It comes as no surprise that most people are questioning the difference between mobile payments and CBDCs. After all, they’re both electronic versions of money, so what’s the big deal? As it turns out, there is a huge difference, and it is a big deal. Lucky for you, here is all what you need to know summarized in a table.

Feature Mobile Payment DLT-Based Retail CBDC Serves (Individuals/banks/central bank)
Data distribution Information stored in a centralized database Blockchain & distributed ledger technology Individuals Banks Central Bank
Cost of transaction Higher due to intermediary, cash in/out costs, and cost of handling money (logistics, security, etc.) No transaction cost by design. Zero to minimal cost of cash management and interbank settlement Individuals Banks Central Bank
Criminal activities At higher risk Lower risk since CBDC is based on blockchain and distributed ledger technology Individuals Banks Central Bank
Wholesale/Retail Retail only Both Individuals Banks Central Bank
Storage Always stored at financial institution’s digital wallet

If CBDC is one-tier- then it is stored at the central bank.

If CBDC is two-tier- then the commercial bank act as an intermediary and manages wallets

Individuals Banks Central Bank
Clearing Happens at clearing unit Money is immediately transferred. No clearing process and immediate settlement Individuals Banks Central Bank
Security Money stored at the financial institution Higher security since CBDC is stored at the central bank, therefore lower risk of losing money Individuals Banks Central Bank
Transaction communication Information is shared between parties involved (sender + receiver), making it difficult to track Information shared to authorized nodes in the network - increases security, speed, and ease of tracking Individuals Banks Central Bank
Monopolies Financial institutions control the wallets and accounts Can be prevented since the entire system is controlled by the central bank Individuals Banks Central Bank
Structure Account-based wallet Consists of account-based wallets or tokens which is the equivalent of cash Individuals Banks Central Bank
Third-party intervention Need to have financial institutions as middlemen Commercial banks can be an intermediary in indirect/hybrid CBDC, but individuals can also register directly with the central bank (direct CBDC model) Individuals Banks Central Bank
Smart contracts Not applicable Applicable Individuals Banks Central Bank
Back-end system Debit and credit between two people Component of monetary base + direct liability of the central bank
Monitoring If there is a switch in the country, then the central bank can monitor the entire system The central bank can have a full overview of the economy’s financial situation and spot tax evaders Individuals Banks Central Bank
Financial inclusion Is promoted but with some barriers Greater promotion of financial inclusion as CBDC is a direct liability of the central bank and is designed to be accessible and accepted by everyone Individuals Banks Central Bank
Trust End-users trust financial institutions for the safekeeping of the money End-users place their trust in the central bank for the safekeeping of their money since CBDC is issued and endorsed by the central bank Individuals Banks Central Bank

Now that you explored the basics, you may also be interested in The Big Differences Between CBDC and Mobile Money.

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