Visa recently shared the findings of its pilot test program that focused on the use of tokenized deposits for B2B payments in partnership with Hang Seng Bank and HSBC. The pilot test was a part of the trials of an e-HK CBDC program.
Details of the pilot program
Visa was one of sixteen different companies that the Hong Kong Monetary Authority selected earlier this year, in May, to test the CBDC and assess its effectiveness, potential use cases, and whether it would be an improvement on the existing financial systems.
During the trial, Visa, HSBC, and Hang Seng Bank primarily focused on simulating two specific use cases of interbank B2B payment flows. Those included property payments and acquirer-merchant settlements. Each of the use cases was tailored to the Hong Kong market since this is where the CBDC is intended to be launched and used.
According to Visa’s results, the pilot did manage to reveal the potential benefits of tokenized deposits for B2B payments, such as settlement risk control, increased payment speeds, greater transaction transparency, and more robust network resilience.
Benefits found during testing
Commenting on the findings, Visa’s head of digital currencies for the Asia Pacific region, Nischint Sanghavi, stated that the company was able to use the pilot program to highlight numerous potential benefits that work in favor of the deployment of the CBDC. The settlements were significantly faster, and the payment experience for high-value transactions was more seamless.
Sanghavi added that the pilot offered greater transparency, in addition to other benefits that accompany the “always-on” infrastructure. “Our involvement in piloting actual use cases delivered pivotal learnings that are not only paramount to the possible implementation of the hypothetical e-HKD but can also help shape the future of the payment ecosystem,” the executive added.
He also noted that the tests have revealed that tokenized deposits could act as an alternative method for time-sensitive high-value transactions. One example of such transactions is property payments, and the method would work better than the existing solutions because it is more secure and it has greater potential to reduce settlement risks compared to what is currently in use.
He said that the use of tokenized deposits as a mechanism for facilitating the settlement process between merchants and card acquirers could become a transformative B2B payment method. Among numerous advantages of the mechanism, he cited the boosted levels of transparency and greater speed of settling high-value payments as the biggest benefits.