Original: Johannes Beermann
Translation: Long Baitao
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In his speech, Johannes Beermann, the Bundesbank Executive Committee, discussed the unique form of cash provided by cash, digital payments increasing the diversity of payment methods, and CBDC as a cash alternative.
Beermann pointed out that in the digital wave, the level of use and circulation of cash in Germany and the euro area is still high, because cash provides three unique forms of independence-independent of one's socioeconomic background, independent of technology ecology, and independent. For social control and data collection, these features make cash help to strengthen financial inclusion, maintain social cohesion, protect users from being locked into specific payment ecosystems, and protect users' personal privacy.
In China, the development of a new payment instrument, from supervision to companies promoting innovation to the general public, has rarely factored these factors into consideration when developing a new payment instrument. Social media talks hotly about the fast, convenient, low-cost, easy-to-use user experience brought by new payment tools and technologies, and less concerned about special groups (such as the elderly or Disabled, etc.), which poses the risk of a digital divide.
In China, Ant Financial and Tencent Pay accounted for 93% of mobile payment market share and 1.3 billion user groups. The diversified economic activities provided on their platforms almost abducted the user's entire lifestyle. This looks good to consumers on the surface, but consumers not only contribute valuable user data to the platform through their economic activities on the platform, consumers may also ignore other (product and service) choices, which makes other The attractiveness of the fee-based business model is greatly reduced. This poses the risk of fair competition.
Chinese companies and citizens generally do not pay enough attention to personal privacy, which has also led to a general phenomenon of widespread abuse of user privacy data. This phenomenon has been curbed with the recent drastic governance of the Chinese government. However, compared with European and American traditions, which have always attached importance to the cultural concept of personal privacy, China still has considerable room for improvement, which will significantly affect the competitiveness of China's digital currency in the short term, whether it is the DC / EP of the People's Bank of China or promotion by Chinese companies. Crypto asset stablecoin. As a negative case, after the European Union launched the General Data Protection Regulation in June 2018, WeChat withdrew from the European market to operate directly, which reflects the shortcomings that Chinese companies can't overcome in the short term. The People's Bank of China claims that DC / EP has achieved a controlled anonymity of "anonymity in the front desk and real name in the back office". As a result, DC / EP actually lost the absolute anonymity provided by physical cash.
Beermann states that "the transition to a less cash-rich society must be driven by users, not suppliers." Under the digital tide, Chinese companies and the public have an unrealistic pride from the so-called "cashlessness". It is naive to think that the degree of currency digitization represents the leading level of social technology and civilization, so businesses and supervision are actively Promote innovation with digitalization as a KPI. Digital transformation (including currency), although there are huge potential benefits in terms of efficiency, convenience, cost, etc., but everything has two sides. The potential negative impact of digital technology is to place immense power in the hands of inappropriate people, which can lead to unfettered and abused power. For example, after achieving a 100% cashless society, individuals may be deprived of the right to use money-the most basic financial service; all financial activities of individuals are recorded, tracked and abused. Therefore, in the absence of a good governance system, the general power of nuclear weapons brought by digital technology cannot be effectively constrained and checked, and the degree of digitization should not be regarded as a single goal of pursuit. As for the issue of cash, as the Bundesbank executive committee pointed out, the transition to a cashless society should not be driven by forces other than users.
Beermann finally discussed the issue of cash replacement by CBDC. Wholesale CBDC is an improvement on the existing structure and has little or no impact on monetary policy. For the current economic relationship between households, commercial banks, and central banks, retail CBDC may mean a paradigm shift. Beermann's subtext is that wholesale CBDC can develop, but the impact of retail CBDC is too great and needs to be treated with caution. The author has analyzed many times that the prudent and wholesale CBDC preferences of senior European Central Bank officials towards retail CBDC are essentially to protect the minting rights of commercial banks, because retail CBDC means that the central bank deprives commercial banks of some of the power to create currency. Behind this is the anti-state consciousness of EU banks and central bank groups. In contrast, China's financial elite group directly chose to develop retail CBDC to resist the risk of erosion of RMB currency sovereignty.
