While Russian banks may be the main losers in the introduction of digital rubles, analysts predict that retailers will save on acquisition fees. The benefits for consumers using the new digital currency are less obvious, as interest and cash back may not be paid.
The launch of the Russian digital ruble is said to lead to losses for banking institutions.
According to projections prepared by financial experts at Yakov and Partners, the Russian arm of management consultancy McKinsey, commercial banks could lose up to 50 billion rubles (about $715 million) annually if the digital ruble is introduced.
On the other hand, retail chains could increase their revenues by up to 80 billion rubles annually, the authors of the study, cited by Forbes’ Russian edition, believe. At the same time, consumers may not receive interest on balances or cash back on transactions.
Experts believe that digital rubles will occupy a niche in the domestic retail payment market and take over some of the card payment share. Banks’ losses are largely due to lower revenues from the fees they earn for processing such payments. Retailers will benefit from savings on acquiring fees and from immediate payments, which are faster than card payments.
The Central Bank of Russia’s Digital Currency (CBDC), an electronic cash concept, does not guarantee consumer benefits because, unlike bank deposits, it does not assume that interest will accrue on holdings. The report also notes and elaborates that the cash back that banks currently pay for card operations will likely be lost.
Digital rubles offer no obvious advantage in terms of convenience in everyday use, and international experience has shown that reducing acquisition costs does not lead to lower prices or slower price increases, but only to higher profits for retailers.
The digital ruble issued by the Bank of Russia is envisioned to become Russia’s third national fiat currency after cash and electronic money. It is envisioned to be used as a means of payment and value preservation, but is not intended to replace deposits or bank payments.
The project was announced in October 2020 and a prototype was completed the following December; the pilot phase began in January 2022, and the monetary authorities plan to start actual transactions and user trials in April 2023, with a full launch in 2024. A bill on the digital ruble was submitted to the Russian parliament this past January.
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