I thought I’d put together my latest thoughts on Central Bank Digital Currency (CBDC). This blog is an update to my June 2022 Post – CBDCs: Growth Opportunity for US Banks.
Challenge – Explain a CBDC to a 10 yr old and describe why it is “better” than using cash or a card. While you can never lose your money. The government has the ability to know the source and destination of every transaction.
Continue readingShort blog today as opposed to the 9 page monster in identity and attribution Friday. Today I’m providing my thoughts on what a consumer data bureau would look like. Summary: Banks have a unique opportunity to create a consumer data bureau and be the key “switch” for regulated and permissioned data. Will they seize it?
Per blog yesterday, everyone has a partial view of you based upon their observations and what you trust them to hold (see Payments and Observer Effect). The more often you interact with a single entity, the more they learn about you. Today Google and Amazon know you much better than your bank. Any unique insights that a bank may have is limited by their ability to take part in that transaction. Thus entities, with the ability to initiate transactions, have the most control (summary of Identity will Define Future of Trust Blog).
Recent issues with Facebook, Equifax, GDPR compliance, … have brought us to a tipping point in data. The basic structure of how data is: permissioned, shared, used, accumulated, analyzed, sold, regulated, … must change. Google and FB operate in a Big Data 1.0 architecture powered by the “virtuous cycle”. Edward Snowden showed us how the NSA also acts in this centralized model as a data vacuum (not so virtuously). Literature and entertainment have created broad awareness of the dangers of centralization and loss of privacy: 1984, the Borg, The Circle, Black Mirror, … etc.
Traditionally the core of bank margin is in risk management. The core of risk management is data.. thus Banks have been the among the best data businesses (as IBM knows). Banks “learn” about their customers through bank interaction: payroll, card transactions, lending. This has helped banks make better risk decisions (both credit and fraud/identity). Within the bank data cycle the traditional use of data is for an internal benefit: risk and cross sale of the bank’s products and services (not that of consumers or merchants). However the “virtuous cycle of banking data” is very different from that enjoyed by Amazon and Google, both in the scale and type of data and consumer facing use.