DBS Tests the Waters for Programmable Money With Live Pilot for Government Vouchers

The financial services group DBS is to launch a live pilot through its partnership with Open Government Products (OGP) to issue purpose-bound money-based (PBM) vouchers using tokenised SGD to facilitate real-world live transactions with selected merchants.

This issuance forms an integral part of the Monetary Authority of Singapore‘s (MAS) Project Orchid, which seeks to develop the technical infrastructure and competencies to enable a programmable digital Singapore dollar (DSGD).

DSGD will be used to create the PBM vouchers, which are to be issued by DBS with the smart contract capabilities provided by its partner OGP.

This will enable issuers to programme and self-execute the distribution and usage of the voucher to designated recipients.

When customers use the PBM vouchers to make payments, they benefit small businesses through instant settlement, payments and collections with their banks.

This will help time and resource-starved small businesses increase cash flow and save time on administrative backend tasks.

The current process involves one to two days of processing time before merchants actually see the money credited into their bank accounts.

According to the official announcement, the DBS believes that its live pilot with OGP will be applicable in scenarios such as ‘the Community Development Council voucher scheme where Singaporean households receive CDC vouchers to help cope with rising inflation and cost of living’.

The majority of these vouchers are now digital vouchers but involve some backend administration for the merchant. However, with PBM vouchers, merchants will be able to be paid instantly, doing away with backend reconciliation, and increasing productivity and efficiency.

The pilot is expected to be first introduced to Singapore’s food and beverage industry, however with the natural passing of time PBM vouchers issued using tokenised SGD could generate benefits for Singapore’s many coffee shops, hawker centres and restaurants.

According to Shee Tse Koon, Singapore country head of DBS, many of the businesses the company engages with are interested in realising the productivity gains from digitalisation, but are unsure of how to do so.

“PBM will be immensely transformative especially when governments, businesses and individuals come together with a collective vision to adopt the use of digital money on inter-connected networks to realise a fully transparent and efficient global financial infrastructure for payments,” comments Koon.

He goes on to add that the pilot “further reinforces how blockchain technology can be the bedrock to build the next generation of payments and settlement infrastructure on.

“Not only because of its immutability and accessibility but also for its programmability by leveraging smart contracts.”

It’s hoped that up to 1,000 selected consumers and six merchants will be engaged in the live pilot, which began on 27 October and is expected to run for a total of four weeks.

DBS anticipates that programmable money will also be applicable in the area of purpose-bound donations, sustainability financing and facilitating the payment of multi-step conditional processes, including conveyancing payments in property transactions.

“Through piloting a ‘purpose bound money’, we demonstrate how we can make it easier for the Government to implement voucher programmes through smart contracts,” adds OGP director, Li Hongyi.

Hongyi goes on to say how the pilot seeks to test how settlements can be made faster and less costly, while reducing the reconciliation effort of banks, voucher issuers and merchants.

“If verified to be helpful, perhaps such a model – in which merchants receive DSGD immediately with each voucher redemption instead of a voucher (and needing to be reimbursed separately) – could be a model extensible to future other government programmes,” he comments.

DBS and OGP have also contributed to a MAS-led industry white paper that introduces the concept of purpose-bound money and the potential benefits of programmable digital currency through various use cases.