Daily news

TransUnion Brings Credit Data to Public Blockchain Networks

TransUnion Brings Credit Data to Public Blockchain Networks
By Julie Muhn (@julieschicktanz) Posted on
Categories: Alumni News, Daily news, TransUnion

Consumer credit reporting agency TransUnion is moving in the direction of Web3. The Illinois-based company announced this week it will bring off-chain consumer credit, identity, and compliance information to public blockchain networks.

The move is made possible via a partnership with Spring Labs, a company that offers decentralized infrastructure for credit and identity data. Spring Labs allows network participants, such as financial institutions, to share information about credit and identity data without needing to share the underlying data itself. Specifically, TransUnion will bring its VantageScore to Spring Labs’ ky0x Digital Passport, a tool that enables blockchain and smart contract applications to access off-chain data sources to create new, permission-controlled decentralized Web3 services and applications.

“We believe in the growth potential of DeFi,” said TransUnion President of U.S. Markets and Consumer Interactive Steve Chaouki. “Providing credit and identity data on-chain is a huge step towards improving the financial products available in the space. Working with Spring’s ky0x, we now have a solution for users to control and share their data on blockchain in a privacy-preserving way, enabling them to safely interact with a broader set of financial products.”

Transporting consumer credit data to the blockchain allows users to offer up information about themselves while maintaining privacy and anonymity of their identity. This secure data sharing allows users to access smart contract applications and helps DeFi and Web3 apps to scale.

Ultimately, the move should benefit both end users and lenders. By having their credit score available on-chain, users can receive better interest rates from DeFi lenders. Simultaneously, DeFi lenders can reduce their risk.

“Enabling access to an industry-standard, trusted credit risk score like VantageScore on-chain and in a consumer permissioned, anonymous way opens the door to greater growth and financial inclusion in the DeFi space,” said TransUnion SVP Consumer Lending Business Leader Liz Pagel. “Paired with ky0x’s AML and KYC capabilities, DeFi lenders can transact with confidence at lower rates, potentially paving the way for lending without the over-collateralization that is standard today.”

To be honest, there is a potential downside to this partnership. Traditional credit scores are prone to racial bias and have negative consequences for borrowers who have no established credit. By porting this imperfect risk underwriting model to the decentralized world, we may be doing ourselves a disservice.

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Checkout.com Earns $40 Billion Valuation with Series D Investment

Checkout.com Earns $40 Billion Valuation with Series D Investment
By David Penn Posted on
Categories: Daily news, Funding

A fundraising round of $1 billion has given Checkout.com a valuation of $40 billion, more than 20x the valuation the company earned upon its first fundraising three years ago. The investment takes Checkout.com’s total capital raised to $1.8 billion, and the company said that it plans to use the funds to support growth in the U.S. market, launch its marketplaces solution, and strengthen its position in Web3.

“At our core, we help enterprise merchants to navigate the complexity of moving money around the world, whether in fiat currency or bridging the gap to Web3,” Checkout.com founder and CEO Guillaume Pousaz said. “By combining an elegant technology stack with industry expertise and an ‘extra-mile’ approach to service over the past decade, we’ve built deep partnerships with some of the world’s most innovative companies.” Pousaz added that while he considered this week’s investment to be a “validation” of the firm’s work to date, “we’re still in ‘chapter zero’ of our journey.”

Investors in the Series D included Altimeter, Dragoneer, Franklin Templeton, GIC, Insight Partners, the Qatar Investment Authority, Tiger Global, the Oxford Endowment Fund and “another large west coast mutual fund manager.”

With customers ranging from Netflix and Pizza Hut to fintechs like Klarna, Revolut, and Coinbase, Checkout.com offers a full-stack online platform that makes payments easier for global businesses. Enterprise merchants that face significant challenges in moving money around the world have partnered with Checkout.com for its flexible, cloud-based payment platform that offers improved authorization rates, feature parity, and direct connection to local networks in key geographies and for all major alternative payment methods.

