fbpx
Connect with us

Fintech

Are CBDCs the future of monetary systems?

Yehia El Amine

Published

 on

CBDCs

The world is becoming more and more digital as time passes, with finance services championing this transformation, especially with the increasing demand of contactless digital payments swooping in, as the global Covid-19 pandemic magnifies our need for them.

Many central banks around the world are looking to create their own digital currencies (CBDC) to spearhead the changing tides of the financial world.

The initial debate over this topic was sparked when social networking titan Facebook announced that they would be launching their very own Libra cryptocurrency last year.

As many have mistaken CBDCs for cryptocurrencies, they are fundamentally two different things.

According to U.S.-based think tank, Brookings Institution, CBDCs are traditional money, but in digital form; issued and governed by a country’s central bank. By contrast, cryptocurrencies like bitcoin are produced by solving complex math puzzles and governed by disparate online communities instead of a centralized body.

What’s common between both digital currencies, to a varying degree, is that both of them are reliant and based on blockchain technology; blockchain is a distributed ledger technology (DLT) that allows information to be stored globally on thousands of servers.

When two companies are in business together and use cryptocurrency as payment, the agreement forms the “block” in the chain. However, while some brick-and-mortar stores and many businesses do accept Bitcoin as a form of payment, cryptocurrencies are not considered to be legal – CBDCs, on the other hand, would be.

“Unlike central bank money, both traditional and digital, the value of cryptocurrencies is determined entirely by the market, and not influenced by factors such as monetary policy or trade surpluses,” the report by Brookings highlighted.

According to the Bank of International Settlements (BIS), electronic cash is more often than not held and supported by banks or on pre-paid cards paid for in hard currency to represent the numbers on a screen.

In this case, however, CBDCs act as a complete replacement for bank notes and coins all together, shedding away its representation in physical funds.

Many central banks around the world view CBDCs as a more cost-effective and efficient replacement for the traditional payment systems that have been around for decades, in the hopes of reducing transfer and settlement times, which would subsequently spur economic growth on a massive scale.

In parallel, CBDCs are seen as the natural champion that would face off against the rise of private sector issued cryptocurrencies such as Facebook’s Libra.

The fear among central bankers is not targeted toward the highly volatile and inconsistent state of cryptocurrencies, but mainly deals with the private sector’s effect on the financial system that would quickly erode sovereignty over monetary policies.

Many consider that CBDCs could address problems like inefficient payments that cryptocurrencies seek to solve, while maintaining state control over money.

The beauty of CBDCs is their ability to fully digitize the entire monetary system, allowing it to become more efficient with easier access to funds all while being transparent, due to the use of blockchain technology.

The theory goes that due to the CBDCs being centrally controlled, regulated, and backed by local governments, then it would grant them legitimacy, trust, and stability in the eyes of citizens and consumers.

This would also pave the way for better monetary policies to be enacted, allowing them to flow more directly and seamlessly while not being hampered by third parties, which would fuel cashless economies and systems.

CBDCs would allow citizens direct access to their funds via the central bank, or via commercial bank partnerships which would subsequently explode financial inclusion to another level; this is a radical change to the financial system, as people would enjoy secure access to their money merely through a smartphone and an Internet connection.

As the notion of CBDCs is still in its infancy, African countries such as Ghana and Rwanda are spearheading research and investigation into the potential use and investment into digital currencies in an attempt to provide financial support to its huge unbanked population.

While most countries are still in the research stages, France has already piloted a CBDC transaction, and Sweden is currently carrying out a one-year trial of the new e-krona, built on the Corda DLT platform.

Be that as it may, central bank digital currencies still need years of development to reach the mainstream, but the sooner banks and financial services can anticipate and prepare for the move, the sooner a seamless transition can be made.

However, one need not forget the barriers that come along with any digital transformation, from policy and regulations to the greater risk of cybersecurity.

If the central banks of the world are able to quickly adapt to the changing tides and fully support this transition, then humanity would be heading toward a new dawn of a more democratized monetary system all together.

