JPMorgan says central bank digital currency could save corps $100B per year

A multi-currency central bank digital currency (mCBDC) network could potentially save global corporations up to $100 billion in transaction costs annually, according to a joint research report by JPMorgan and Oliver Wyman.

The report states that $23.5 trillion moved in cross-border transactions in 2020, with transaction costs adding up to $120 billion at an average of $27 per transaction. That cross-border volume should increase, with the global economy becoming more connected everyday and intra-region payments rising in importance.

For mCBDC to offer those savings opportunities, the report says four main requirements must be met during implementation, according to Finextra. These include building blocks (minting, CBDC redemption, FX conversion, settlements), roles and responsibility structure for financial institutions, design considerations for data and privacy, and governance framework.

“The case for CBDCs to address pain points in cross-border payments is very compelling,” Oliver Wyman partner of corporate and institutional banking Jason Ekberg said in response to the report.

“The bulk of today’s wholesale cross-border payments process remains sub-optimal due to multiple intermediaries between the sending and receiving banks, often resulting in high transaction costs, long settlement times and lack of transparency on the status of the payments.”

The report acknowledged that a mCBDC-based network would challenge every sector of traditional banking, including commercial banks, payment operators, liquidity providers and payment operators.

However, the report states this same challenge would push new capabilities and opportunities for those same players and welcome new tech providers into the ecosystem.

“The development of CBDCs brings new tangible opportunities such as subscription-based mCBDC corridor access or smart contract-enabled cash management services,” JPMorgan global head of coin systems and Onyx Naveen Mallela said.

The ability to pivot effectively and quickly is key, and ultimately we aspire for a cross-border payments system that is transparent, inclusive and efficient for all parties across central banks, corporates and commercial banks,” Mallela said.

In other recent fintech news, Valon raised $43.9 million for its mortgage servicing platform, raising its valuation to $590 million. Klarna also launched its new super shopping app, reducing its reliance on partnerships and moving to become an end-to-end retail provider.

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