Payment News

Banknotes for Steam Age, CBDCs for Digital Age

Dr Joachim Nagel, President of the Bundesbank, opened the central bank’s recent Payments Symposium with a speech about the future of payments.

His speech compared the impact on payments of the arrival of railways in the 19th century with today’s internet and digital developments. The railways were part of an industrial revolution that led to banknotes becoming an everyday payment tool out of necessity. Today nearly every second payment in Germany is made online. Although private enterprise has moved fast to enable this, he identified three problem areas where the market is not working well – (1) a lock-in effect; (2) data protection; and (3) strategic dependencies.

His conclusion was that a central bank digital currency could address these problems, providing the population with continued access to government money. There are also potential cross- border benefits. He sees this as a centralised system.