Voice of the Industry

Retail CBDC trends

Friday 15 March 2024 08:24 CET | Editor: Estera Sava | Voice of the industry

Steve Pannifer, Consult Hyperion: Central banks, including the ECB, cautiously move towards retail CBDCs. The ECB is preparing for a digital euro, emphasising offline support, programmability, and cross-border efficiency.


Central banks around the world have spent several years exploring retail CBDC. Whilst some countries have moved quickly into pilots, the majority are taking their time, carefully developing their thinking and plans. This is completely understandable. The introduction of a digital form of cash has the potential to be disruptive to the banking sector and so any central bank will want to be sure that any disruption – intended or otherwise – is well managed. The ECB has recently moved into what it describes as a ‘preparation phase’. Over the next two years, it will be finalising the digital euro rulebook, selecting providers that could develop a digital euro platform and infrastructure, continuing with its experimentation, and engaging with the public. This does not mean that a digital euro is inevitable. In two years, the governing council will then need to decide whether to move to the ‘next stages of preparation’.

As this work continues during 2024, we expect three particular areas to continue to be important: 

  • Support for offline,

  • Programmability, and

  • Support for cross border. 

As we explain below these are areas where a CBDC can differentiate itself from the payment methods we have today.

Offline payments

Research conducted by the BIS Innovation Hub Nordic Centre suggests that around half of central banks believe it is essential for CBDC systems to support offline payments, with the other half viewing it as advantageous.

Reasons cited in support of offline payments include:

  • Resilience, which is a clear need because, like physical cash, CBDC will need to work even when other services fail.

  • Inclusion, which is a particular concern in locations and contexts where people may not have access to the internet.

  • Privacy, allowing people to use money without the fear of surveillance. There will of course be limitations here – CBDCs also need to be resistant to exploitation for nefarious purposes.

A less cited reason but one that we believe could outweigh them all is scalability and performance. Depending on the design, there is a real risk of CBDC ledgers becoming a bottleneck, which an offline capability should be able to alleviate.

BIS also researched the technologies that could be used to deliver offline capabilities. Whilst including offline as part of the design of a CBDC system may increase the complexity of the system, it does not necessarily mean that the total cost of ownership will be higher. Having an offline fallback mechanism may reduce the operational demands on the CBDC ledger, especially during peaks, lowering the cost and increasing the availability of the CBDC overall.


Many payments today are automated. For example, batch payment processing, standing orders, and direct debits all allow payments to be performed automatically without human intervention. These payments are not however intelligent or dynamic – they simply execute according to how they are configured in the banking or payment systems. Cryptocurrencies introduced the idea of smart contracts – ‘programmed’ business logic that can either be executed when a payment transaction is performed or can potentially control when a payment occurs based on pre-defined conditions. Many future use cases – such as in DeFi and IoT payments – will require intelligent payments, so it is hardly surprising that programmability is one of the features being considered by central banks, given that like physical money it should be possible to use CBDC anywhere. There are still some big questions to be answered on programmability – including technically how it will work, who will be able to program the CBDC and how will programmability be governed to ensure the capability is not misused. In the summer, MIT published a framework for programmability in digital currency. This helpfully distils the differing views on programmability and explores these questions.

Cross-border payments

Anyone who sends money internationally will know there can be significant issues with cross-border payments. Complex and fragmented correspondent banking arrangements result in cross-border payments being slow and expensive. Consequently central banks are wondering whether CBDC systems, designed from the ground up, have the potential to provide a better solution.

Whilst central banks are collaborating extensively on the topic of CBDC, ultimately each central bank will be responsible for establishing a CBDC system meeting its local requirements. Through collaboration patterns are emerging, such as the widely recognised two-tier model. Over time, there may be technical standards that central banks can align with – as a minimum, you can expect central banks to try to align with ISO 20022 messaging. These will help to ensure interoperability but will that be enough to enable cross-border CBDC payments?

Several experiments, such as the Icebreaker and mBridge, have already been conducted exploring how cross-border CBDC payments may be realised. These have looked at ways of shortening the long value chains that can exist in cross-border payments today. That will certainly help but this only begins to address the full range of potential issues with cross-border payments including governance, compliance, funding, foreign exchange, and so on.

Everything else

Designing a CBDC involves analysis of legal, commercial, and technical factors. It needs to be done in collaboration with the government, business, and society. There are complex issues such as privacy that need to be worked through. And all that in a fast-moving landscape with parallel initiatives such as Open Banking and open finance disrupting the payments landscape. Central banks are playing a long game. They are concerned with creating the conditions for economies to flourish. Determining if, how, and when CBDC can help with that is something they will take their time over.

This article was originally published in The Paypers` Global Payments and Fintech Trends Report 2024. The report compiles insights and expertise from leaders representing companies across the financial services spectrum and it delves into the latest innovations and trends in payments and fintech across key markets worldwide.

About author

Steve is an esteemed digital identity expert, advising banks, governments, and tech firms on governance, architecture, and implementation. He’s contributed to various digital identity initiatives worldwide and co-authored guides for the DIACC and the EPA. Steve is advising Central Banks on various aspects of CBDC including governance, privacy and technology.

About company

Consult Hyperion is a UK and US-based consultancy specialising in secure electronic transactions, with over 30 years of experience. They help global organisations take advantage of new technologies and regulatory changes in payments, identity, and future mobility. They design systems, offer digital innovation, and unblock technical issues, while their in-house Hyperlab team quickly prototypes concepts and delivers secure software.

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Keywords: banking, fintech, CBDC, retail CBDCs, digital currency, payments , paytech, cross-border payments, digital euro, payment methods, DeFi, IOT, ISO 20022, financial inclusion
Categories: Banking & Fintech
Companies: Consult Hyperion
Countries: World
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