Kiffmeister’s #Fintech Daily Digest (11/04/2020)

Payments go (even more) digital

This commentary looks at the payments landscape through the lens of the Committee on Payments and Market Infrastructures (CPMI) 2019 Red Book statistics. It shows how consumers are increasingly shifting from physical to digital instruments, promoting efficient, faster and more convenient payments. However, cash, and in some jurisdictions, other paper-based payments such as cheques remain important payment instruments. In more than half of the CPMI jurisdictions, “cash is still king” and its circulation continues to grow. In the same time frame, more than half of the CPMI countries have experienced a switch from physical payment instruments to digital payments. 

A model for central bank digital currencies: Do CBDCs disrupt the financial sector?

While central bank digital currency (CBDC) offers several benefits, many suggest they might disintermediate commercial banks and facilitate bank runs. To analyze these concerns, this paper uses a New Keynesian DSGE framework to study the effects of interest- and non-interest-bearing CBDCs in times of financial crises and their interaction with the zero lower bound (ZLB). Additionally, it studies the role of central bank funding and a rule-based interest rate on CBDCs. It finds that CBDCs indeed crowd out bank deposits and affect bank funding. However, this crowding-out effect is not necessarily a threat to financial stability and a cause for economic disturbances when the central bank chooses an adequate policy. 

Financial Services Leads The Development Of Enterprise Blockchain

This Global Digital Finance paper reflects on the evolution of the enterprise blockchain ecosystem, assesses the current state of the industry, and explores the key trends that will shape its future trajectory. Findings are based on research conducted in June and July 2020, which involved desktop research and semi-structured interviews with key decision-makers from the ecosystem’s leading companies. It also provides a conceptual framework for how to approach the blockchain ecosystem that categorises projects into four layers. The framework can be equally applied to public blockchains and crypto-assets.  

6 Bitcoin Debit Cards To Use In 2020

Crypto debit cards enable you to pay using cryptocurrency at any store that accepts debit cards. You can use crypto debit cards at ATMs, in shops, and on online merchants. Each crypto debit card is different: these cards differ in which cryptocurrencies they support, the fees they charge, and the incentives they offer to users. Some of them are only available to people from certain countries, too. 


Hong Kong FinTech Week 2020

The Hong Kong Monetary Authority (HKMA) co-organised with InvestHK Hong Kong FinTech Week 2020, and announced a range of initiatives to further foster the fintech ecosystem and support corporates, particularly small and medium-sized enterprises (SMEs). 

Facilitating the digitalisation of trade finance

To provide importers and exporters with more convenient trade finance services, the operators of eTradeConnect and the People’s Bank of China Trade Finance Platform announced in November 2019 that a PoC would be conducted to explore connecting the two platforms. Phase 1 of the PoC was completed successfully, and a pilot run was initiated in October 2020 for banks in both places to execute cross-border trade finance transactions. Seven banks have already successfully used the connection to conduct trade financing transactions, with the total trade value exceeding HK$26 million. Phase 2 of the PoC, tentatively scheduled for early 2021, is expected to cover more types of trade activities and financing products. 

The HKMA is exploring the use of the Commercial Data Interchange (CDI)

The Hong Kong Monetary Authority (HKMA) is exploring the use of the Commercial Data Interchange (CDI) to enable more efficient financial intermediation in the banking system, and to enhance financial inclusion in Hong Kong. The CDI is a consent-based financial infrastructure that would enable more secure and efficient data flow between banks and sources of commercial data. It has the potential of solving long-standing pain points in SME financing by allowing SMEs to use their own data to enhance their access to financial services. To study the technical feasibility of the CDI, the HKMA is conducting a Proof-of-Concept (PoC) study in collaboration with banks. The PoC focuses on using trade-related data to facilitate trade finance application process and is expected to be completed by the end of 2020. 

Alternative Credit Scoring of Micro-, Small and Medium-sized Enterprises

To develop the related technology for alternative credit scoring, the HKMA has commissioned the Hong Kong Applied Science and Technology Research Institute (ASTRI) to study the use of artificial intelligence in SME loan applications; and published a white paper to deliver the findings. 

Transforming Risk Management and Compliance: Harnessing the Power of Regtech

The HKMA has developed a two-year roadmap to promote Regtech adoption in the Hong Kong banking sector. the HKMA commissioned an external consultant to explore the current state of Regtech in Hong Kong, examine common practices and barriers to adoption, and outline a roadmap to accelerate adoption in the banking sector. 

Joint BIS-HKMA TechChallenge Winners Announced

The winners of the the HKMA and the Bank for International Settlements Innovation Hub TechChallenge, launched in August 2020, were announced. The TechChallenge, which explored innovative solutions to address challenges in trade finance, received a total of 103 solutions. The ten winners will have the opportunity to materialise their proposed solutions through prototype development in 2021.