From our experience, payment triggers solve about 99% of the blockchain use cases we are currently observing in the corporate space
Alexander Bechtel, Head of Digital Assets & Currencies Strategy, Deutsche Bank
flow: Why is this the case? Does the ECB believe that the value-add is higher for B2C payments than for B2B? Alexander Bechtel: I think one important reason for this is that central banks need to limit the risk for the commercial banking system. If consumers hold CBDCs as a direct
replacement for physical cash, that’s not a problem. But if they withdraw bank deposits and store the money in their central bank account instead, this could become a threat to financial stability. Today, about 90% of the money that is circulating is bank deposits. With the introduction of a retail CBDC, this relation could revert – especially if CBDCs will be used for large-scale B2B payments.
Advantages of token-based CBDCs for corporates
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Supporting digital business models by enabling payment automation on (blockchain) platforms for trade finance, procurement, IoT, etc
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Direct access to central bank money that eliminates counterparty risk
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Speeding up (cross-border) payment processes
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Supporting payment fraud prevention through consensus mechanism
Possible barriers to adoption
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Most CBDC projects are still at an early stage, few are launched yet
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Interoperability: the need to agree common global standards for cross- border payment based on CBDCs
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Missing regulation, e.g. how to deal with machine-initiated payments
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Companies need to ramp up internal processes
At Roche, our goal is to integrate the physical supply chain with the financial ecosystem where payments are truly made end-to-end Martin Schlageter, Head of Treasury Operations, Hoffmann-La Roche
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flow: Martin, over the past few years Roche has spent a lot of time centralising and standardising its payments processes. In your view, which incumbent payment system problems could CBDCs solve? Martin Schlageter: As a cash manager you are working between two worlds: the physical supply chain, where we buy from our suppliers and sell to our customers, and the financial world where payments are made. At Roche, our goal is to integrate these two worlds end-to-end. That’s why we have recently launched a proof of concept together with Deutsche Bank to automate and integrate the order process via smart contracts until the payment to the supplier. Up to now, order intake, checking of invoices, establishing bank data and initiation and approval of payments are sequentially done in different systems. In the future, we want to increase efficiencies in the purchase- to-pay process and eliminate costly and error-prone reconciliation steps. We strongly believe that token-based CBDCs are ultimately the best way to accelerate and improve the last step in this chain – in other words, the payment.
flow: But wouldn’t that be possible with incumbent payment systems as well? Martin Schlageter: For a start, it could be possible. In our PoC, we are drawing on so-called payment triggers to connect the blockchain platform that we use to make payments with our existing payment systems. However, this can only be an interim solution. From our treasury perspective, we want to strengthen our
We still need several intermediaries to conduct a cross- border payment, which makes the process slow, costly and fraud-prone. If central banks were to introduce token-based CBDCs, this could change
Britta Döttger, Group Treasurer, Hoffmann-La Roche
business models and therefore we need to be as close to business processes as possible. We believe that a programmable CBDC best meets this requirement. Britta Döttger: Moreover, cash on chain transactions would also help to prevent payment fraud, as payment data originates from the blockchain and could only be changed if all parties agreed to it. Alexander Bechtel: I agree, CBDCs are the best solution as they allow for frictionless automation. However, from our experience, payment triggers solve about 99% of the blockchain use cases we are currently observing in the corporate space. In a nutshell, these triggers are bridging the gap between blockchain platforms and existing payment systems such as SEPA or SWIFT. This allows companies to seamlessly include and automate payments on their trade finance, procurement, billing or Internet of Things (IoT) platforms. Furthermore, the question is who should put cash on chain: do we need central banks, or are commercial banks better positioned to offer this service?
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