Standard Chartered, in collaboration with PwC China, have co-published a comprehensive white paper detailing the potential advancements in the future of banking, courtesy of Central Bank Digital Currency (CBDC). This report highlights the benefits that CBDCs could offer in retail sectors, international trade, and supply chain finance, as well as their potential to enhance customer loyalty programs and provide innovative supply chain financial solutions.
The study underscores that CBDCs are particularly beneficial for simple retail operations initially. However, to expand their utilization in trade and supply chain finance areas, significant evolution in technology and international collaboration is necessary. The successful execution of this can provide immense advantages, especially to small and medium-sized enterprises. The report identifies four pillars to support these developments: smart contract execution, efficient data management and sharing, seamless integration with other payment ecosystems, and robust local and international regulatory backing.
The Greater Bay Area encompassing Guangdong, Hong Kong, and Macao is proposed in the report as an ideal location for pioneering CBDC’s innovative applications, particularly those with global growth potential. Within this context, the paper delves into the programmable aspects of CBDCs, examining their developmental prospects and pinpointing practical, innovative application scenarios.
One key discussion in the paper pertains to retail customer loyalty programs. It proposes that programmable CBDCs can disrupt traditional point-based systems, waking up a massive amount of “inactive” points and promoting “universal redemption” in multiple scenarios, including cross-border ones, thus increasing consumer activity and spending.
Deputy Head of Standard Chartered China and General Manager of Personal, Private and SME Banking, Li Feng, has praised CBDCs’ transparent nature and programmable capabilities, which he believes can foster stronger connections within fragmented information sources in the present industry value chain. This, in turn, could catalyze innovation through open collaboration and streamline the financial system to meet real economy needs more effectively.
The report also emphasizes that programmable CBDCs could significantly boost trade and supply chain transactions. Many SMEs currently struggle to secure financing due to their size, or lack of collateral and credit history. Supply chain finance solutions often face standardization and interoperability issues in cross-industry and cross-border operations. The combination of trade and payment information with CBDCs, programmed according to the relevant rules and terms, could be a revolutionary tool in trade finance. This could enable commercial banks, key enterprises, and SME suppliers to navigate credit transparency and funds circulation more efficiently and securely.
Ricky Kaura, Head of Transaction Banking for Standard Chartered Bank in the Asia Pacific, Africa, and Middle East regions, notes that CBDCs hold the potential to mitigate these challenges through innovative models, providing better liquidity support for SMEs, thus promoting long-term stability and sustainability within the supply chain.