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Visa’s CBDC pilot with HSBC and Hang Seng Bank reveals insights into the advantages of tokenized deposits for interbank B2B payments.

After working with HSBC and Hang Seng Bank to implement tokenized deposits for a central bank digital currency (CBDC) pilot programme, Visa has released its findings.

Commencing in May 2023, Visa participated in the e-HKD CBDC pilot programme, which aimed to simulate two specific use cases of interbank B2B payment flows, namely acquirer-merchant settlement and property payments, both of which were customised for the Hong Kong market. In terms of transaction transparency, network resilience, settlement risk management, and payment speed, it also illustrated the possible advantages of tokenized deposits for B2B payments.

B2B

When Visa was chosen to take part in the e-HKD Pilot Programme (Pilot Programme) by the Hong Kong Monetary Authority (HKMA), the pilot test got underway in May 2023. In a worldwide first for collaboration,

Using tokenized deposits, Visa and two banks based in Hong Kong investigated the atomicity and interoperability of on-us and cross-chain payments across interbank B2B payment flows.

Tokenization will offer a fresh industry opportunity with unrealized potential in the upcoming years. The financial industry is paying more attention to tokenized deposits in particular, as they have the potential to alter the way that digital assets and banks interact. Visa intends to pursue the exploration of significant use cases for tokenized deposits. Specifically, the company will concentrate on the tokenization of asset markets, programmable finance, retail offering expansion, and cross-border payments.

Paulina Leong, general manager of Visa Hong Kong and Macau, said, “The HKMA’s Pilot Programme provided a great opportunity for Visa to continue doing what we do best: working with partners to drive payment innovation and experiment with new forms of money movement.”

It has brought attention to the wide range of applications for Visa solutions in facilitating safe money transfers that could help more individuals, organisations, and locations. We are incredibly grateful for our partnership with HSBC, Hang Seng Bank, and the HKMA, and we can’t wait to keep working to advance digital payments in Hong Kong in the future.

Alternative methods for large-value exchanges

The trial showed that tokenized deposits might be a different way to conduct time-sensitive, high-value transactions. For instance, payments for property, as they offer a safe way to make payments and may lower settlement risks.

Furthermore, using tokenized deposits as a way to speed up the settlement process between card issuers and their merchants has the potential to revolutionise B2B payment methods. Faster settlement of high-value transactions and enhanced transparency are two main benefits.

“Visa has highlighted various potential benefits for the deployment of CBDCs through the pilot programme,” said Nischint Sanghavi, head of digital currencies, Visa Asia Pacific. Better transparency, faster settlement times, and a more smooth payment experience for high-value transactions are a few of these. Not to mention the additional advantages of having a “always-on” infrastructure.

“By piloting real-world use cases, we were able to gain important insights that will not only help shape the future of the payment ecosystem but also be crucial to the potential implementation of the hypothetical e-HKD.”

The pilot’s results point to the possibility of improving current banking procedures and bringing more effectiveness and security to business-to-business transactions.

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