Citi Payments Perspectives

12 Treasury and Trade Solutions Citi Payments Perspectives Global Initiatives Payments Infrastructure Developments Regional Developments (North America) ECB: Speech on designing a digital euro for the retail payments landscape of tomorrow Fabio Panetta, European Central Bank (ECB) Executive Board member gave a speech 6 to the European Parliament’s ECON Committee. He focused on why the ECB would issue a digital euro before outlining how the investigation phase will be structured to help ensure that the design is attractive to consumers. He stated that a digital euro “would enable people to continue using central bank money as a means of exchange in the digital era.” He referred to a risk “for some debit card schemes” and their “use in cross- border settings” being dependent on “the continued willingness of the international card schemes to provide such services.” He also highlighted concerns that “traditional payment services could be crowded out” by stablecoins and Big Tech. Over the next two years, the ECB “will investigate the key issues related to the design and distribution of a digital euro.” They “expect to narrow down the design-related decisions by the beginning of 2023 and develop a prototype in the following months.” Citi: Digital Money Index 2022 Developed by Citi and Imperial College London, the Digital Money Index was created as a yearly study of how the adoption of digital money has tangible benefits for governments, businesses, and consumers. The index reveals insights on how both the public and private sectors can improve and benefit from their state of digital money readiness. There are three substantial benefits from driving digital money adoption: increased adoption could allow for 220 million individuals enter the formal financial sector shifting an additional $1 trillion to the formal economy, cost reductions could lead to up to $350 billion to $400 billion in annual savings to public and retail sectors, and for up to $1 trillion in share gains for businesses. As digital money adoption accelerates, Citi and Imperial College have revamped the digital money index (DMI). The DMI now assesses digital money readiness in 110 countries, up from 84 in the previous iteration, in addition to new indicators to acknowledge the progress made by several developing countries. Key insights from this year’s analysis show that recent technology developments, regulatory mandates and pandemic induced change in customer behavior towards digital are providing a significant impetus to digital money readiness. Driving readiness requires all economic actors — Governments, Corporates, Financial Institutions, and Households to work harmoniously, in order to address the many challenges currently preventing the digital revolution from reaching its full potential. A holistic policy should bear in mind four pillars: digital infrastructure, digital adoption, service innovation, and digital trust, all driven by a clear vision and supported by robust regulations and governance. Case studies in countries including Malaysia, United Arab Emirates, Estonia, and Uruguay that have augmented a holistic digital policy with targeted investments, have performed well on digital money readiness, as well as driven economic growth. INCLUSION: Enabling broader societal participation 1.7B To gain access to financial services with a digital ID COMMUNITY: Improving government-to-citizen experience 4.4B Hours saved by people in the U.S. with e-government services EFFICIENCY: Making financial flows more transparent $1T In tax collections with a 10% increase in e-money adoption ECONOMY: Positive for citizens and public fiscal balances 6% In economic value, unlocked in India with full digital ID coverage SECURITY: Strengthening defenses against cyber threats 80% Of cyber attacks can be prevented by UK government’s cyber scheme (Source: Citi) Continued � Global Initiatives Financial Stability Board (FSB) Enhancing Cross-Border Payments Roadmap Emerging Payments and Digital Assets Payments Infrastructure Developments ISO 20022 SWIFT Transformation Instant Payments Financial Market Infrastructure (FMI) Interlinkage Initiatives Regional Developments (North America) Immediate Cross-Border Payments (IXB) TCH Request for Pay (RFP) Bill Pay Latest on Fed/CHIPS ISO Timelines Lynx — Canadian High-Value Payment System Glossary