Looking forward, Checkout.com plans to launch a solution to service both marketplaces and payment facilitators later in 2022. The new offering will combine identity verification, split payments, and treasury-as-a-service functionality with Checkout.com’s Payouts solution, which helps companies send funds to both cards and bank accounts worldwide by way of a single integration. Checkout.com reports that both TikTok and MoneyGram have taken advantage of the service, with “billions of dollars in payout transactions” processed.

Headquartered in London and founded in 2012, Checkout.com spent 2021 opening new offices in six countries across four continents and making numerous major C-suite additions. These include a new Chief Financial Officer, a new Chief Technology Officer, and a new Chief Product Officer. The company announced an extension of its strategic partnership with JCB in September, and led a $110 million funding round for Saudi Arabian-based fintech Tamara in April.

Photo by Karolina Grabowska from Pexels

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Tandem Bank Acquires Oplo

Tandem Bank Acquires Oplo
By Julie Muhn (@julieschicktanz) Posted on
Categories: Daily news, Mergers & Acquisitions

Founded in 2015, Tandem Bank used to be among the ranks of U.K. challenger banks Monzo and Starling. But Tandem Bank has remained relatively quiet for the past year-and-a-half– seemingly sidelined from the digital banking race taking place across the globe.

That’s changing today, however. Tandem Bank announced it has acquired lending platform Oplo. Financial details about the deal were undisclosed.

“I think this is a really exciting business combination,” said Tandem Bank Group CEO Susie Aliker. “We have a shared and common purpose to create a greener and fairer banking proposition. We want to build on our digital and technology capabilities to really create a really exciting but also profitable challenger bank.”

https://www.youtube.com/watch?time_continue=1&v=rtfY2lYRqsE&feature=emb_logo

Oplo was founded in 2004 and has since lent over $1.2 billion (£900 million) to mainstream customers. The U.K.-based fintech offers car finance, personal loans, and secured loan products as alternatives to traditional bank loans. When it combines with Tandem, the digital bank will have $1.64 billion (£1.2 billion) in assets.

Tandem is very focused on the ESG initiative that has been sweeping the fintech industry; this includes digital banking players in particular. Tandem Bank currently holds $315 million (£230 million) in its Green Loans, a product that helps accountholders “save the planet whilst saving money.” Last year, the digital bank provided customers with loans for home improvements that contributed to over 12,000 tonnes of CO2 reductions.

The Green Loans product comes courtesy of Tandem Bank’s 2020 acquisition of Allium Money, an alternative lender that offers consumers financing to improve the energy efficiency of their homes.

“By joining forces, we will be able to offer a wider range of products and higher quality of service to more people than ever before,” Oplo said in a blog post announcing the change. “And together, as Tandem, we will build a fairer and greener bank for all.”

In a video, Aliker described the company’s recent shift to double-down on its ESG focus. “Our target market going forward will be what we call The New Mainstream.” We want to give them the choices so that they can also help contribute towards a fairer and greener future.”

Photo by Adolfo Félix on Unsplash

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Community Banking Network CBANC Unveils New B2B Fintech Marketplace

Community Banking Network CBANC Unveils New B2B Fintech Marketplace
By David Penn Posted on
Categories: Alumni News, cbanc Network, Credit Unions, Daily news

CBANC, the biggest verified professional network for U.S. commercial banking institutions – and the professionals that run and work for them – announced the launch of its new platform this week. The CBANC Marketplace will host data and information on 1,000 products from more than 450 companies – all designed to meet the unique needs of small banks and credit unions.

“Over the past 10 years, CBANC has been a place for all financial professionals to connect and discover the information they need to succeed,” CBANC CEO Tom Ferries said. “Today, the speed of technological innovation is outpacing awareness, and community banks and credit unions need a place to discover what’s available for them and feel confident in their decisions.”

The CBANC Marketplace gives companies the ability to have their solutions accessed by a verified audience of community banking and credit union professionals. Both the CBANC Community and Marketplace are free for all employees of U.S. financial institutions, and there is no cost for fintechs and other companies that want to add their product or solution. For more information, and to request inclusion in the CBANC Marketplace, visit the network’s vendor hub.

