CBDC payments to more than double in 7 years

This radical growth of over 260,000% reflects the early stage of the sector; currently limited to pilot projects. Cross-border payments currently have high costs and slow transaction speeds. However, this area is not currently the focus of CBDC development. As CBDC adoption will be country-specific, it will be incumbent on cross-border payment networks to link schemes together, allowing the wider payments industry to benefit from CBDCs, the report says.

Adoption will be driven by governments using CBDCs to boost financial inclusion and increase control over how digital payments are made. CBDCs will improve access to digital payments, particularly in emerging economies, where mobile penetration is higher than banking penetration.

The research found by 2030, 92% of the total value transacted via CBDCs will be paid domestically. This reflects a change from almost 100% during current pilot stages, as of 2023. Since CBDCs are issued by central banks, they will be closely targeted to domestic payment challenges initially, with cross-border payments coming later, as systems become established, and links made between CBDCs used by individual countries.

The research identified lack of commercial product development around CBDCs as a key limiting factor for the current market, with few well-defined platforms for central banks to leverage. The research recommends prospective CBDC platform providers develop a full end-to-end solution, including wholesale capabilities, wallet provision and merchant acceptance, to allow for the realisation of CBDCs’ potential.

How does the CBDC roadmap look like?

We recently talked to Sophocles Ioannou, Regional Director, Business Development Europe and Latin America at OpenWay Group, to discuss the importance of CBDCs in a highly digitalised world. As he sees it, the adoption of a CBDC will most likely bring new digital business models and additional opportunities to commercial banks and financial service providers for revenue and growth, similar to the way that roles and tasks are distributed today within the financial ecosystem. As central bank experts reach towards partnerships to build innovation, companies will benefit from knowledge sharing and new models of collaboration.

There are reasons to believe that crypto will play a role in government-backed financial initiatives. However, cryptocurrencies are too volatile right now for governments to plan tax revenues, expenditures, and economic activity around them. Unsurprisingly, most countries have rejected crypto assets as legal tender. El Salvador and the Central African Republic, on the other hand, are forerunners to a race that has no exact finish line for now.