Advertisement

Yehia is an investigative journalist and editor with extensive experience in the news industry as well as digital content creation across the board. He strives to bring the human element to his writing.

Fintech

Buy now pay later services to reach $995 Bn globally in 2026

Inside Telecom Staff

Published

 on

Buy now pay later

Commerce has come a long way in the 21st century; it has evolved from the simple act of exchanging banknotes for goods, to the current digital age where you can make transactions by a digital currency mined by someone on the other side of the planet.

Commerce transformed into eCommerce, and with it came a plethora of strategies, payment methods, and gateways that can give you the option to pay at your convenience based on your preferences.

As such, technology took financial services and procedures to the digital realm, and then birthing the popular eCommerce strategy of Buy Now Pay Later, that many have found to be go-to method of payment when online shopping.

A new study from Juniper Research has found that spending via buy now pay later services, which are integrated within eCommerce checkout options, including fixed instalment plans and flexible credit accounts, will reach $995 billion in 2026, from $266 billion in 2021.

This 274 percent growth will be fueled by a greater appetite from users for credit to spread costs, particularly in the wake of the pandemic, which has put extreme pressure on user finances.

The research identified that, while regulations will inevitably place restrictions on services, such as limiting charges or enforcing affordability checks, these changes will not diminish the appeal or growth of the platforms; merely placing them on a more secure footing.

The report recommends that vendors focus on improving the transparency and use of credit assessment and reporting now to minimize future disruption.

Buy Now Pay Later a go-to eCommerce

The new research, Buy Now Pay Later: Vendor Strategies, Regulatory Frameworks & Market Forecasts 2021-2026, found that, by 2026, buy now pay later services will account for over 24 percent of global eCommerce transactions for physical goods by value, from just 9% in 2021.

“As a tool to split the cost for users, buy now pay later is ideally suited for high-cost items, as it enables users to seamlessly split large costs into smaller, more manageable payments. By 2026, these platforms will increasingly become the norm for lower-cost purchases as well; driven by user demand and eCommerce platform integrations,” Research co-author Damla Sat explained.

Buy Now Pay Later to reach 1.5 billion in 2026

The research also found that the global number of buy now pay later users will exceed 1.5 billion in 2026, from 340 million in 2021.

In turn, the report recommends that eCommerce merchants must integrate buy now pay later services immediately, or risk losing transactions to other payment platforms which offer preferable payment options.

Continue Reading

Fintech

SoftBank invests $60m in Malaysian digital marketing business

Karim Husami

Published

 on

digital marketing

SoftBank and Axiata Group announced Tuesday an investment of $60 million by the Japanese company in ADA, a digital analytics, artificial intelligence (AI), and marketing company in the Malaysian telecom’s conglomerate.

The investment is aimed at expanding and speeding ADA’s analytics, data and AI digital marketing business in Asia, Axiata and SoftBank said in a joint statement. ADA currently serves 1,300 customers in the region.

“Beyond Japan”

In addition, Daichi Nozaki, SoftBank Vice President and Head of the Enterprise Business Unit’s Global Business Division, will join the ADA board in mid-May 2021.

SoftBank Corp. Representative Director and Chairman Ken Miyauchi said the ADA investment enables his company to embark on its “Beyond Japan” business strategy.

“We will utilize ADA’s know-how in data and AI, and its support structures,” Miyauchi told a virtual news conference. “And by closely collaborating with ADA, I’m confident we can propose new digital marketing solutions to companies in Asia and help support their digital transformation.”

The investment is also in line with SoftBank’s growth strategy announced during its initial public offering in 2018, he said.

With the investment, SoftBank will hold a 23.07 percent stake in ADA, which has a valuation of 1.07 billion ringgit ($260 million). Axiata Digital Services remains ADA’s majority shareholder at 63.47 percent.

Japan’s Sumitomo owns a 13.46 percent stake.

Common ground

Also, Axiata Group President and CEO Izzaddin Idris said both Axiata and SoftBank discovered they have common ground, and that ADA could fit well with some of SoftBank’s existing businesses.