Overall, China's innovations in payments and digital currencies, although leading, seem to be cold and lack the German / European temperature and humane care. The differences between China and the EU in CBDC innovations reflect the difference between the awareness of sovereignty and the anti-state consciousness behind supersovereignty.
December 4, 2019
This article is a keynote speech delivered by Dr. Johannes Beermann, Executive Director of the Bundesbank, at the Payment Asia Summit in Shenzhen, China on November 22, 2019.
Good morning ladies and gentlemen
I am very happy to participate in today's meeting. Considering the theme of the next meeting, you might think I am "incompatible".
After all, as a member of the Bundesbank's executive committee in charge of cash management, I may very well represent the "old payment world" that many of you might consider.
• A world with limited space for innovation and progress, a world with high risks but low returns in general
• At least this is what people usually claim
When introducing you to my European and German perspectives, let me tell you: this thing is not as simple as it seems.
In Germany and throughout the euro area, cash flows are still rising.
• The Bundesbank has issued half-value euro notes in circulation.
• Processing and distribution of cash is a major operational task performed by central banks in the eurozone, especially the Bundesbank. It also means we need to continue investing in our cash infrastructure.
Cash serves a variety of economic functions, and payment is just one of them.
• We expect about one-tenth of the banknotes issued by the Bundesbank to be used for payments in Germany.
• This limits the size of the cake snatched by various non-cash payment options.
Nevertheless, let's focus on using cash as a payment tool.
• The use of cash as a means of payment is declining-both globally and in Germany.
• But the level of cash use remains high in many countries, especially Germany.
• There may be less cash around, but we are far from cashless.
So why hasn't physical cash disappeared into the ocean of digital payment methods so far?
2 Cash as a separate payment method
Ladies and gentlemen, in my opinion, this has to do with the special features that cash offers.
We regularly monitor payment behavior in Germany to understand the motivations of households using specific payment methods.
Preventing financial losses, personal privacy, and clear spending summaries are key features that households expect from payment instruments. According to our survey, cash scores well in all of these areas.
My interpretation of these results is that German families value independence, and physical cash offers three unique forms of independence that set it apart from digital payment systems.
First, independence from one's socio-economic background.
• Cash is touchable and does not require any technical equipment. The use of cash is easy to understand and spans generation gaps. In my opinion, the tactile nature of cash is an important factor in strengthening financial inclusion.
• In rural areas with insufficient banks or technical infrastructure, ensuring access to cash may be particularly important. In this sense, cash is also a means of maintaining social cohesion.
Second, it is independent of the technology ecosystem.
• Given the fragmented payment landscape in Europe, cash is still one of the truly universal payment methods in P2P (person-to-person) transactions in the euro area.
• Fintech companies are shaking up Europe's traditional banking system. These companies can often leverage their global reach and large customer base. This may bring benefits to consumers, such as cross-border payments. But it also means that customers are being locked into specific payment ecosystems. Cash provides an easy way out, at least for some transactions.
Third, it is independent of social control and data collection.
As legal tender, cash is fully supported by domestic central banks.
If personal privacy is a concern, cash is the obvious payment option. This strengthens personal freedom.
After all, digital payment systems use personal data to work. Collecting data itself is not harmful, but in the era of big data, collecting detailed data means obtaining valuable information, which in turn may build personal behavior patterns.
• From a consumer protection perspective, the question arises of how much necessary information is required to perform a particular transaction.
• From an economic point of view, when we compare the basic cost structure of different payment methods, personal data may be considered as an additional source of transaction costs.
3 Retail – the source of future transformation?
Ladies and gentlemen
Payment methods often develop in stages. For example, the use of credit and debit cards was often common before mobile payment solutions were adopted.
In Germany, contactless payments are just beginning to become popular. On the other hand, China itself seems to be an example. Comparative research between China and Germany supports this.