Headquartered in Austin, Texas, and founded in 2009, CBANC benefits from the collective wisdom of more than 8,600 financial institutions with a combined total of more than $22 trillion in assets. The CBANC Community consists of 65,000 verified financial professionals representing more than 80% of all financial institutions in the United States. A unique opportunity to connect and collaborate with peers in the industry who are innovating in a wide range of technologies from AI to the blockchain to cryptocurrencies, the CBANC Network earned a spot on the 2020 Inc 5000 list of the fastest growing private companies in the U.S. Ferries, who took over at CEO days before the Inc 5000 announcement, credited CBANC’s three-year revenue growth of more than 6.5x for helping the organization secure the listing.

“Our strong revenue growth is a testament to the value we deliver to our Members and Partners,” Ferries said. “Look for new and exciting product launches later this year to continue our mission of helping our Members preserve the diversity of the American banking system.”

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Brex Raises $300 Million to Expand Product Portfolio

Brex Raises $300 Million to Expand Product Portfolio
By Julie Muhn (@julieschicktanz) Posted on
Categories: Daily news, Funding

Credit card and cash management solutions company Brex closed a $300 million D-2 round today. The round, which values the company at $12.3 billion, was led by Greenoaks Capital and Technology Crossover Ventures (TCV).

Brex will use the fresh capital to expand its product portfolio to serve more of companies’ financial needs. The California-based fintech’s funding now totals $1.2 billion.

“Brex is a market disruptor and the opportunity to create economic opportunity for millions of people and businesses globally through innovation in financial products is incredibly exciting,” said Brex Chief Product Officer Karandeep Anand. “The opportunity ahead for Brex is expansive, and I’m grateful for the opportunity to create products that will help our customers grow their businesses.”

Brex was founded in 2017 to create a digital-first business banking solution. The company offers business bank accounts with credit cards that have built-in rewards, spend controls, and expense tracking. The accounts give businesses early access to their online revenue, billpay tools, and integration with popular accounting tools– all with zero fees. The company serves “tens of thousands of businesses” ranging from small private companies to large public brands, including Airbnb and Classpass.

“Brex has always moved fast. But as the company has scaled, they’ve managed to get even faster, accelerating their growth since our last investment,” said Greenoaks Founder and Managing Partner Neil Mehta. “Brex is building a full financial operating system that keeps getting more comprehensive, all of which will delight existing customers and attract new ones.”

In addition to the funding announcement, Brex is also highlighting a noteworthy personnel change. The company appointed Karandeep Anand as Chief Product Officer. Anand comes to Brex from Meta, where he led the business products group, which served more than 200 million businesses globally. Before his start at Meta, Anand spent 15 years at Microsoft leading the product management strategy for Microsoft’s Azure cloud and developer platform.

Photo by Hal Gatewood on Unsplash

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BeSmartee Pursues Opportunities in Commercial Lending with FlashSpread Acquisition

BeSmartee Pursues Opportunities in Commercial Lending with FlashSpread Acquisition
By David Penn Posted on
Categories: Alumni News, Alumni profile, BeSmartee, Daily news, Mergers & Acquisitions

With its acquisition of financial analysis as a service company FlashSpread, digital mortgage platform BeSmartee’s ability to deliver a complete, digital lending experience just got that much more complete.

“We are excited to welcome FlashSpread and Ariel Trybuch to the BeSmartee family,” CEO and co-founder of BeSmartee Tim Nguyen said in a statement. “This is an acquisition that not only brings new clients, technologies, and talents to BeSmartee, but one that also sparks further innovation into all lending verticals, including mortgages, consumer, and commercial.”

Founded in 2017 and headquartered in Glendale, California, FlashSpread specializes in instant tax spreading for commercial lenders and fintechs. The company’s proprietary algorithms enable lenders to convert scanned tax returns into customized and comprehensive financial reports with the click of a button. The technology brings significant efficiencies to the commercial loan process – from origination to servicing – and empowers lenders to make accurate, data-driven credit decisions quickly.

