Transaction Trends

By Jodie Kelley, CEO, ETA

At ETA, we are proud of our advocacy on public policy issues that matter to the economy, to consumers and small businesses, and to our members. As experts in payments, FinTech, and crypto, we bring an important perspective to debates that have the possibility to fundamentally shape the future of commerce.

One such conversation is around Central Bank Digital Currencies (CBDCs). ETA has been part of the ongoing dialogue around CBDCs as governments around the world — including our own — have explored the viability of creating and issuing a U.S. CBDC. As those conversations accelerated, ETA took the lead, working closely with members, by creating a set of guiding principles for the federal government to consider before moving forward with the creation of a CBDC.

ETA’s “7 Guiding Principles for CBDC” are important, because the stakes here are high. The U.S. has a well-developed, interconnected system that provides — among other things — secure, robust, reliable mechanisms for consumers, including low-and moderate-income consumers, to engage in commerce. To be clear, ETA believes the conversations around CBDCs are vital, and we look forward to constructively engaging on the topic. But we believe that those conversations cannot occur in a vacuum, and that any proposal must be evaluated to determine whether it would significantly enhance the innovative, ubiquitous, and secure payments ecosystem that currently makes access to financial services a reality.

As it turns out, we’re not the only ones thinking along these lines. Just last week, Federal Reserve Chair Jerome Powell said, “Our key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S. domestic payments system.” Here at ETA, we couldn’t agree more. That is precisely why we believe that the federal government should carefully consider our guiding principles as it considers the creation of a CBDC.

ETA believes that any CBDC should:

• Foster innovation.

The pandemic showed us how important technology is to keep the economy running. Any new payments system must be continuously innovative, incorporating infrastructure innovation, products and services innovation, and anti-fraud innovation. Over several decades, the industry has essentially built a “highway system” for digital transactions in America, and around the globe, with mature, interconnected networks. The industry has invested billions in R&D to develop the current financial infrastructure and continues to modernize its infrastructure to support new product and service offerings.

• Serve the needs of consumers.

The current digital payments system works well for Americans. The current payments system is widely accepted by consumers and merchants, in person, via apps, or via the web. Consumers and merchants will be likely to adopt a CBDC only if they can use it everywhere they need to spend and can use it with ease. For that reason, any CBDC would need to seamlessly interoperate with the existing payments landscape. Additionally, to give consumers confidence, a CBDC must also offer the same unparalleled level of protection that the current payments system offers, including zero liability for fraud, data security, privacy protection, and fraud prevention.

• Further financial inclusion.

Digitalization of the industry is increasing financial inclusion, and the industry is continually developing products and services to serve Americans of all income levels, including prepaid cards, eCash, mobile wallets, and peer-to-peer (P2P) services. Consumers, including those of low and moderate incomes, already have access to many no-cost and low-cost financial services that are evolving to meet their daily needs. This ongoing innovation of the industry has produced many options to allow all Americans to conduct their daily financial transactions safely and securely — even during a pandemic.

• Preserve the health of the financial system.

Any CBDC proposal should include participation by the private sector. We are experts in both payments and crypto, in the U.S. and internationally. We have built a payments ecosystem that is secure, fast, and reliable. We already partner with the federal government to deliver federal and state benefits — EIP and unemployment are two examples. Put simply, where things are working, we must be careful not to break them. And that holds true more broadly across the financial system. As Fed Chair Powell noted in his recent remarks, any CBDC would present additional risks that must also be addressed: “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis — including input from the public and elected officials.”

Read ETA’s “7 Guiding Principles for CBDC”

Obviously, this is a quick summary of a very complex issue, and I’ve touched on only a handful of ETA’s “7 Guiding Principles for CBDC.” That said, what is clear is that any new CBDC should foster innovation; should interoperate with the current payments system; should include participation by the private sector in its design, piloting, and distribution; and should provide appropriate safeguards for consumers.

Regardless of whether the federal government decides to move forward with the creation of a U.S. CBDC, ETA and its members will continue to work with the government to ensure that all Americans continue to have access to critical financial services they need to receive, hold, and spend their money.