• Evidence from the 2017 report shows that cash and debit card payments make up the majority of German retailer revenues. At the time, mobile-based payment solutions did not play a significant role.
• The opposite is happening for Chinese consumers in big cities. Third-party mobile payment providers clearly dominate here, and their credit card payments have jumped to third place.
With the continuous development of payment technology, China's payment habits are still constantly changing. Seamless payment methods are emerging. These methods basically attempt to combat the "pain of payment" with a physical smile.
The popularity of similar shopping experiences in Germany remains to be seen. There are serious problems with data protection and these problems need to be mitigated first.
I believe that the transition to a less cash-rich society must be driven by users, not suppliers. At least in Germany, consumers seem to value the diversity of existing payment options. Cash remains an important part of it.
In Germany's bank-centric financial system, commercial banks are the main players in providing payment infrastructure that can satisfy both cash and the needs of their digital alternatives.
Germany's retail industry is also transforming.
• On the one hand, German retailers are increasingly turning to China's mobile payment solution providers, especially looking to increase sales to Chinese tourists.
• On the other hand, retailers are also increasing their reach by closing the cash cycle in Germany. Today, more and more stores offer customers basic banking services such as cash withdrawals and over-the-counter deposits.
To me, this suggests that the shift in payment landscape is not complete.
4 CBDC as a cash alternative?
In the digital age, it is not surprising that central banks are discussing the potential advantages and disadvantages of the digital form of central bank currency (CBDC).
Many business issues related to CBDC remain unresolved. For example, this is related to the technology implemented.
• Blockchain and underlying distributed ledger technologies seem promising, and the central bank is open to them in principle. For example, there are several potential use cases in settlement and payment systems that deserve further exploration.
• However, processing and secure storage of large amounts of data does not necessarily require a distributed ledger. We need to better understand the underlying technology in terms of operational risk.
In addition, the exact setting of the CBDC needs to be considered, as specifications may identify potential impacts. Broadly speaking, there are two imaginable variants of CBDC.
• Wholesale type, which restricts specific financial market participants from accessing the CBDC for specific purposes. • On the other hand, retail types can allow a wide range of domestic, even non-domestic non-bank (user) access to CBDC.
In dealing with securities transactions and foreign exchange transactions, the wholesale form is an improvement over the existing structure, but it has little or no impact on monetary policy.
However, for the economic relationship between households, commercial banks, and central banks that have developed to date, retail formats may mean a paradigm shift.
This fundamental change is not without risks and requires careful consideration. • There is also the question of how strong the family's appetite will be for this form of CBDC. In the discussion, the user's perspective should not be left out.
We need to look at the problem correctly. After all, many of these debates are driven by plans announced by the Libra Association.
For me, the most important thing is to provide a fast and cost-effective system for cross-border payments.
We should go step by step. There are already some innovative market solutions that are likely to turn into efficient pan-European digital payment solutions.
• In addition, SEPA Instant Credit Transfer can be used as the basis for a pan-European payment solution.
Before considering further and more radical steps, we should further develop these systems.
Ladies and gentlemen,
Pay the old world and the new world. This story is not new. At the turn of the millennium, people praised the so-called German new economy.
• The new economy is a term used to describe Internet startups that often rely on very little physical capital to generate amazing market valuations.
• This is in stark contrast to the old economy. Think of a physical car factory, which in some cases has considerable overhead.
At this moment, we can say, "The new one has become a bit old, and the old one has become a bit new." The economic structure has been integrated. Basic market forces still apply: companies that can survive are those that are competitive and offer unique products.
I look at the world of payments in this spirit. For me, digital payments offer exciting prospects. However, this does not necessarily mean the disappearance of existing payment methods. It is likely to actually increase the diversity of payment methods.
Cash offers unique forms of independence that are independent of social and electronic networks. This shows that cash will continue to be popular in the euro area.
I look forward to having fruitful discussions with you.