Via its acquisition of FlashSpread, BeSmartee will be able to accelerate its growth strategy, prioritizing increased automation as it expands into the commercial lending space. FlashSpread is integrated with some of the largest loan origination systems in the commercial lending industry, with more than 100 financial institutions relying on its technology to automate manual processes. Post-acquisition, FlashSpread will continue independently to serve customers as a “BeSmartee Company” with FlashSpread founder and CEO Ariel Trybuch taking on the role of General Manager.

“This partnership will provide the resources necessary to support the hyper-growth FlashSpread is currently experiencing, as well as allow us to provide our customers with an even higher level of customer support, rapidly introduce new features and functionality, and expand our ever-growing library of supported document types,” Trybuch said. The company will continue growing its document library to support a broader range of financial statements, as well as launch a no-code reporting module to offer instant custom reports, and unveil an ongoing credit monitoring tool.

BeSmartee’s acquisition announcement comes just days after the company reported a partnership with Freddie Mac. The Huntington Beach-based fintech will integrate Freddie Mac’s automated underwriting system, Loan Product Advisor, improving workflows for lenders by automating risk assessment, and both asset and income data review. The integration will also improve lenders’ ability to make smart business decisions, leveraging actionable insights from Loan Product Advisor’s rich data visualization features.

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PayPal Plans to Launch its Own Stablecoin

PayPal Plans to Launch its Own Stablecoin
By Julie Muhn (@julieschicktanz) Posted on
Categories: Alumni News, Daily news, PayPal

PayPal has confirmed recent rumors regarding plans to launch its own stablecoin. According to Bloomberg, which broke the news last week, a developer found evidence of PayPal’s future stablecoin in the form of the below logo inside the fintech’s iPhone app.

Photo credit: Bloomberg

SVP of Crypto and Digital Currencies at PayPal Jose Fernandez da Ponte later confirmed the suspicion. “We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators,” Fernandez da Ponte told Bloomberg.

Developer Steve Moser made the discovery by looking at hidden code inside the PayPal app. The code unveils work on PayPal Coin, a PayPal-specific stablecoin that would be backed by the U.S. dollar. After PayPal was made aware of the discovery, the company confirmed that the code was part of a recent internal hackathon and that details surrounding the project will likely change.

If the project comes to fruition, the stablecoin would be just one initiative among a host of other cryptocurrency efforts. In October of 2020 the company partnered with cryptocurrency company Paxos to allow PayPal users in the U.S. to buy, hold, and sell cryptocurrencies. And last March, PayPal launched Checkout with Crypto, a tool that enables users with cryptocurrency holdings to transact using crypto at the online point of sale.

When it comes to working on a stablecoin launch, PayPal is in good company. Meta (formerly Facebook) was developing its own stablecoin, Diem, until it experienced regulatory hurdles and pivoted to work with the Pax dollar instead. On top of that, Visa is looking to leverage a stablecoin to settle transactions.

In addition to its stablecoin ambitions, PayPal is also hoping to gain a reputation as the first super app in the U.S. The company revamped its mobile app last September and now offers a range of features including direct deposit, billpay management, rewards, and more. Founded in 1998, PayPal is now listed on the NASDAQ under the ticker PYPL. The company’s market capitalization currently sits at $213 billion.

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Biometric Authentication Innovator iProov Secures $70 Million in Funding

Biometric Authentication Innovator iProov Secures $70 Million in Funding
By David Penn Posted on
Categories: Alumni News, Daily news, Funding, iProov

An investment of $70 million from Sumeru Equity Partners will enable online facial biometric authentication specialist iProov to expand its business in the United States, grow its worldwide partner network, and add more “top-quality staff” to its global team.

“This investment by one of America’s leading growth funds recognizes the preeminent position we have established,” iProov CEO and founder Andrew Bud said in a statement. “Our potential is enormous and we now have the resources to scale in the United States and worldwide. Our strong balance sheet will give our customers and partners confidence in our long-term ability to keep them and their customers secure.”

Updated valuation information was not immediately available. The company secured Series A funding in 2019, though the amount of the investment was not disclosed. In a statement, the company announced that it had tripled its revenues from 2020 to 2021, and processed more online verifications during a single 10-day period in 2021 than in the whole of 2020. The company added that it had completed more than one million verifications in a single day multiple times in 2021.

