we see more announcements about CBDC POC’s or pilots – among some of the headlines here, you will find one about Switzerland’s pilot, in production, of one model of CBDC with six Swiss banks. https://lnkd.in/gQaP6Bmm In the other news, the Consumer Financial Protection Board (CFPB) in the U.S. has flexed its muscle by fining a payment remitter for, essentially, false advertising about fees and speed of payments. You might recall that in 2010, the Dodd-Frank Wall Street and Consumer Protection act was passed, in response to the 2007-2008 crisis, which, among other things, formed the CFPB. One of the outcomes was the regulation on transparency of fees and services for cross-border payments for consumers in the U.S. It seems that Sendwave didn’t adhere to the rules. https://lnkd.in/gPzUXtTK Another big headline is the movement among European banks to create a new payment scheme named “wero” – a digital wallet platform that promises instant account-to-account payments. This would be a rival to Mastercard and VISA, since it would appeal to merchants in getting their funds instantly for purchases by their consumers. Given the big bank names participating, this is definitely an initiative to watch. https://lnkd.in/gk_Ev-DA You will likely already have heard about the U.S. President’s Executive order regarding AI usage – here’s a link to the White House’s full fact sheet on the Order. Coinciding with that order is a draft policy release by the U.S. Office of Management and Budget. This important direction is already being considered by other countries to inform their positions, but experts disagree on how far such policies and regulations should go. Using AI in payments is a nascent, innovative field, in which IBM is starting to work. As regulation usually follows innovation, this is likely just the beginning of a long story: https://lnkd.in/gjvYv-gE Shanker Ramamurthy Mike Cook Andrew Higgins Expertus, an IBM Company Abdulah El Tarazi Carmen Cutajar Yannick Boudreau Sridhar (Sri) Narayanan Robert Matys Marie-Claude McKay Donna Scott Sujeet Prakash

Bank for International Settlements – BIS, Syngjoo Choi, Bongseob Kim, Young-Sik Kim, Ohik Kwon “Central Bank Digital Currency and Privacy: A Randomized Survey Experiment” Privacy protection has been regarded as the most important characteristic to consider in the issuance of CBDC. In this paper, the authors have designed and conducted a large-scale randomized online survey experiment to investigate the impact of CBDC design choices regarding the preservation of privacy on the willingness to use CBDC as a means of payment. The survey experiment also examines how the willingness to use CBDC is affected by information on the potential privacy benefits of using CBDC in the sense that it can prevent the commercial use of personal identity information and transaction data by financial institutions and BigTech companies. The authors find that when privacy-sensitive products are purchased in both offline and online transactions, the willingness to use CBDC increases substantially when it is designed to preserve the privacy of its users by storing their personal identity information and transaction data separately in two different institutions and when the potential privacy benefits of using CBDC are informed. The findings from the survey experiment with a nationally representative sample of over 3,500 participants provide useful insights into the specific features of CBDC concerning anonymity and privacy protection that can facilitate the choice of CBDC by the general public as a means of payment. The findings imply that as long as CBDC is designed to provide sufficient anonymity and protect privacy while meeting the AML and/or CFT regulations, it is more likely to substitute the existing payment instruments provided by the private sector, including commercial banks’ demand deposits. This means that CBDC could enhance the public-good role of money in providing anonymity and protecting privacy in the digital age, but at the expense of credit intermediation. It would be interesting to investigate quantitatively how the degree of anonymity associated with using CBDC as a means of payment affects credit creation by banks, including the optimal degree of CBDC anonymity. ——— #datasharing #globalsupplychain #crossboarderpayments #securefinancing #fraudprevention #tradefinance #tradematters #sustainability #digitaltrade #globaltrade #technology #LEI #digitalidentity #C4DTI #paperless #digitalidentities   #innovation  #digitalisation #paperlesstrade #digitaltransformation   #digitaltradechampion #digitaltradeevangelist  #internationaltrade #digital #crossbordertrade #cbdc #regtech #suptech #payments #innovation #banks #digitalrevenueimpact #risk #regulations #digital #m2mi #cybersecurity #risk #banking #embeddedfinance #openbanking #sustainablefinance #iot #money #bankofengland #digitaleconomy #fintech #multicurrency #privacy #artificialintelligence

Banking and CBDC Weekend Roundup: US lawmakers are trying to stop a digital dollar from spying on you, but other countries are racing ahead with CBDCs. ➡️ Here's everything happening in banking and CBDCs: https://lnkd.in/dNP3UUUi

“I lost my wallet which has Rs.20,000 cash in it”😟 “It might not have happened if it was in digital form”, said one of my friend. Say no more RBI INTRODUCED CBDC by name of e₹ CBDC??? Yes, CBDC or Central Bank Digital Currency are a form of digital currency issued by a country's central bank. They are similar to cryptocurrencies, except that their value is fixed by the central bank and equivalent to the country's fiat currency. In simpler words, it is digital version of say 100 rupees note in your pocket, means completely legal. The only difference is, it is stored in your digital wallet on your smartphone instead of your leather wallet. “So, is it like UPI or other digital payment apps?”🤔 NOO, Well UPI is a payment interface (one of ways of making payment), whereas CBDC is a CURRENCY itself. "But, why should one shift from physical currency to e-currency?" So, I would like to quote the lines said by RBI Governor, Mr. Shaktikanta Das, “CBDC is going to be the FUTURE currency of the world and it is necessary that every central bank, every country work on CBDC”. There are several BENEFITS such as: ▪️Lesser risk of theft and damage to currency notes, as it is digital ▪️Easy Cross border transaction - if two countries have CBDC system then it will be easy and convenient for public to carry cross border transaction. Mr. Shaktikanta Das also mentioned that, right now cost of remittance is as high as 6-7%, which can be brought down by implementing CBDC. (Though this system is currently under process) ▪️Savings in cash printing and transaction tracing cost, which is approximately around 5000crores. ▪️Digital currency is environment friendly (a small yet effective initiative, as we know every drop counts to fill an ocean) ▪️Reduction in time for processing BIG transaction - large amount transaction take time to process between banks, however here time will be reduced, reason being we don’t have to route our transaction through bank. It's similar to having cash on hand that you can immediately give to someone without any delay. But along with benefits, there come some CHALLENGES as well: ▪️Need of smartphone and internet connection to access digital currency – as not each individuals owns a smartphone or some areas don’t have good internet connection, will the system still work. ▪️Will user be able to use it WITHOUT LINKING it with bank account, same as cash. (Though the same work is in progress right now, however, not yet completed) ▪️Literacy about CBDC and its underlying technology, is very low among people – will public at large be accepting such change. ▪️Use of system- Whether we have appropriate system required for CBDC and its cost to run. After considering all this, it is sure that accepting such change might not be easy, however consistent efforts by all of us, as one nation, is what it takes to implement it successfully. What are your thoughts on this??? #rbi #digitalindia