In the last article, I outlined what Central Bank Digital Currencies (CBDCs) are, how they work and the important role they will play in the realization of a digital society. I also looked at some of the guidelines that should be considered for successful implementation of CBDCs. This article will look at the effect that CBDCs will have on Consumers and Businesses.

CBDC benefits for the Consumer

The advent of digital currency means that it will be cheaper for banks (central & commercial) to manage money. As such, consumers will no longer have to pay banks high fees to store/manage money.

Additionally, local and international financial transactions will occur much faster and at a lower cost with digital currencies. This will fundamentally change the remittance landscape.

Many consumers cite concerns they have with putting their money in a bank, the biggest being, “What happens to my money if the bank ceases to operate?” (flashback to the financial meltdown of the 1990s). In an era of CBDCs, the solvency of commercial banks tends to be less of a problem for consumers, because your money (in CBDC form) will be safe regardless of the fate of the institution.

Technically, consumers would not need to have a traditional bank account. Instead, they would have a CBDC account which is a lot cheaper and simpler to get, allowing them to transact business/make payments easily, conveniently and safely in the new digital environment.  As such, CBDCs will enable the unbanked to become more active in the formal financial system.

These are just some of the consumer benefits expected to positively impact the financial inclusion efforts associated with CDBCs.

CBDC benefits for Businesses

The biggest benefits CBDCs provide for businesses is the ease and speed of payments. With CBDCs, the transfer of money between customers, across banks and across country boundaries, becomes much easier and happens in near real time. This will allow micro, small and medium sized businesses which are reliant on timely cash flows, to get paid more quickly for the goods and services that they provide.

CBDCs will completely change the retail payment systems landscape as well. Locally, and in other jurisdictions globally, retail payment and, by extension, e-commerce is almost totally monopolized by commercial banks. CBDCs can open the retail payment landscape to more innovative payment solutions that are expected to make it much easier for micro and small businesses to enter the global e-commerce marketplace. Entirely new methods for consumer-to-consumer (C2C), consumer-to-business (C2B) and business-to-business (B2B) payments would now be possible.

Trevor Forrest is CEO, 876 Solutions and a certified blockchain architect with over 29 years of experience in the IT industry in Jamaica and overseas. Send comments/feedback to [email protected]