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Business Times
a day ago
- Business
- Business Times
Digital money and the art of the impossible
WHILE G7 central banks continue to agonise over supplementing physical cash with digital money, and in the case of the US, ban the central bank digital currency version outright, India has surged ahead with a mobile-based payments platform accounting for half the world's real-time payments in 2023. India's United Payments Interface continues to overcome apparently insoluble conundrums facing mature economy central banks, such as managing digital identity, balancing state and private-sector players in payments and ensuring the stability of commercial banks in the monetary system. The instant payments system has already boosted the tax take, had a transformational impact on financial inclusion and democratised the provision of financial services – with mutual fund subscription at a record high. Meanwhile, other major non-G7 economies such as China and Brazil – where state-backed digital retail payments platforms operate – have for now set aside trying to map distributed ledger technologies (DLT) onto national payments systems or sovereign money. Still, a variety of national and cross-border projects are in the works, though mired in circular discussions about regulatory, liquidity, foreign exchange and interoperability challenges. DLT – which underpins digital assets and versions of money such as stablecoins and tokenised money market funds – may also become a component of mainstream wholesale and retail finance in the wake of the Genius Act. But as statements at OMFIF's 2025 Digital money summit made clear, the technology continues to flummox many in the official sector in practical terms. Renato Gomes, deputy governor of Banco do Brasil, described the 'privacy trilemma' within DLT. Discussing experiments to build on the success of their Pix platform with Drex, he noted that trade-offs between privacy, scalability and programmability were tough, and legal frameworks remain 'incompatible' with DLT. The bank wished to remain 'technology-agnostic'. At other sessions, cross-border DLT networks between central banks and commercial banks in different jurisdictions on a unified ledger, such as Project Agora, continue to be defined. A technologist at the summit declared 'this project simply will not be possible on a single network'. The net result of it may simply be an improved set of data standards in the extant system. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Correspondent banking – a method for cross-border transactions, often criticised for being expensive, slow and inefficient compared to blockchain-based finance – already deals with the regulatory burden which DLT innovators are struggling to reinvent. A representative from a major US bank experimenting with tokenised versions of commercial bank money wryly pointed out that stablecoin-based remittances are simply regulatory arbitrage. Regional successes Reinventing the cross-border financial system by joining central banks schemes together is difficult even without DLT. While significant progress has been made with the Nexus cross-border instant payments project, the establishment of the Nexus Scheme Organisation and the harmonisation of governance frameworks are continuing efforts. Participating central banks are working out how to cater for foreign exchange – a function embedded in the cross-border commercial banking system already. There are also regional pockets of progress. An intriguing example is Buna, the Middle East's cross-border payments initiative, which has bypassed these problems. Backed by the Arab Monetary Fund, Buna has created a regional network resembling a 'unified ledger' between central and commercial banks, but in a closed and centralised system – the opposite of DLT – built on the existing real-time gross settlement platforms. While DLT might be a hard toy to handle for central banks, it is also advancing at pace as a transformational financial infrastructure – enabling cheap, quick and also cross-border payments via stablecoins such as Tether and USDC. Whether it is secure or practically regulatable or not, it is a version of money regulators will have to contend with as consumers vote with their feet, and is expected to accelerate further as an explicit aim of US policy. What is the official sector to do? Artful hacks are in the works to handle DLT-based tokenisation, which may or may not become a mainstream component of existing money and securities markets. An informal vote even among digital finance specialists at this year's Digital Money Summit could not quite find a majority to say that it would. The European Central Bank is running a twin-track approach through projects at Deutsche Bundesbank and Banque de France, with the former creating a bridge between the existing T2 RTGS arrangement and DLT-based tokens, and the latter creating a DLT-native setting for DLT-based tokens to be settled atomically in tokenised wholesale CBDC. As both banks explained at the summit, the former would smooth the path to the latter, but also continue to run in parallel with it while traditional finance persists. Pioneers at the Brazilian central bank are watching the former with an eye on replicating that model in Brazil. If these projects to integrate DLT-based private money and tokenised securities into the official monetary system are not successful fairly soon, first principles may be rediscovered the hard way. A panel of central banks at the summit quietly demurred at the suggestion that they would eventually be asked to bail out a version of DLT-based money which had become de facto systemic and then unstuck in the next financial crisis. OMFIF John Orchard is chairman, and Katie-Ann Wilson is managing director, of the Digital Monetary Institute at the Official Monetary and Financial Institutions Forum (OMFIF)
