James Wallis, Vice President of Central Bank Engagement at Ripple, recently spoke to PYMNTS about the transformative potential of Central Bank Digital Currencies (CBDCs) in global payments.
Prior to his current role at Ripple, he was the Vice President of Global Sales Strategy & Operations at Ripple from May 2019 to January 2021. In addition to his work at Ripple, Wallis is the Founder of 7e4 LLC, a consultancy he established in August 2018. 7e4 specializes in providing business advice and strategic planning, particularly in the areas of blockchain, Payments & Transaction Banking, and Fintech.
Before joining Ripple, Wallis had an extensive 17-year career at IBM. He co-founded IBM’s Blockchain business and led its global operations and sales from January 2015 to July 2018. He was also the Vice President for the Global Payments Industry at IBM from January 2008 to June 2017, where he managed a multi-billion-dollar franchise in the payments industry. His leadership roles at IBM also included positions in corporate development, software sales, and global sales operations.
During this interview, Wallis emphasized the speed and certainty that digital currencies can offer, particularly in cross-border transactions.
According to Wallis, CBDCs have the ability to simplify the “last mile” in cross-border payments. Traditionally, sending money across borders involves multiple steps and intermediaries. Wallis suggests that CBDCs can streamline this process by enabling peer-to-peer transactions, thereby reducing the need for additional payout mechanisms.
Wallis pointed out that CBDCs could offer significant cost savings in cross-border remittances. He also mentions that traditional remittance methods can sometimes involve fees as high as 10-20%. He pointed out that with CBDCs, these fees could be reduced to a fraction of a percent and claimed that this reduction in fees is likely to result in increased transaction volumes.
Wallis identified three key elements for the scalability of any payment method: the number of users, the volume of transactions, and the variety of use cases. He referred to these elements as “growth flywheels” that are crucial for any payment vehicle to scale. He emphasized that each CBDC use case must offer distinct advantages over existing payment methods in terms of speed, cost, and user experience.
Looking ahead, Wallis envisions a future where multiple CBDC networks are interconnected, providing massive scalability and redundancy. He also mentioned the importance of an ecosystem involving various participants, with the central bank serving as the catalyst. Wallis believes that the public and private sectors must collaborate to unlock the full potential of CBDCs, particularly in areas like cross-border payments and financial inclusion.
Last month, in an episode of Ripple’s “Crypto in One Minute” series, Wallis offered insights into the different types of Central Bank Digital Currencies (CBDCs). According to Wallis, CBDCs can be broadly categorized into three main types: wholesale, retail, and cross-border.
Wallis explained that wholesale CBDCs are intended for transactions between financial institutions. These digital currencies are not designed for consumer use but act as a digital mechanism for banks to conduct transactions among themselves.
Retail CBDCs, as Wallis pointed out, are consumer-focused and serve as a digital substitute for physical cash. He emphasized that retail CBDCs are the category that garners the most attention. Wallis elaborated that these digital currencies would allow people to use digital wallets in the future, offering functionalities beyond what physical cash can provide.
The third type, cross-border CBDCs, are designed to facilitate international money transfers, Wallis noted. These CBDCs aim to make the process of sending money across countries more streamlined and efficient.
Wallis also discussed the topic of financial inclusion. He stated that CBDCs could offer better financial services to individuals with lower incomes, who are often not well-served by traditional banking systems. Wallis anticipates that CBDCs will introduce a wide range of new use cases that could benefit these marginalized communities.