Making Central Bank Digital Currencies bulletproof with business process intelligence

This article was contributed by Torsten Hoffmann, chief technology innovation officer at SAP Banking

Central Bank Digital Currencies (CBDCs) are quickly gaining traction across the traditional finance landscape. Currently, more than sixty central banks are exploring the possibility of launching CBDCs. China is actively working on its plan to connect its central bank digital currency to Hong Kong’s Fast Payment system, and Israel is accelerating its study and preparations for the possibility of a digital shekel.

While these innovative moves have the potential to completely alter the banking landscape, it is clear that to truly ready themselves for this new digital reality, CBDCs need to remain at the forefront of adopting new technology. By implementing business process intelligence (BPI) for continued improvements and changes to processes, the possibility of a new, centralized banking system may not be far away.

The roadblock

A recent study from OneSpan showed that nearly half of financial institutions have reported that regulatory compliance has slowed additional digital transformation. However, despite the security and regulatory challenges that were faced in 2021, 84% of banking leaders are still taking steps to prepare for CBDCs over the coming year. Recognizing the need for increased security, half of all banks are attempting to implement mobile app shielding technologies, anticipating these upcoming CBDC initiatives.

While banks have always spearheaded adopting and implementing new technology, the OneSpan study shows that financial institutions face roadblocks when it comes to strategic process transformation. If traditional banks are unable to manage the continuous internal steps across multiple siloed departments (creating delays and the potential for additional bottlenecks), it will be extremely difficult to implement the critical technologies needed for the deployment of CBDCs. It is against this backdrop that business process intelligence tools can be utilized to help establish a streamlined process.

The question is, “Why?”

Many might be wondering why countries are toying with the idea of replacing traditional banks, which have arguably helped to build civilization as we know it today.

A central bank digital currency is a digital version of any country’s national currency, issued and regulated by the country’s “central bank”. A CBDC would ideally be designed to facilitate transactions across borders, including cross-currency payments and remittances. By reducing dependency on physical currency (cash), lowering transaction costs, and reducing settlement risk, CBDCs would essentially be safeguarding monetary and financial stability for a nation.

CBDCs can also provide the ability to reach citizens of respective countries directly. For example, in the case of a crisis, CBDCs would provide an avenue for direct interaction, through bypassing the complex and indirect approach the private bank sector takes — which often delays payments at a time when speed can literally save lives.

However, all of this does not come without problems. It is clear that the mainstream adoption of CBDCs is not going to happen tomorrow, as there are issues that must be addressed before a worldwide rollout. Process gaps such as scalability, security, and stringent regulatory requirements are all major concerns that need to be tackled, and business process intelligence is the key to accelerating CBDC’s digital transformation.

Zero downtime and the need to be bulletproof

Business process intelligence provides end-to-end capabilities for strategic process transformation and the reinvention of customer experiences. Essentially, when it comes to CBDCs, the implementation of BPI would allow the analysis of each of the process gaps (scalability, security, regulatory requirements) based on real-time data. This is absolutely necessary to streamline the digital transformation of CBDCs and create a seamless rollout plan, as it must be 100% secure with zero downtime.

For example, if the stock or cryptocurrency markets crashed, it would (realistically) negatively affect only a select few wallets. However, if a CBDC were to be hacked or crash for any reason, it has the potential to massively damage the economy of an entire country. Consequently, if CBDCs were to become the main financial currency in any country, it (along with all the processes) would need to be absolutely bulletproof.

Business process intelligence is the bulletproof vest in this scenario. It would evaluate the entirety of a CBDC’s processes, roles, systems, and data involved in every single action, even the most minuscule. BPI also would monitor and optimize operations with clear responsibilities including onboarding, wallet rollouts, compliance lifecycles, and most importantly, security and safety, leaving no stone unturned.

Central Bank Digital Currencies: Accelerating the transformation for tomorrow

As we look towards a more digitally transformed future with one-click banking options through CBDCs, it all lies in managing banking connectivity. Accelerating the growth and adoption of CBDCs across the traditional finance sector is important, and data-driven process management discipline will allow digital banking to truly focus on the future of technology, operations, and culture.

If and when CBDCs begin utilizing BPI, it will have a real shot at transforming itself into the foolproof payment and banking system of the future.

Torsten Hoffmann is the chief technology innovation officer at SAP Banking