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Central bank digital currencies will force traditional lenders to innovative, give small businesses access to funds, says report

  • CBDCs will disrupt the banking industry, according to a report by Standard Chartered and PwC China
  • They will transform retail, trade and supply chain finance, and help plug the financing gap facing SMEs, it says

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Central bank digital currencies will disrupt the banking industry, forcing traditional lenders to innovate and helping small businesses access financing, according to a report by Standard Chartered and PwC China. Photo: Shutterstock
Iris Ouyangin Shenzhen
Central bank digital currencies (CBDCs) will disrupt the banking industry, forcing traditional lenders to innovate and helping small businesses access financing, according to a report by Standard Chartered and PwC China.
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In addition to facilitating cross-border payments, the CBDCs – fiat virtual currencies issued by central banks – are expected to motivate lenders to integrate their traditional services with other payment service providers to provide more innovative products and services to customers.

“Beyond digitalising physical cash, CBDCs could disrupt existing local and cross-jurisdictional payment systems, leading to a paradigm shift in the way banking services interact with the rest of the economy,” said the report released on Thursday.
As at least 68 central banks have been developing their own virtual currencies, which are expected to transform domestic and cross-border transactions. The report shed light on how these initiatives will disrupt the US$240 trillion global payment industry and create opportunities for businesses, particularly small and medium-sized enterprises (SMEs).

CBDCs will transform retail, trade and supply chain finance, the report said. In the vast retail industry, the CBDC infrastructure can be integrated with other payment methods such as cash or debit cards.

It could help bridge the financing gap facing SMEs too. Not only will businesses be able to assess to funds at a lower cost, the data in the CBDC system can also boost the credit profiles of smaller companies, the report noted.

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