Nick Drury, director of the Mojaloop Foundation’s CBDC Center of Excellence, discusses what the new initiative in Singapore means for advancing financial inclusion and for the financial literacy of the Asia-Pacific region.
Our vision is universal financial inclusion so that everyone, everywhere can access digital financial services.
You have just been selected as Mojaloop’s new Director of the CBDC Center of Excellence (COE) – congrats! What does this new role mean to you and how does your experience working in the region tie into the Mojaloop Foundation’s vision?
Thank you. I’m very excited to be here, as increasing numbers of central banks are now investigating how to design, implement, and operationalise CBDCs. I’ve worked in financial services for 25 years or so as a practitioner, as well as a researcher on the impact of emerging technologies on business and operating models. I’ve been based in the Asia-Pacific region for two decades and data clearly shows that huge opportunities exist here to increase greater and cheaper access to digital financial services, especially in payments.
Only about 40% of the Asia-Pacific population has access to finance through banks or traditional financial services, so there are still plenty of opportunities to promote greater financial inclusion through innovation and collaboration across public and private sectors, both within and across regional knowledge and financial services networks. Mojaloop sees faster interoperable payment models as enabling greater financial inclusion.
For a migrant worker to send USD 100 back home on a banking rail, it can cost between USD 12 to USD 15. That worker may get lucky and secure a rate as low as 6% to 7%, but it can still take time to process. If we can connect two fast payment systems, we have seen the cost brought down to as low as USD 3, including fees. CBDCs could play a role where a central bank can potentially simplify cross-border settlements and bring the cost down significantly. That’s part of the COE’s goal.
The ability to connect the underlying payments rails between the Asian and African corridor (together with data rails and the trade rails) can only happen if similarly interoperable systems exist in both markets. To advance financial inclusion effectively, we need to ensure that Asian and African markets have a way to ensure payment interoperability between corridors.
According to the June 2021 World Bank Financial Inclusion Global Findex Report, ‘Governments, private employers, and financial service providers—including fintech providers—could help expand financial access and usage among the unbanked by lowering barriers and improving infrastructure. Lack of money, distance to the nearest financial institution, and insufficient documentation were consistently cited by the 1.4 billion unbanked adults as some of the primary reasons they did not have an account. [At the same time], more than half of unbanked adults in South Asia and Sub-Saharan Africa have a mobile phone’.
The Working Group’s main goal is to help guide the direction of the COE, with a focus on reducing costs and the inefficiencies of payments platforms by leveraging Mojaloop open-source software. Mojaloop Foundation members include the Bill & Melinda Gates Foundation, Coil, Google, ModusBox, the Monetary Authority of Singapore (MAS), RedCompass Labs, Ripple, and Sybrin. We call on a wide range of stakeholders to join us – those with relevant experience in designing, implementing, and operating payments, both from the perspective of technology and functional design, as well as the objectives, practical use cases, opportunities, and risks of a potential CBDC.
Financial inclusion begins with payments. By extending Mojaloop’s ecosystem engagement, the COE can collaborate with regional organisations focused on developing open and inclusive digital payment systems. The mission, in turn, is to connect the underserved with emerging digital economies across borders securely and affordably. The COE will collaborate to find new ways for Mojaloop open-source software to leverage CBDCs and reduce the costs and inefficiencies of fast payment platforms and cross-border payments. And we’ll accomplish this through activities such as hackathons, workshops, and pilot projects.
When we look at Southeast Asia in particular, but also across the greater Asia-Pacific region, we find that a majority of the economies are comprised of small, medium-sized, and micro enterprises. It’s a diverse region with many family businesses and millions of individuals who are unbanked, underbanked, and often underserved in many respects. What we’re hoping to do with the COE is to leverage the position of innovation-friendly Singapore, which is English-speaking, centrally located in Southeast Asia, and has very good connections both within the region and internationally.
We will use this influence to open up discussions with regional financial services ecosystems to accelerate much broader adoption of inclusive, affordable, domestic, and cross-border payment platforms. This is where the CBDC comes in. It’s about modernising existing payment infrastructures and looking at what a CBDC might be in practice. Designing, implementing, and operating a potential CBDC is part of the digital innovation story that will help millions around the world.
There are already a number of existing projects relating to exploration into CBDCs across the Asia-Pacific, including Singapore. We need to be very clear about understanding the scope and outcomes of projects and working through the issue of how they can be used in practice. And of course, a decision on whether to launch a digital currency is for each country to make. This is why collaboration and careful evaluation with our partners is critical. Like countries, CBDCs don’t work in isolation. They could be part of the international digital financial infrastructure that is shared across the world.
We need to support and inform the exploration of CBDCs holistically, in the context of how economies and financial systems will be re-shaped, as well as the way in which people interact with money and payments. Low-income populations and those living in remote locations continue to confront barriers to digital payments. Authorities across the Asia-Pacific are expanding available access points and developing tools to improve awareness of transaction accounts and digital money. Mojaloop will continue to support and promote interoperability between CBDCs and existing payments infrastructure. If you are interested in getting involved, visit https://mojaloop.io/career-section/
About Nick Drury
As Director of the Mojaloop CBDC Center of Excellence (COE) Nick Drury, leads operations and drives the growth of the COE, and oversees the Mojaloop CBDC COE Working Group’s efforts. Based in Singapore, he brings 25 years of experience in the payments and financial inclusion space to the Mojaloop Foundation.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now