As part of the investment, Sumeru Managing Partner Kyle Ryland will join iProov’s Board of Directors. Ryland praised the company’s “combination of patented deep technology, exceptional customer references, and hugely capable team.”

A three-time Finovate Best of Show winner, iProov made its most recent Finovate appearance last spring at FinovateEurope 2021. At the event, iProov demonstrated Flexible Authentication which combines two of the company’s solutions – Genuine Presence Assurance and Liveness Assurance – to enable firms to choose the appropriate level of verification to be applied in a given situation.

Last month, iProov announced a partnership with high-speed passenger rail service Eurostar to test a new contactless fast-track service. The solution, SmartCheck, leverages iProov’s Genuine Presence Assurance technology to provide biometric face verification during the U.K. exit check to both streamline and better secure the travel experience. The pilot project was launched at London’s St. Pancras International station.

“This secure, convenient, and privacy-protecting technology will make life easier and safer for travelers around the world,” Bud said when the Eurostar collaboration was announced in December. “The days of rooting around in your bag for your passport or hoping that your phone battery doesn’t run out before you show your e-ticket at the gate are over. It’s effortless and convenient while also delivering the reassurance and security that travelers expect.”

Photo by Sourav Mishra

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Starling to Launch Software-as-a-Service Offering

Starling to Launch Software-as-a-Service Offering
By Julie Muhn (@julieschicktanz) Posted on
Categories: Daily news

If you forecasted banking-as-a-service as one of the top trends in 2022, you can go ahead and put a check mark next to your prediction. That’s because U.K.-based digital bank Starling Bank announced today it is launching a software-as-a-service product, Starling as a Service.

Starling as a Service will help banks launch their own digital banks in months. “With SaaS (or Starling as a Service, as we like to call it) we will offer our partners the benefit of Starling’s advanced technology to use as their own,” Starling CEO Anne Boden announced in a blog post. “It will be their license, our technology.”

The move is part of a new phase for the digital bank, one that also includes an expansion of Starling’s lending offering. Going forward, Starling will now offer “a mix of strategic forward flow arrangements, organic lending across various asset classes, and a targeted M&A strategy.”

Today’s announcement also showcased some of the bank’s growth metrics. Starling has opened over 2.7 million accounts since its 2014 launch, 475,000 of which are SME accounts. The company now has $11.4 billion (£8.4 billion) in customer deposits, a figure that has risen almost $5 billion from $6.5 billion (£4.8 billion) at this same time last year. Additionally, the company has grown its lending from $2.6 billion (£1.9 billion) to $4.2 billion (£3.1 billion).

Along with the boost in these metrics, Starling also grew as a company in 2021. The bank acquired buy-to-let lender Fleet Mortgages last July, launched a new app for kids called Kite, committed to offset its own carbon emissions, (excluding lending and investments), and raised $437 million (£322 million) in March. Starling is now valued in excess of $1.5 billion (£1.1 billion).

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MoneyGram Makes Strategic Investment in Cryptocurrency Cash Exchange

MoneyGram Makes Strategic Investment in Cryptocurrency Cash Exchange
By Julie Muhn (@julieschicktanz) Posted on
Categories: Daily news, Funding, MoneyGram

Pre-digital P2P payments and remittance player MoneyGram made a strategic investment in cryptocurrency cash exchange company Coinme this week.

The amount of MoneyGram’s strategic investment in Coinme was undisclosed, but it gives the firm a 4% stake in the Seattle-based company. As a result, MoneyGram now holds direct ownership in Coinme.

“At MoneyGram, we continue to be bullish on the vast opportunities that exist in the ever-growing world of cryptocurrency and our ability to operate as a compliant bridge to connect digital assets to local fiat currency. Our investment in Coinme further strengthens our partnership and compliments our shared vision to expand access to digital assets and cryptocurrencies,” said MoneyGram CEO Alex Holmes.