Mint
28-05-2025
- Business
- Mint
From idea to execution: A guide for your digital banking platform journey
The number of unique internet banking users has increased by only 18% between March 2019 and September 2021, according to the Reserve Bank of India's Payment Vision 2025 document. This cohort constitutes a very small percentage of over 26 crore digital payment transactions that are processed every day by our burgeoning digital payment ecosystem, of which United Payments Interface (UPI) accounts for more than two-thirds. As India's financial landscape continues to evolve at an unprecedented pace, driven by consumer demand for seamless, personalised experiences and rapid technological innovation, how can financial institutions strengthen their digital platforms to increase adoption and deliver greater value for their customers? Do all banks need digital platforms and, if yes, when is the right time to start building one? In a world where technology is advancing so rapidly, is it wise to wait for Generative AI to stabilise before making the leap? A new e-book titled 'Digital Banking Platform Journey – The 5Ws (and an H) of starting, accelerating or re-aligning your digital platform strategy', attempts to provide answers to these questions and many more that organisations in the Banking, Financial Services and Insurance (BFSI) are grappling with, especially as India takes giant leaps in the adoption of digital in this sector. The e-book is co-authored by Thoughtworks' Bharani Subramanian, CTO, India and the Middle East, Muralikrishnan Puthanveedu, Head of the BFSI Practice, IME and Sandeep Reddy, Global Head of Financial Services Strategic Initiatives and Delivery and is an attempt at offering financial institutions a systematic approach to thinking about developing or revamp their digital banking platforms.'We have carefully curated the strategic ideas and implementation best practices we learned from building banking platforms for global organisations over the last few decades. We intend this e-book to be a useful starting point to structure your thinking and clarify what's important to you,' said the authors in their opening note. Whether you're just beginning your digital journey or looking to re-align an existing platform strategy, this e-book serves as a compass. It introduces a practical six-point readiness framework, explores the build-versus-buy dilemma, and lays out pathways for AI-augmented banking—all while grounding the conversation in the unique needs of Indian financial institutions. Click here to download the e-book. Note to the Reader: This article has been produced on behalf of the brand by HT Brand Studio and does not have journalistic/editorial involvement of Mint.
Deccan Herald
08-05-2025
- Business
- Deccan Herald
Post offices misaligned with digital reality
In today's rapidly digitising economy, where cashless transactions have become the norm rather than the exception, India Post's continued reliance on cash payments in many of its branches is an alarming anachronism. As the most extensive postal network in the world, with over 1.5 lakh post offices, 90% of them located in rural areas, India Post plays a dual role both as a communication lifeline and a crucial financial services provider for millions. Yet, despite its unparalleled reach and historical significance, the organisation risks losing relevance by failing to implement comprehensive digital payment solutions across its branches. The digital payments landscape has undergone a tectonic shift in recent years. Post-Covid, digital payments have increased at a staggering Compound Annual Growth Rate (CAGR) of 44%. United Payments Interface (UPI) alone processes over 10 billion transactions monthly, with even street vendors and small kirana stores now accepting digital payments. In this context, India Post's inconsistent infrastructure where many sub-post offices operate on a cash-only basis stands out as a glaring anomaly in an otherwise digitally inclusive India Post has made some efforts towards digitisation, these initiatives remain woefully inadequate. Dynamic QR codes for services like speed post, parcels, and registered post have been introduced in select post offices, leaving thousands of branch offices without basic cashless payment options. The withdrawal of static QR codes due to technical issues has compounded the problem. Customers are thus forced to access nearby ATMs or scramble for change. India Post officers acknowledge these gaps, admitting that promises of a new UPI-enabled software have been made but not fully implemented. Customers frequently express frustration, as the lack of digital payment options not only causes inconvenience but undermines confidence in a system that many rely on for both postal and financial services. Given that India Post plays a crucial role in last-mile banking, particularly for the poor and rural populations, this technological stagnation is India Post to maintain its position as a trusted public institution, immediate and comprehensive digitisation is non-negotiable. The organisation must accelerate UPI integration across branches, not just in urban head offices. It should develop offline digital payment solutions for areas with poor connectivity and train staff to ensure the smooth adoption of technology. With private courier companies and digital alternatives eroding India Post's traditional strengths, the organisation must fully embrace the digital revolution or risk becoming obsolete. India Post has been doing its best to remain relevant under the changed circumstances, but it must keep pace with the times if it is to survive.
