Mobile Payments Vs. DLT-Based Retail CBDCs

It comes as no surprise that most people are questioning the difference between mobile payments and CBDCs. After all, they’re both electronic versions of money, so what’s the big deal? As it turns out, there is a huge difference, and it is a big deal. Lucky for you, here is all what you need to know summarized in a table.

Feature	Mobile Payment	DLT-Based Retail CBDC	Serves (Individuals/banks/central bank)
Data distribution	Information stored in a centralized database	Blockchain & distributed ledger technology
Cost of transaction	Higher due to intermediary, cash in/out costs, and cost of handling money (logistics, security, etc.)	No transaction cost by design. Zero to minimal cost of cash management and interbank settlement
Criminal activities	At higher risk	Lower risk since CBDC is based on blockchain and distributed ledger technology
Wholesale/Retail	Retail only	Both
Storage	Always stored at financial institution’s digital wallet	If CBDC is one-tier- then it is stored at the central bank. If CBDC is two-tier- then the commercial bank act as an intermediary and manages wallets
Clearing	Happens at clearing unit	Money is immediately transferred. No clearing process and immediate settlement
Security	Money stored at the financial institution	Higher security since CBDC is stored at the central bank, therefore lower risk of losing money
Transaction communication	Information is shared between parties involved (sender + receiver), making it difficult to track	Information shared to authorized nodes in the network - increases security, speed, and ease of tracking
Monopolies	Financial institutions control the wallets and accounts	Can be prevented since the entire system is controlled by the central bank
Structure	Account-based wallet	Consists of account-based wallets or tokens which is the equivalent of cash
Third-party intervention	Need to have financial institutions as middlemen	Commercial banks can be an intermediary in indirect/hybrid CBDC, but individuals can also register directly with the central bank (direct CBDC model)
Smart contracts	Not applicable	Applicable
Back-end system	Debit and credit between two people	Component of monetary base + direct liability of the central bank
Monitoring	If there is a switch in the country, then the central bank can monitor the entire system	The central bank can have a full overview of the economy’s financial situation and spot tax evaders
Financial inclusion	Is promoted but with some barriers	Greater promotion of financial inclusion as CBDC is a direct liability of the central bank and is designed to be accessible and accepted by everyone
Trust	End-users trust financial institutions for the safekeeping of the money	End-users place their trust in the central bank for the safekeeping of their money since CBDC is issued and endorsed by the central bank

Now that you explored the basics, you may also be interested in The Big Differences Between CBDC and Mobile Money.