The two companies originally teamed up last year to offer a crypto-to-cash product that combined MoneyGram’s mobile payments platform and Coinme’s cryptocurrency exchange and custody technology. The new product allows customers to purchase bitcoin with cash and withdraw bitcoin holdings in cash at thousands of physical point-of-sale locations.

“Our unique cash-to-bitcoin offering with Coinme, announced in May of 2021, opened our business to an entirely new customer segment, and we couldn’t be more pleased with our progress. As we accelerate our innovation efforts, partnerships with startups like Coinme will further our position as the industry leader in the utilization of blockchain and similar technologies,” Holmes added.

And while last year’s partnership between the two was limited to U.S.-based point of sale locations, Coinme CEO Neil Bergquist unveiled plans for a global launch. “We see this as an incredible opportunity to continue our strong growth and build on our leading presence in the world of crypto,” said Bergquist. “With MoneyGram’s global network and infrastructure, both [MoneyGram’s] continued partnership and strategic investment will help us accelerate our growth and international expansion.”

Coinme offers two cash-to-crypto products that enable users to purchase cryptocurrencies using cash at MoneyGram and Coinstar locations in 48 U.S. states. Since the company was founded in 2014, it has raised $19 million.

Last October, MoneyGram partnered with the Stellar Development Foundation and Circle to enable consumers using Circle’s USDC stablecoin to receive cash funding and payout in local currency. MoneyGram was founded in 1940 and is currently listed on the NASDAQ under the ticker MGI with a market capitalization of $692 million.

Photo by Caleb Oquendo from Pexels

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CSI Inks Partnerships with Cypress Bank & Trust, NYDIG

CSI Inks Partnerships with Cypress Bank & Trust, NYDIG
By David Penn Posted on
Categories: Daily news

End-to-end fintech and regtech solution provider Computer Services, Inc. (CSI) has announced a pair of new partnerships to start the new year. At the beginning of the week, the Paducah, Kentucky-based company announced that Cypress Bank & Trust would deploy CSI’s NuPoint core platform to serve as the backbone for its integrated banking services. A de novo bank headquartered in Palm Beach, Florida, Cypress Bank & Trust will leverage its new platform to offer a suite of commercial and consumer banking services to new customers and expand its services to current trust and investment management customers.

“At CSI, our top priority is providing industry-leading technology and services that empower community banks to grow their businesses and innovate,” CSI Enterprise Banking Group President Giovanni Mastronardi said. “As a de novo, Cypress Bank & Trust has the opportunity to establish a modern technology foundation for their banking services.”

NuPoint is a cloud-based, core banking system that leverages seamless integration and the ability to connect to third-party APIs to enable banks to deploy customer-facing banking solutions and streamline back office operations. Cypress Bank & Trust President, CEO, and Director Dana Kilborne noted that the partnership will help the financial institution, which grew out of The Cypress Trust Company last year, to continue to evolve and build out its offerings.

“For the last 25 years, we have specialized in providing personalized trust services to meet the holistic needs of our clients,” Kilborne said. “To successfully expand into banking services, it is imperative that we work with a provider that has the technology advancements and proven experience to support our initiative.”

Computer Services, Inc. followed up its bank partnership announcement with a fintech partnership announcement a few days later. The company announced that it was teaming up with bitcoin innovator NYDIG to enable community financial institutions to offer a full suite of turnkey Bitcoin services. This includes giving banking customers the ability to buy, sell, and hold bitcoin from within CSI’s digital banking platform.

In a statement, Gerald Reiter, president and CEO of CSI core banking customer Granite Bank, noted the growing popular interest in cryptocurrencies and the importance of ensuring that consumers have a safe way to participate in digital asset trading and investing. NYDIG Chief Innovation Officer Patrick Sells underscored the point, emphasizing that safety and regulatory compliance need to keep up with customer enthusiasm for cryptocurrencies.

“Community banks are excited about offering Bitcoin services to their customers,” Sells said, “but they also know that they need to provide a secure and compliant environment to maintain the trust that their customers place in them.”

