The future of payments

Central banks' digital currency journey

Money is a topic of incredible socio-political relevance. The question today is, in the age of digital transformation, what is the future of payments or what is the payment of the future?

OMFIF, at 10, is rather young for an organisation focusing on finance and monetary policy. The concept of money dates back to around 10,000 BC; communities used shells, grain or stones as tangible tokens and units of account, exchange and store of value. The world’s first central bank, the Amsterdamsche Wisselbank, was founded in 1609. Mandated by Amsterdam city council, it established an efficient and standardised currency cycle to remedy the chaos of a system made up of more than 800 different coins.

Central banks have managed currency in all its aspects ever since. They have been continuously optimising their currency cycles, employing the latest technologies available and pushing their suppliers to provide innovations necessary to maintain state-of-the-art currency. Their technological expertise has contributed greatly to building trust in government-issued currency as it exists today.

For a long time, bank accounts, paper banknotes and cards have complemented coins. More recently, online payments and mobile phones have been added to this list. But cash is the only sovereign public payment instrument that fulfils all of users’ requirements. It is independent from technology, and can be used easily and universally. Cash guarantees full financial and social inclusion with no entrance hurdles, and offers a truly democratic means of payment that provides great value to any society.

Yet for all its benefits, cash does not work in the digital realm. The world is changing drastically, with more and more fully digital business models. Therefore, how can central banks transfer the benefits of cash, especially its characteristic as a public good, to the digital world?

This question, and many others linked to it, are reflected in OMFIF’s report on trust and central banks’ mandate for issuing digital currency. There is no doubt that the online ‘shells, grain or stones’ – cryptocurrencies such as bitcoin – are not a solution and neither is Facebook’s Libra. That is why government-issued digital currency has become such a widespread topic of discussion.

As outlined above, central banks are well-equipped and tech-savvy enough to offer not only the most solid and trusted digital solution, but also the most convenient. They are the technology leaders when it comes to currency. Many central banks are already working on CBDCs, either through research or pilot projects. Doing nothing is riskier than embarking on the digital currency journey and staying in control.

G+D, a leading supplier in the currency industry, has been shaping the debate with its central bank customers and supporting them through these transformational times.

As the future unfolds, it is our responsibility to design a society in which all groups feel comfortable. A fair, democratic, inclusive and secure government-issued payment system – currency as a public good – is an important element of this future. Looking at the latest OMFIF survey, the public would appreciate greater visibility and more leadership on the part of central banks when it comes to transferring cash as a public good into the digital space.

Wolfram Seidemann is Chief Executive Officer of G+D Currency Technology. This is an edited version of Wolfram Seidemann’s speech at OMFIF’s 10th anniversary reception.

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