CBDCs & MDLs [Oct'20 edition]
Behind every digital transaction is an identity.
October is incomplete without Halloween, however our much awaited pseudo-holiday gave us a wide detour this year, with congregating restrictions and the less-than-gleaming mood overall.
However what caught my attention last month was the accelerated pace at which national governments and agencies are taking a note of digital identities & digital currencies, and what does the merger between the two look like.
Top Trends in October -
Central Bank Digital Currency (CBDC)
Central Banks are rolling out digital currencies for their nations, or atleast laying the framework for future adoption of a version of the national digital currency.
Our own Bank of Canada started looking for a digital currency economist in earnest to “monitor and analyze developments in electronic money and payments, including CBDCs, cryptocurrencies, stablecoins, crypto exchanges and others." It wants to have it’s skin in the game to influence future monetary policy should other digital currencies become widely used in the nation without governmental controls.
China, as usual, is way ahead in the game, by laying down the foundation for CBDC, that legitimizes digital yuan and may criminalize the issuance of yuan-backed stablecoins by third parties.
Sand Dollar, the new digital currency from Central Bank of the Bahamas (CBOB) is up for launch soon, and aims to be interoperable with global currencies. This enables API-driven card-less onboarding & improves financial inclusion for it’s hurricane-brushed world.
Back in Jan 2020, The World Economic Forum (WEF) launched the Global Future Council on Cryptocurrencies. It’s the first global consortium focused on designing a framework for the governance of digital currencies, including stablecoins. The job of the council is to evaluate challenges and opportunities, bring together different stakeholders and members of the global ecosystem to improve governance and spearhead initiatives that approach money in new ways.
Ontario, Canada finally announced a major government services overhaul that makes Mobile Driver licenses (MDLs) a legitimate thing. No need to carry around those physical identity cards anymore!
Google also added new features to its Android’s Mobile Driving License (mDL) framework. “… new APIs could be used in the future with other types of identification documents like school IDs, bonus program club cards, and even passports.” - this is a telling sign of things to come.
EU leaders, for their part, recently called on the European Commission to develop a public electronic identification system (e-ID) that would provide EU residents with access to cross-border digital services and give them greater control over their online identity and data.
Kenya, meanwhile, has created the first national ID program in Africa, which aims to make it easier for citizens to securely access government services online. India is also in the process of rolling out a biometrics-based digital ID system for government services.
This trusted identity ecosystem is also making a global immunity passport a reality with airlines introducing a COVID-19 passport to ease mandatory quarantine procedures on arrival.
And hence just as we have digital currencies taking shape across the world to promote financial inclusion (serve the un-banked and under-served), there’s a need for the presence of trusted and trustworthy digital identities to enable an effective payment & health infrastructure.
Crypto & Rewards for Ecommerce & Capital
The ever-volatile cryptocurrencies have entranced the world over the last decade, however they’re still not being ubiquitously used for everyday purchases.
CoinBase is aiming to change that behavior with the launch of a VISA-powered crypto debit card. This enables customers to use their crypto (including stablecoins) directly from their Coinbase accounts without having to move funds to their bank accounts. The crypto is first converted to fiat currency (US dollars) prior to completing any purchase.
On the business side, JP Morgan is turning loyalty points into tradeable assets. Airlines, hotels, and other big loyalty operators can now realise the value of their portfolios by converting their rewards programmes into a standardised, exchangeable currency that can be traded by fund managers and used as collateral to raise capital from lenders, institutional investors, and operating partners.
PayPal has dived head-first into the crypto game by allowing customers to buy, hold and sell digital currencies through its apps and platform.
Facebook on the other hand is experimenting with a Neighbourhoods feature that allows users to create local community groups (AKA NextDoor). In the future, this can also mean the use of Libra for easy exchange of goods and services between neighbors along with hyperlocal offers.
Ecommerce across channels (messaging, social video and productivity)
Whether you’re 13 or 30, it’s never been the best time to shop than right now, not just due to the pandemic-induced sales but also due to the expanding array of channels you can shop from.
TikTok recently opened its doors to shopping through Shopify.
And thanks to Skipify, Google has enabled shopping directly through your Gmail!
WhatsApp is also on the verge of going WeChat’s route enabling businesses to sell products inside WhatsApp via Facebook Shops, an online store launched in May to offer a unified shopping experience across Facebook's apps.
Open Banking as a Service
Trilo is offering a tangible way for customers to check-out using ‘open banking’ on their favourite online stores. Through rewards and incentives, Trilo makes it easier for the customer to select ‘bank-to-bank payment’ as a checkout option, thereby eliminating merchant-network transaction fees.
Trilo provides open banking payment APIs at a monthly subscription fee, rather than a per-transaction fee for a merchant, thereby (hopefully) eliminating the duopoly of Visa/MasterCard.
Going Green & Sustainable
In other promising news, Canada made a commitment to ban single-use plastics by 2021 for commercial purposes.
And that means small business owners (especially restaurants) are going to find it incredibly difficult to transition to eco-conscious packaging and food-ware due to the relative costly nature of such alternatives, unless provided with suitable support from government.
Some notable quotes & snippets from articles
Innovation happens in the times of distress.
Managers looking at their employees and saying, “Go try something new. Blow Up the playbook, I don’t care,” is not something that gets said when the economy is booming and the outlook is bright.
Identity — the vital need to create and maintain trusted identities in an increasingly digitized world. After all, behind every digital transaction is an identity, and the easiest way to prevent fraud is to determine whether that identity is true in real time.
The best API-first companies give their users “superpowers” that they wouldn’t have otherwise.
Did you like this snapshot of the underlying shifts & currents brewing in the Payment, Cards & Innovation space? If you found this useful, feel free to comment, share and subscribe.