ADA aims for a $2 billion valuation in the next five years across Southeast Asia.

“We have no immediate plans to spin off ADA via a public listing,” Izzaddin said. “Listings are to raise capital, but ADA is already raising capital without listing,” he added.

ADA CEO Srinivas Gattamneni said the $60 million investment would be used to develop a big data platform and AI models focused on digital marketing and the automation of content creation for the advertising industry.

Miyauchi said SoftBank sees tremendous potential in digital marketing, digital communication, digital automation and security services — with digital marketing in Asia as a promising growth area.

The latest advertising statistics show that as of January 2021, there were 5.22 billion unique mobile phone users in the world, as DataReportal noted. This makes up 66.6 percent of the total global population.

It also marks a 1.8 percent year-over-year increase from January 2020. In this one year, the world gained 93 million more mobile phone users. If these digital marketing statistics continue to trend, we’ll be seeing even more mobile phone users over the coming years.

Continue Reading

Fintech

MTN Rwanda launches mobile money FinTech services

Yehia El Amine

Published

 on

Mobile Money

MTN Rwanda announced late last week the launch of a FinTech subsidiary called Mobile Money Rwanda LTTD, to provide and manage mobile money services throughout the country.

The announcement – which was made as the operator received approval from National Bank of Rwanda to launch the FinTech service – also places Chantal Kagame as its Chief Executive Officer to drive business development, strategy, innovation, and day to day operations of the company.

According to a statement by the South African courier, the setting up of Mobile Money Rwanda Ltd is in line with MTN Rwanda’s strategy to lead digital solutions while contributing to the national economic strategy on enhancing cashless transactions that offer convenience and security to all Rwandans.

“We are very glad to announce the establishment of Mobile Money Rwanda Ltd as a wholly owned subsidiary of MTN Rwanda. One of the key pillars in our strategy is to establish platforms that our customers find valuable. This restructure will ensure that the Mobile Money business remains agile, well poised for future growth and accelerated innovation. Mobile Money has matured over the last ten years in Rwanda, and this marks a pivotal milestone in our journey toward a cashless economy,” MTN Rwanda CEO, Mitwa Ng’ambi said in a statement when speaking about the new standalone firm.

In parallel, Kagame highlighted the company’s commitment to enhance the MoMo user experience and keep innovating products and services aligned with their digital ambition.

“The transition process to a standalone business has now kicked off and we look forward to cementing Mobile Money Rwanda Ltd as a key FinTech player in the Rwandan market,” she added.

The South African-based telco already provides FinTech services under the name of MoMo, a service that has been in operation since 2010. According to figures by the company, MTN currently boasts about six million subscribers.

MTN claims the largest market and value share in the increasingly competitive telecoms sector of Rwanda.

The announcement comes in line with MTN’s ambition to expand within the large African market, as the courier placed a bid to receive an operating license in Ethiopia, as the country looks to liberalize its telecoms sector and digitize its economy.

Prior to Chantal’s appointment, she held the role of Chief Business and Corporate Affairs Officer since she joined MTN in 2018. She is a senior Telecom Executive with over 19 years of experience in Multinational Telecommunications.

She has a track record of excellent achievement in areas of Executive Leadership, Sales and Distribution, Mobile Financial Services, Strategy Development and Execution, Corporate Affairs and Credit Management.

Prior to joining MTN Rwanda, Chantal was the Deputy CEO/COO at Tigo Rwanda for 3 years and Head of Sales, Distribution and Corporate Affairs at the same company from 2011 to 2015.

The establishment of Mobile Money Rwanda Ltd does not in any way affect nor change the delivery of services to current Mobile Money customers. Mobile Money customers will continue to enjoy access to the wide range of MoMo products and services, the over 30,000 Mobile Money agents and 60,000 MoMoPay merchants across the country.

MTN foresees an even brighter future to further expand and deepen its offerings to the public in line with Rwanda’s vision to become a fully cashless economy.

Continue Reading

Trending