Digital Payments Showdown: BOE Set to Roll Out CBDC if Banks Slip Behind

Bank of England (BOE) Governor Andrew Bailey shared his outlook on the evolution of digital payments in a speech at the Group of Thirty's Annual International Banking Seminar in Washington on Saturday

The Bank of England (BOE) might introduce a digital currency if commercial banks fail to drive innovation in retail payments, according to BOE Governor Andrew Bailey.

Speaking at the Group of Thirty’s Annual International Banking Seminar in Washington on Saturday, Bailey highlighted the need for updates in cross-border and wholesale payments. He suggested that digital technology could make these payments more efficient, less costly, and more transparent.

The central bank governor said that commercial banks are best placed to drive innovation in retail payments, but a central bank digital currency (CBDC) might be required if they fall behind.

“If for some reason innovation is unlikely to happen, then the central banks have to decide whether they are the only game in town,” Bailey said. “For me, this justifies why we must continue to prepare for retail CBDC. We have not yet seen enough evidence that the innovation will happen in commercial banks.”

“As central banks, we should be thoroughly engaged to encourage, and if necessary, provide such innovation – but there is no good reason to be proprietorial on this,” he added.

The BOE is closely tracking developments in payment technologies and user preferences, Bailey said.

“For commercial bank money to function effectively, it must keep pace with the needs of its users,” he said. “Our work on retail CBDC is considering these trends in the payments landscape closely. Absent innovation in commercial bank money, central banks may be left as the only game in town insofar as retail payments innovation is concerned.”

“That is not my preferred outcome, but not one that we should rule out,” Bailey added.