CBDCs are everywhere – and nowhere. Everyone is discussing them, but almost no one is actually deploying them. Sure, this is in part due to the early stage thinking that is going into working out what is actually required but it’s also due to the tricky business of actually working out how they would be implemented. Developing a retail payment solution is a lot harder than creating a Central Bank backed payment instrument.
I had the privilege to chair a discussion about identity in the metaverse at the Identiverse conference in Denver in June 2022, and had great fun discussing the new landscape for identity with Heather Vescent, Jonathan Howle, Katryna Dow and Gopal Padinjaruveetil. In order to frame my thoughts and get the discussion about identity and privacy going, I needed a mental model.
This week, a press release from China announced they had expanded acceptance of the digital Yuan onto public transport in 12 cities. China has led the way in the development of a Central Bank Digital Currency (CBDC), launching a trial in 2020 which has been expanding steadily. But what does this mean? What is a CBDC? And when will I need to consider accepting them in public transportation?
The human society is now at crossroads – demanding changes in our lifestyle, health choices, economics, and civil liberties. These changes are accelerated by climate change, political response to the pandemic, the need for racial and gender equality, human migration, and of course, a few break-through technologies such as digital automation, data analytics, and machine-learning (AI). So where are we heading? The call for “Great Reset” has been reverberating since the past few years and is now getting louder and louder. This was the topic of the virtual fireside chat by two visionaries on our Tomorrow’s Transactions webinar, Brett King and Dave Birch, discussing the societal and technological changes that are foreseen in the next few decades. This conversation was centered around Brett King’s (Richard Petty, co-author) book, “The Rise of Technosocialism” and aligns with Consult Hyperion’s engagement with think tanks on global issues. Our aim to is separate foresight and facts from fiction in trying to understand the trends in the market that our clients should watch-out for especially in payments, banking, transit, digital identity, and information security.
Our overriding theme of this year’s Live5 is interoperability which will lead to inclusion. Whether this is in payments or transit, identity or as a generalised trend what we’re seeing is a collapsing of the barriers between silos. In some areas this is happening more quickly than in others.
Victoria Saporta, BoE executive director for prudential supervision, has said recently that minimum resilience requirements should be required for the tech giants’ (and others’) hosting services, before they may process and store banking data. We strongly support these comments. We have identified this issue as one of a number of new risks arising from modern financial systems architecture, in recent Structured Risk Analyses that we have carried out for financial and retail organisations in North America, Asia-Pac and EMEA.
We were delighted to get a lot of good feedback on Neil’s previous blog on Mondex Memories and CBDCs and its relevance to CBDCs and thought it would be interesting to respond to some of the more interesting – and difficult – points raised in a follow-up blog. Before addressing those I wanted to put the Mondex program into some historical context. They were very different days – we didn’t have an intranet until 1996, let alone internet access. There were no SDKs – although actually we did build a precursor to one of those – or APIs and the idea of remote payments was still in its infancy (although we did that too).
Deep in the mists of time (that is to say, the early-1990s), I led the team from Consult Hyperion responsible for Mondex specification, design and development. For those not familiar with paleo-payments, it was one of a clutch of (contact) smart card based electronic cash systems, none of which survived beyond, let’s say, early adolescence. There were two main reasons for their demise, one technological and one business. The concept was ahead of the capabilities of the underlying technology. Transactions took about the same amount of time as cash plus change, which wasn’t a compelling reason for anyone to leave their wallet behind. The promoters of the schemes (retail banks and payment brands) did not target particular niches where there may have been a business case (I always thought car parking might work) but instead blanketed retail outlets in particular cities or small countries. So, mostly unused devices were put under the counter, and people forgot about the schemes after an initial blaze of publicity.
The Bank of England and the UK Treasury have announced a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential British CBDC. But how could a digital Pound actually work? As it happens, this is something that Consult Hyperion knows rather a lot about. Apart from our work on the first British central bank digital currency (Mondex) back in the 1990s, our work on the first population-scale mobile money scheme (M-PESA) in the 2000s and our work on the most transformational contactless payment roll-out (Transport for London) in the 2010s, our practical experience across implementation platforms means that we understand the architectural options better than anyone.