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Banks of Russia may be the main losers from the introduction of the digital ruble while retailers will save on acquisition costs, analysts predict. The benefits for consumers using the new digital currency are not as clear as they may not get any interest or money back.
The Launch of the Russian Digital Ruble Is Said to be Harming Banking Institutions
Commercial banks could lose up to 50 billion rubles a year (nearly $715 million) when a digital version of the ruble is introduced, according to estimates made by financial experts at Yakov and Partners, a former management consultancy for McKinsey’s Russia division.
Meanwhile, retail chains have the potential to increase their revenue by up to 80 billion rubles annually, according to the authors of the study, quoted in the Russian edition of Forbes. At the same time, consumers cannot receive interest on their balance or cashback for their transactions.
Specialists see the digital ruble occupying a niche in the domestic retail payment market, taking over a share of card payments. Bank losses are largely due to depreciation of revenue from commissions they get for processing these payments. Retailers will benefit from savings on acquisition costs and from instant payments that are faster than card transfers.
Benefits for consumers are not guaranteed because the concept of the Russian Central Bank’s digital currency (CBDC), electronic money, does not take into account the accrual of interest on holdings, unlike bank deposits. They will also likely lose cashback currently paid by banks for operations with their cards, the report notes and explains:
The digital ruble does not have a clear advantage in terms of convenience in everyday use, and international experience shows that reducing acquisition costs does not lead to price reductions or slowing price growth, only increasing retailer profits.
The digital ruble, issued by the Bank of Russia, is supposed to be the third form of Russian national fiat, after cash and electronic money. It is intended to be used as a means of payment and a store of value but is not intended to replace bank deposits or payments.
The project was first announced in October 2020 and a prototype was completed in December the following year. The pilot phase started in January 2022, with the monetary authority planning to start a trial with real transactions and users in April 2023 and targeting a full launch in 2024. The bill on the digital ruble was submitted to the Russian parliament last January.
Do you agree with the research that Russian banks will incur losses due to the adoption of the digital ruble? Let us know in the comments section below.
Source: Bitcoin.com
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