Chris Skinner, author and commentator on banking and fintech topics, shares his thoughts on all things digital – from the rise of central bank digital currencies to what will happen in the ‘great unlock’.

How has the COVID-19 crisis altered the digital landscape?

A great many things have had to change in 2020 due to the pandemic. One of the major shifts has been the need for just about every business to become completely digital. Having said that, the temptation for many companies has been to just put a digital overlay on their existing businesses, rather than restructure to become truly digital.

For example, with both employees and customers operating from home, banks and most companies have moved towards cloud computing. But there is a big difference between a business having a presence on the cloud and being truly ‘cloud native’. An existing business that has been put on the internet is only cloud-based, but a business that has been totally restructured to operate on the internet is cloud native.

Many of those cloud-based businesses struggle when it comes to delivering a consistent customer experience, but cloud native businesses – those that are digital at the core – offer their customers the means by which they can access a digital structure where their experience is consistent, no matter how that structure is accessed.

What important changes do you see happening going forward?

For me, probably one of the most exciting things to have happened on the digital front in 2020 is the movement towards central bank digital currencies, or CBDCs. Many of the major central banks, including the Bank of England, the Federal Reserve and the European Central Bank, are taking the ideas behind bitcoin’s technology as a new way of issuing money and replacing physical cash with digital cash.

Some of the drawbacks around existing digital currencies such as bitcoin and others are that they are largely unregulated and are not backed by either assets or by a government. This leads to the problem of how such currencies can have value, other than by their existence on the internet. By contrast, a digital currency issued by a central bank would at least have a government behind it.

What are the implications of central bank digital currencies for treasury?

For treasurers, the implications are enormous. One of the challenges will be in understanding how to use it. China – which is probably the most far ahead in this space – has been running trials in which over US$300m has been transacted using digital cash through mobile wallets.

With central bank-issued digital currency replacing physical currency, cash management becomes digital cash management. That changes the whole way in which cash and transactions are handled. Much of the debate around the topic of CBDCs centres on the question of whether the central bank should issue the currency directly to citizens, or whether it should go through intermediaries such as banks that are regulated.

How have fintechs been faring during 2020?

Many fintechs have a very good business model and are well funded. But equally, some have a pretty poor business model and are under-funded. I would say that the ones that are succeeding are the ones that enable people in a lockdown situation to work and live more effectively. The ones that are struggling are those that have a business model based upon the lifestyle spending of their customers, who have had to put their lives on hold in lockdown.

What do you think people will seek to change after their experiences this year?

During the crisis, many financial providers have performed fantastically, but others have performed terribly. If a bank that relies on an overseas call centre suddenly becomes uncontactable because its call centre closes and its internet access fails – and you can’t physically go there because you are locked down at home – that is a complete disaster for customers.

When the ‘great unlock’ happens, I believe there will be a massive movement away from many of the traditional financial providers that have not delivered the service their customers have wanted, towards those that offer both digital and physical outreach, and that have been well supported and recommended in 2020. So I expect to see a lot of switching next year – not just for retail banking, but for corporates as well.