Founded in 2017 and based in New York, NYDIG ended 2021 with a $1 billion investment that gave the company a valuation of more than $7 billion. New investor WestCap Group led the round, which also featured participation from Affirm Holdings and Fiserv. Also involved in the funding were existing investors Morgan Stanley, Massachusetts Mutual Life Insurance, and New York Life Insurance.

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3 Takeaways from the Launch of China’s Digital Yuan Wallet on Android and iOS

3 Takeaways from the Launch of China’s Digital Yuan Wallet on Android and iOS
By David Penn Posted on
Categories: Daily news, List series

Will 2022 be the year that CBDCs – central bank digital currencies – finally emerge from concept to solution? One of the countries that has been most aggressive in developing these digital assets – China – announced this week that it has launched its digital yuan wallet in both the Android and iOS app stores. The launch comes after more than seven years of development and extensive field testing across the country. This includes a pilot project that involved using the digital yuan (or e-CNY, as it is also known) for transactions worth more than $5 billion as of June of 2021. The Chinese central bank claims that, to date, its digital yuan has been used in more than 70 million payments across 1.3+ million scenarios.

What does this suggest for the digital yuan in specific and CBDCs in general going forward? Here are a handful of takeaways from this week’s announcement out of China.

China is still the global leader in CBDC innovation

Talking with CBDC experts like James Wallis of RippleX about which countries are leading the way on innovation in CBDCs, China is often treated as if it is in a category of its own. Among the more advanced economies in the world, none rival China in terms of their commitment to developing a CBDC. This week’s news of China’s digital yuan wallet being made available via the Android and iOS app stores is a testament to this leadership in the field.

While the United States has certain advantages in what has been called “the digital currency space race,” the lack of institutional support compared to what the e-CNY is receiving could play a significant role as digital currencies move toward broader use. This relative lack of support is a potential challenge both inside of the U.S. as well as internationally. “In the long term, the absence of U.S. leadership and standards setting can have geopolitical consequences, especially if China maintains its first-mover advantage in the development of CBDCs,” researchers from the Atlantic Council, a nonpartisan think tank on international affairs, concluded in December.

A digital yuan challenges offerings from Ant Group and Tencent

The timing of the Android and iOS app store launches is also noteworthy. The Winter Olympic games begin in less than a month in Beijing and it is believed that the Chinese government hopes to showcase the new technology during the weeks-long event. It has been suggested that if the new digital yuan wallet gains traction swiftly enough – selected Chinese citizens in any one of 10 provinces including Shenzhen, Shanghai, and Chengdu are eligible to download the wallet – there is a likelihood that the wallet will compete with commercial payment options from domestic firms like Ant Group and Tencent.

Interestingly, some American politicians are concerned enough about the presence of a digital yuan at the Winter Games that they have written a letter to the U.S. Olympic and Paralympic Committee asking that American athletes be banned from using it. The authors of the letter point to possible security risks, including potential “tracking and tracing” of athletes. The Chinese central bank, for its part, has indicated that the e-CNY will feature “controllable anonymity” that will protect data and prevent fraud.

The e-CNY could serve both China’s consumer tech and international finance goals

One of the conversations from 2021 that China watchers will be continuing in 2022 is the degree to which the country’s government is incentivizing “science-based” technology such as its semiconductor industry relative to more consumer tech/internet-based technologies. In some ways, development of its digital yuan cuts against this dichotomy. On the one hand, a digital yuan opens up consumer payment opportunities that could disadvantage commercial payment offerings, as noted above. On the other hand, the rise of a Chinese CBDC has the potential to play a major role not only in the digitization of China’s financial system, but also as a potential reserve currency for emerging countries or as a universal payment instrument for China’s economic partners.

“In the coming years, the e-CNY will likely be deployed across China as part of Beijing’s focus on bolstering domestic financial security,” Robert Greene wrote in a commentary for the Carnegie Endowment for International Peace last July. “The e-CNY could also be used to navigate international transactions around payment systems and networks that can be shut off to Chinese financial institutions serving U.S.-sanctioned entities.”

For more on China’s plans for its CBDC, check out this white paper published by the People’s Bank of China in July of last year.

Photo by Ágoston Fung from Pexels

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