By, smartwatches 15/04/2022

Bank of Japan, LayerX, Kanmu talks about "DX of money system", what are the merits and risks of increasing liquidity | FinTech Journal

Open / Close Button User Menu User Menu Content

Information media for the future of finance

New member registration

E-mail newsletter registration

Business + IT

Sales Strategy

Cost reduction

Organizational reform

Production / manufacturing

crisis management

compliance

Energy saving and environmental friendliness

By industry / scale

Core system

Information system

Operation management

Security

network

mobile

hardware

development

Events / seminars

Special

Business + IT

What are the benefits and risks of increasing liquidity in the "DX of the money system" that the Bank of Japan, LayerX, and Kanmu talk about?

Now that the movement over Central Bank Digital Currency (CBDC) and stablecoin has become active, signs of money system transformation are beginning to appear in various countries around the world. Mr. Wataru Yamaki, President and CEO of Kammu, Mr. Yuki Matsumoto, CTO of LayerX, and Mr. Yutaka Soejima, Director of Institute for Monetary and Financial Research, Bank of Japan, talked about the future of the Japanese money system centered on the Bank of Japan. ..

* This article has been reorganized based on the lectures of the Financial DX Summit "Financial DX / SUM" sponsored by the Nihon Keizai Shimbun from September to October 2021.

What's happening in the money system right now
From a user-first perspective, payment services are closer to banks
Need to digitize existing processes
When the money barrier disappears, the barrier between money and assets will melt.

At the beginning, Mr. Yutaka Soejima of the Institute for Monetary and Financial Research of the Bank of Japan cut out that "the way money should be and the money system is entering a period of major change" as a premise of the discussion. According to Mr. Soejima, domestic and overseas money systems are currently entering a transitional period from the three perspectives of "money form," "money function," and "infrastructure that supports the money system." Currently, in addition to traditional electronic money such as cashless payment apps, new payment methods such as QR code payment and postpay have appeared and are diversifying. In addition, there are some such as Rakuten points that have a payment function and are compatible with electronic money. Furthermore, stable crypto assets such as "stablecoin" are attracting attention, and low volatility crypto asset tethers (USDT), US dollar-linked USD coins (USDC), and non-bank platforms are based on backed assets. The Libra (currently Diem) to be issued has been born. These are the changes in the "form of money". Programmable money, which incorporates the idea of "smart contracts" in the blockchain that forms the basis of crypto assets, is a prominent example of updating "money functions." This movement is also affecting the existing financial system, and the financial EDI system "ZEDI" established by the Japanese Bankers Association is trying to streamline inter-company settlement by collecting accounting and accounting information that is the basis of settlement. In addition, embedded finance using BaaS (Banking as a Service) is becoming widespread. These changes can be seen as superficial events associated with the review and reinvention of the "infrastructure that supports the money system." The current money system has a two-tiered structure consisting of a bank-to-bank fund settlement and clearing system controlled by a central bank and a bank-to-customer transfer settlement system. According to Mr. Soejima, "When making payments between different banks, the systems of Bank A and Bank B are different and must be via the Zengin System or the Bank of Japan Net. Furthermore, with the diversification of payment services, many FinTech Businesses are hanging in the lower layers of banks, and there are costs such as fees when crossing each layer. " The cost caused by such a deep hierarchical structure is the problem of the "money wall". "If you go back in time to the time when the money wall piled up as high as it is now, you can see that the issuers, debt conditions, units, etc. were much more diverse than they are now. This diversity is convenient for end users by various stakeholders. It existed as a result of pursuing sexuality. The money wall problem also arises from the need to unify the money system and pursue efficiency, but to diversify the experience of end users. With a deeper understanding, the future of money may become apparent. ”(Mr. Soejima) Kammu, which provides a prepaid“ bundle card app ”that can be used instead of a credit card for online payments, is a“ user. We are aiming for "payment that is close to the needs of." Mr. Yamaki, President and CEO, explained that the company's services fit the needs of not only junior and senior high school students who do not have a credit card, but also those who are sensitive to money, such as "I have one but do not want to spend too much". According to Mr. Yamaki, 60% of Creca users have a common sense of the problem that they use too many credit cards because they have too many credit lines. In addition, Kanmu is investing in a postpaid charge function for users who cannot make online payments on the spot because they do not have a credit card, and an asset management service that efficiently manages and manages outsourced financial assets. We are preparing a pool card that can seamlessly transfer funds to payment. These businesses will not only meet the diverse payment needs of users, but will also enhance the capabilities and feasibility of a fintech company. Bundled cards have the role of being close to users seeking online payment methods other than credit cards. The postpaid service is also a short-term, small-amount credit-type payment method that replaces credit cards. Pool cards have the role of lowering the hurdles for users who cannot afford cash flow to participate in the financial markets so that they can sort out daily payments and investment funds. By demonstrating synergies, it is possible to reproduce the same functions as banks, such as settlement, credit, and investment, even though they are small. Mr. Yamaki said, "Like the US Square and Afirm launched Challenger Bank, we will be more resilient as a financial business by allowing money to move smoothly in our services. It will also increase the ability to be close to the user. " He talked about the aim of realizing user-first financial services, similar to Challenger Bank, which has grown in the United States and elsewhere. [Next page] It is necessary to digitize existing processes in a muddy manner.