Investment banking giant JP Morgan Chase and management firm Oliver Wyman recently released a joint report stating that central bank digital currencies (CBDCs) can save companies nearly $100 billion a year in transaction costs along with estimating that corporate wholesale payments can amount to $24 trillion a year.
The report also highlights the potential positive impact of CBDCs as central banks around the world start to explore its feasibility and facilities. At present, banks rely on correspondent banks and other intermediaries to process international money transfers which results in costly transactions. It is often time-consuming as banks process the payments across time zones.
Naveen Mallela, Global Head of Coin Systems, Onyx by JP Morgan told the media, “Central banks around the world who are at various stages of CBDC development are considering how to build an infrastructure where systems operate and work together with the necessary controls in place. In this report, we put forward robust design considerations for a successful CBDC network and demonstrate how it can be practically implemented, using ASEAN corridors as an example.”
The report also noted that the region accounts for 7 percent of global trade belonging to thousands of European, Asian, and North American multinational companies. Through intermediaries, a simple transfer of $2,950 from a company in Thailand to Indonesia can move through six banks and rack up extra transaction fees of $40, keeping aside foreign exchange costs.
If the CBDC network is used, it can save both companies up to $35 of the $40. Globally, as estimated by the authors, companies are losing $120 billion in transaction costs a year on $23.5 trillion in cross-border money transfers.