Weekly Wrap: China pushes U.S. to take central bank digital currency seriously

This week, Bank Automation News delves into a House committee’s inquiry into a potential central bank digital currency (CBDC), and explored China’s role in prompting the U.S. to explore a CBDC, as well as the U.S. hesitancy to adopt digital currency. The BAN team also explored how neobanks are causing more banks to abandon a major financial institution money maker — overdraft fees . Find a discussion of these topics and more in today’s episode of the Weekly Wrap with Editor Myra Thomas and Associate Editors Jaspreet Kalra and Loraine Lawson for the week ended June 18, 2021. Subscribe to The Buzz Podcast on iTunes , Spotify , or download the episode .

The following is a transcript generated by AI technology that has been lightly edited but still contains errors. Myra Thomas Hi, everyone. I'm Myra Thomas and welcome to The Buzz from Bank Automation News , where we explore how automation technology is transforming the banking industry. This is our weekly wrap for what's happening in the industry this week. Before beginning, I'd like to give a big thanks to our sponsors, MX, Zeta Tech, and Point Predictive. Thank you so much for your support. I'm pleased to be joined this week by Loraine Lawson, our associate editor, and Jaspreet Kalra, also one of our associate editors. It's June 18 2021 and here are the biggest news items from our editorial team this week. But before we do that, let me chat a little bit about what's happening in the news today. I guess the EU is looking at opening up to Americans, which I'm sure will be a major boon to the economy. Also, we're looking at the EU PE activity which has gone through the roof. And cyber security startups are enjoying a really wonderful, lots of activity, given some of the things that have happened on the cyber fraud front in the last few weeks. And investors in energy and big oil are seeing and seeing tremendous, tremendous increases and riding high. And they're seeing some of the best performances of stocks this year. So let's sort of move over and talk a little bit about the best stories happening in Bank Automation News this week. The first thing I guess, of course, is the House hearing on Wednesday regarding central bank digital currencies. And a quick look at that will show us that I guess the biggest motivator for all of this is industry pressure, whether it be banking, or FinTech to move towards that way. I think the last Senate, the last hearing, the house hearing, unlike the Senate hearing, gave us a little look at you know some of the technology that might exist behind it. But it'll be interesting to see exactly what will come of it and how long the rollout will take. This summer, we'll have a report coming out of the Fed, which may give us a better indication of where we're heading. The previous hesitancy, I guess by the Fed has really been related to the rollout and banking pressure to make sure they're part of this whole deal. By we had a chance to talk to one of the fintechs that was actually at the hearing and testifying. And so the executive from MTech was really very specific about giving us a sense of how the rollout would actually happen. And whether or not, you know, banks would be an intermediary, which it seems as if many in the FinTech world are have mixed feelings about depending on what part of the industry they sit in. Any thoughts guys on what's happening? As far as house development, Senate development?Loraine Lawson I have a question. Sure. Absolutely. I always have questions. Let's see. My question is why is digital currency up for debate? Now? Why is why at the Congress level? Are we talking about this?Myra Thomas I think a lot of it obviously, is industry pressure to move ahead. And I, which includes trying to make some sort of, you know, dominant statement to jump ahead of the Chinese, which is having, you know, which is way ahead of where the US is, and has a pilot already, the digital one. And so, you know, right now, it's really an issue of trying to be the standard bearer, as far as central bank digital currencies. I mean, the one thing that sort of stands in the way, I guess, here in the US, and I was, I guess, surprised to hear this from it, I guess the president of MTech was that, you know, really, it was more an issue of customer adoption, then it was about automation that would, you know, make this whole process a little bit more difficult in the rollout. And so, you know, she was pretty much sure that the technology already exists. But you know, really, it's much more about customer behavior and customer fears that might keep a central bank digital currency from catching on in the US.Loraine Lawson Whether you'll think that people are afraid to adopt it. I mean, I personally don't know much about it, I think that would be my fear. But Myra Thomas yeah, that's part of it. It's part of it, I think, you know, the newness of it and the new idea of it, and trying to figure out, you know, what it exactly means and how it fits into the current, you know, financial banking system. But also, you know, there are, you know, fears as far as the traceability in real time that exists in regards to Central Bank digital currency. So, I think there's just some, maybe, I don't know irrational fear about that as well. So let's make a shift over to some of the things that you guys are working on this past week, just for you. Maybe you can talk a little bit about what A few more exciting stories. Jaspreet Kalra Sure. I mean, so one of the stories that I worked on this week was how rippled trading, which is basically repurchase agreement trading where in banks and financial institutions, give away securities, loans securities and get cash in return, and at the same time sign an agreement to buy them the next day at a higher price is now moving over to DLT based trade, and broadridge is the company that's introducing a platform to do this. Now, mainly, JP Morgan has already piloted something like this on its onyx blockchain platform. But what the sort of main takeaway was from there is that it's a market that really depends on shared source of truth, wherein you want to be able to trust that counterparty risk enough that it's a safe transaction, it will execute. Also, it's about speeding up some of those transactions, so the liquidity can be opened up in the same day instead of waiting for the next day settlement. So there's movement happening on that front. But I think one thing to watch there is how fast the industry will be to adopt something like this because with things like cryptocurrencies blockchain cbdc, is, as you mentioned, there's some hesitance involved with adoption of new technology, like always. And so the speed of adoption is something to watch out for there. And sort of other things that I looked into this week with Dave's proposed spec listing, which is supposed to close by the end of this year, which is the third of the fourth quarter. And one of the major things they tout in their offering is that they help customers avoid fees. And that's a trend that we've seen with Neo banks and challenger banks, largely is that they're targeting customers who sort of at the margins of the legacy banking system, and they want to capture that ground by saying, Hey, we have this cheaper product for you to access. That brings you the same liberties with a better technology stack at the core of Loraine Lawson and Dave wasn't going to do something with overdraft fees. I wondered why that's such a hot topic right now. And why banks are giving that up? Why do you think Neo banks are not charging overdraft fees. Jaspreet Kalra So historically, fees have been a very rich source of revenue for banks, but they're starting to move away from that, like earlier, these fees used to be even higher. And if you go back even banks like ally, financial and PNC, they already have products in the market that help customers totally eliminate or avoid some of these fees. So I think it's really a matter of new banks saying we're going to eat into your margins. And then the banks also responding to it by saying, Yeah, we can also reduce this sort of revenue and focus on offering other products that can be a rich source of income. Loraine Lawson Interesting. Myra Thomas Yeah, that's very interesting. Well, I'd like to give a big thanks to our sponsors once again. As far as this is the weekly wrap. Thank you so much for participating and for joining us for the buzz. For more podcast content, check out bank automation news, calm and search for the buzz for bank automation news on iTunes and Spotify.

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