CBDC pilot projects seeing adoption in Ghana and Thailand – Giesecke + Devrient

Editorial

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Herborg provided an overview of the report released by G+D in collaboration with OMFIF, which collected responses from 34 central banks worldwide, including the Bank of Ghana, Bank of Thailand, and European Central Bank, and in-depth interviews with senior representatives concerning the implementation of CBDCs into the mainstream banking ecosystem.

G+D has been working on several pilot projects to launch retail CBDCs. Explaining the revolutionary potential of CBDCs, Herborg stated that CBDCs can transfer the benefits of cash into the digital world, and would be a public means of payment without transactions fees or the need of a commercial bank – they will be an alternative method of payment comparable to PayPal, Visa, and Mastercard, intended to expand accessibility and inclusivity. “It’s this idea of transferring the capabilities of cash into digital world,” Herborg commented.

Herborg emphasised that CBDCs will not replace commercial alternative payments, but provide a public alternative. Commercial banks will not be left on the sidelines of CBDC innovation, and are involved in the progress with central banks acting as a platform for developing new services.

The report found that 48% of the global central banks surveyed in the report expect to issue a CBDC within the next three to five years, and 50% of central banks are developing CBDCs to preserve monetary sovereignty. Key motivators for implementing CBDCs are financial inclusion, offline payment capabilities, and preserving the role of central banks in emerging markets. However, motivations differ according to region, with Europe prioritising sovereignty and African markets focusing on financial inclusion. Herborg stated that in countries in Africa there has been an influx of mobile money providers, but many come with exorbitant fees on transactions, onboarding, and other features.

Providing examples of pilot projects that have seen significant progress and success, Herborg describes CBDCs launched by the Bank of Ghana and Bank of Thailand. With Bank of Ghana, G+D launched a pilot in a rural area where they provided cards to people without smartphones. Herborg detailed that the users were reluctant at first, but as they followed the project and continued to survey adoption, there was a significant uptake. The Bank of Ghana reported a 60% increase in usage.

“For the people in that village, it was the first digital payment in their life. They had only used cash. We had a use case where people were bringing their cash to the merchant to exchange it to CBDC on a card, because they considered the money on the card to be more secure than the cash. That was definitely a big success, that proved that the technology works and can deliver financial inclusion to people in very rural areas.”

With the Bank of Thailand pilot project, there was also a need for offline support that offered working payment solutions. The report found that 20% of respondents were satisfied with their offline payments functionality, up from 0% in 2023. These onboarding processes were not exclusive to a G+D or Bank of Thailand app, but were integrated into the existing technologies of commercial banks – in this case Siam Bank.

Challenges facing CBDC adoption include political approval, regulatory alignment, and protecting against security breaches. Herborg explained: “If you look at countries in Europe, it’s a lot about sovereignty. If you want to pay in Europe, it’s not easy to pay without using a non-European payment solution. Here in Germany, I’m not sure I have ever used in any European online payments solution. I use PayPal, Visa, and MasterCard – there are no European solutions. Therefore, sovereignty is a big topic. You can imagine, with the current political situation, it’s a risk being dependent entirely on North American solutions.”

Herborg went into detail on the progress of the digital euro from the European Central Bank: “If you look at Europe, there’s this huge project of the digital euro. There has a big political policy aspect, because it’s not only the European Central Bank that wants to drive the topic, but there’s also regulation. Since regulation is currently discussed among the European Commission, there also needs to be political approval. That’s another learning, confirmed by that report – technology is one thing in that you have to provide great usability, but it’s also about the political process that is needed in order to make it really happen.”

Herborg shared an optimistic outlook for CBDC development in the coming years, highlighting their its potential to enhance the ever-evolving digital payments landscape.