Kiffmeister’s #Fintech Daily Digest (20220302)

The potential effects on the Israeli banking system of issuing a digital shekel

The Bank of Israel published a paper on the potential impact of issuing a central bank digital currency (CBDC) on the stability of the banking system and its ability to continue fulfilling its financial intermediation function. It concludes that, under common assumptions regarding the substitution volume between the public’s deposits and the digital shekel, the negative impact to profitability is not expected to lead to a significant erosion in the banking system’s profitability, its stability, or its ability to provide credit and fulfill its classic functions in a modern economy. [Read more]

A Report Card on China’s Central Bank Digital Currency: the e-CNY

The People’s Bank of China’s Mu Changchun provided an update to the central bank’s CBDC pilot.  He reported that the e-CNY system completes transactions at higher speed than Visa, but it’s still way behind payment AliPay and TenPay. The pilot uses a centralized ledger to record retail transactions and, in parallel, implements a distributed ledger for day-end reconciliation. Wallets can be software based or hardware based, and Mr. Changcun presented a video showcasing how the hardware wallets work, including their offline functionality. [Read more]

Klarna losses swell to $748 million

Full year 2021 operating losses at Swedish “buy now, pay later” (BNPL) group Klarna soared to SKR7.1 billion (versus SKr1.4 billion reported in 2020), driven by expansion to fresh markets and the challenges of underwriting a massive inflow of new customers. Credit defaults of SKR4.6 billion (versus SKR2.5 billion in 2020) were a significant proportion of losses. On the other hand, net operating income was up 38% from 2020, with the U.S. market continuing to be Klarna’s fastest growing market (71% year-over-year growth). [Read more]