The Benefits of Digital Cash for Cross-Border Payments
Money permeates our everyday lives and serves as the backbone of the economy. Technological developments in money and payments could foster equal access and increased competition – or foment entrenched market power and data concentration.
Cross-border payments enable businesses to provide customers with a tailored customer experience by offering payment methods they use in their native country, which in turn increases sales and loyalty.
Convenience
Digital cash not only speeds up transactions but can also save money. Traditional banking transactions require expensive infrastructure, including bank branches, tellers and electronic systems; by contrast, digital cash requires only basic internet services to function, significantly lowering overall transaction costs.
Digital cash has quickly become a favorite among e-commerce merchants because it allows customers to complete purchases without providing sensitive financial details – providing greater privacy than with traditional payment methods and offering additional peace of mind regarding security of credit card and bank account data online.
Grey was instrumental in developing an intermediated CBDC model similar to retail FPS, both involving open architectures that ensure interoperability among PSPs through APIs. This approach ensures competition among providers so as to bring down end user costs; furthermore it creates a virtuous cycle through greater user participation and network effects which further decrease costs.
Security
Digital cash differs from electronic money in that it does not rely on banks for security; instead of coins being kept at one central location, digital cash uses tokens that are linked directly to an owner’s account and can be scanned with smartphones before being sent for verification at a bank. This process reduces transaction costs while simultaneously speeding up processes.
Digital cash offers many advantages for users and businesses. It enables people to buy products online without providing personal details that could compromise their privacy, while helping businesses reduce fraud and chargebacks, thus improving customer experiences.
Hardware-based digital cash would require minimal infrastructure and work even in regions without internet connectivity, making it useful in times of natural disaster and sparse connectivity. Furthermore, this could lower cyberattack risks by making it harder for criminals to move large sums without detection.
Transparency
Digital cash is an electronic system that enables individuals to transfer funds over the internet more cost effectively and more securely than traditional banking systems, including traditional banks. Digital cash also bypasses costly infrastructure requirements and makes banking accessible to those without bank accounts; additionally it increases security as hackers and criminals cannot gain access to personal information that would otherwise remain at risk in transactions conducted using this technology.
Notably, CBDCs could reduce costs but may not solve all the problems facing global payment systems. Indeed, their benefits may be nullified by inefficiencies like slow cross-border payments and currency substitution risks; ultimately, their success depends on competitive structures of underlying payment systems as well as data governance arrangements in place.
UBS Digital Cash will increase transparency and facilitate timely payment processing, helping businesses manage intraday liquidity more effectively. Adjustments of liquidity buffers will become simpler while real-time visibility will provide companies with an overview of their cash positions in real time.
Costs
Companies offering various fast settlement cross-border payment options can improve their cash flow by cutting processing expenses. Whether these savings are passed on to customers or invested back into the business, their impact can help increase sales and customer loyalty.
Technology innovation has led to an explosion of digital assets with money-like characteristics – “cryptocurrencies” in particular – with potential to facilitate decentralized cross-border payments that could be more affordable, faster and safer than traditional payments.
However, creating such a system requires significant efforts: it must ensure PSPs remain competitive, provide an equal playing field and prevent closed networks dominated by major technology companies from emerging. Furthermore, any risks related to stablecoins failing to remain pegged to central bank reserves or market value must also be minimized; an intermediated CBDC model offers one such solution, with two-tiered architecture leaving core functions for central banks while permitting PSPs to operate digital wallets using APIs for interoperability purposes.
