Our CEO and Founder, Gilbert Verdian, describes how Quant’s work on the UK’s retail CBDC and, more recently, on tokenised commercial bank money for the Regulated Liability Network, has led to a deeper understanding of the profound benefits of programmable payments.
It was tempting to call this article ‘next generation’ payments, but there is already a vast amount of headlines announcing a new era of banking. Instead, the focus should be on implementing practical, incremental changes that will, over time, equate to drastically improved payments for both the short and longer term.
Our involvement in the RLN
In 2023, we announced our work on Project Rosalind, the Bank for International Settlements and Bank of England’s experiment with a retail CBDC, which also saw commercial banks and other payment firms testing use cases for a CBDC.
Since then, the likes of Barclays, Citi, HSBC, Lloyds Banking Group, Mastercard, Natwest, Nationwide, Santander, Standard Chartered, Virgin Money and Visa have joined forces to work on the UK RLN – a common ‘platform for innovation’ across multiple forms of money, including existing commercial bank deposits and a shared ledger for commercial bank deposits. Quant, alongside R3, is providing the technology to make this a reality. The main goal for the RLN is to explore options for users to make payments, transact, and settle liabilities in an increasingly digital marketplace.
Enabling the next wave of innovation
Programmable payments is a key focus because – although it is now easier than ever to plan a budget, pay a vendor, or send money to relatives around the world – the tools that will allow individuals and businesses to truly automate their financial lives are still a work in progress.
Paradoxically, it is the progress alluded to above that can reduce buy-in for the next wave of innovation. There is a tendency to believe – outside the payments sector at least – that the tools we have already developed (open banking, contactless, faster payments) have created a system that is ‘good enough’. But statistics tell a different story.
If we take the number of failed direct debits in Britain, which have trended upwards since the Office for National Statistics began collecting this data in 2019: 0.9 percent of direct debits bounced in February 2024, compared with 0.55 percent the same month five years ago.
While there are no comparable figures for the single Euro payments area, it is easy to extrapolate and see how costly the associated administration is for banks and businesses. Failed payments are also stressful and inconvenient for the end customer, when household finances are under strain.
The impact of programmability
Programmable payments will mean intelligent bank accounts with personalised logic built in. A customer could set up a rule which pays their rent only once their salary arrives, thereby avoiding unarranged overdraft fees.
Similarly, they could tell their account to “save 30 per cent of my salary, only when my balance will remain over €3,000” or “send my child €20 if her balance drops below €50”. Simple ‘locks’ of this type will be among the first programmable payment use cases that come to market and will assist customers with their personal finances, while reducing the time businesses spend chasing payments.
This becomes even more interesting when we consider the possibilities for two-and three-party locks. Under the latter, funds could be pre-authorised in favour of a beneficiary, with final settlement controlled by a third party. Use cases here include conveyancing with split payments, and trade financing.
Looking to the future
Programmable payments are often associated with CBDCs and tokenised deposits – and these innovations are indeed linked. But the RLN is examining how programmability could work across both existing bank deposits and tokenised deposits. It is probable we will first begin to reap the benefits of programmable payments via traditional rails.
For banks, fintechs, and payment service providers who want to keep up with the latest payment innovations, Quant provides end-to-end solutions for both traditional and tokenised payments. As we harness incremental innovation via projects like the RLN, we will indeed transform the way money is moved and managed – though the future of finance will unfold more gradually and methodically than headlines often suggest.
How Quant can help
