View from Sibos
Interview with Dave Kretz
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[Liz Lumley]
Hello, I’m Liz Lumley of The Banker and this is the View From Sibos. Today, I’m speaking with David Kretz, managing director head of GTS global strategy and payments at Bank of America. Hello, David. How are you?
[David Kretz]
Hi, Liz. Thanks for having me.
[Liz]
So we’re going to have a chat about payments. So Central Bank Digital Currencies have been called cash 2.0. What are some of the key considerations we should keep in mind?
[David]
Okay. Well, first of all, thanks for having me and it’s a great way to start. Before we get into answering your question directly, let’s define our terms here. So Central Bank Digital Currency or CBDC is a third format of money. The original of course is physical currency. The second which is predominant today are electronic entries at banks and central banks and then the third is of course the idea and reality of entries on a distributed ledger and or token. So that’s what we’re talking about. The second is the aspirations. So people have many aspirations for this technology and the business models. So the aspirations range from public policy, which would include financial inclusion, financial stability, operation efficiency and settlement, instant settlements, reduction of balances and throughout everything is security. In transaction banking which of course is the focus of Sibos, our focus is on reducing physical currency and the potential of instant settlement which has a great opportunity and potential within cross-border payments and also the cash leg of securities. All that is background. I apologise for that much time but it is important to set the stage… considerations, and really here’s how we think about it at least, which is whatever we do, the investment we make both as an institution and in a broader public sense has to be additive to the system. So today, we have a robust global financial system. It’s compliant, by large it’s fast, it’s effective and we think it’s very good but [unclear 00:02:14] whatever we do with CBDC, we think should be additive to that. So that’s our thinking about the considerations which is your question and while we are waiting for things to mature, we are building greater resiliency 24/7, greater security because we think it will happen. It’s just a question of time and how. So it’s sort of a long answer but that’s how we think about it.
[Liz]
So I wanna move on a little bit to talk about real-time payments which of course has been matching around the globe at the moment and it’s raised expectations for corporates and consumers. Are most banks ready for this new sort of faster payments reality?
[David]
We think so. Most implies over 50% and I think certainly in the US we have now 50% or greater of all deposit accounts connected to RTP schemes so we think we’re making good progress in the US. Of course, UK is ahead of us. You picked the right term… the Global match continues. So today of course there are, by our count, 56 countries including all the SEPA zone countries that are connected to instant schemes. There are at least five more [s.l. plan 00:03:19] and probably even more than that. The mission then is to make sure the banks are not only [unclear speech 00:03:24 - 00:03:25] making sure the clients are educated, that they see the value in the real itself and the instant settlement and that we build functionality for them that [unclear speech 00:03:35 - 00:03:36] in the US so that it works both ways. So we think we’re ready and our mission as I said is to make sure that clients are enjoying the benefits.
[Liz]
So my final question is really around beneficiaries. So how is the industry looking at solving the problem of payment errors caused by wrong or missing beneficiary preferences?
[David]
It’s a great question and it might seem like a rifle shot but really bad beneficiary information either by error or fraud is really critical to solve as we go to an instant environment which of course has RTP and Central Bank Digital Currencies. So it’s a great sort of tie-in to both of them and the solutions are narrower than the other two. So Central Bank Digital Currency is very broad, RTP, the match you discussed but here it’s a rifle shot that we think is being attacked very successfully by the industry and our own bank which is to validate the beneficiary [unclear 00:04:28] pretty simple which is to reach out to the beneficiary bank in advance [unclear 00:04:33] that the account information just make sure it’s a real person and not either an error or part of a fraudulent scheme. There’s great progress both with SWIFT and participating institutions. As I said, it’s really critical to a secure environment as we go to something faster in a broad sense.
[Liz]
Excellent. David, thank you very much.
[David]
Thanks for the time and enjoy the week.
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