As crypto and stablecoin transactions for everyday payments become the subject of growing media interest, we spoke to Paul Rodgers, Founder and Chairman of Vendorcom, about the implications of introducing stablecoin and crypto payments to the existing landscape.
ERIS: As a payments leader, you’ll be aware of claims that the volume and value of stablecoin transactions in particular is rising. What’s your view on where we stand now?
Paul Rodgers (PR): As with all new trends in payments, stablecoins and crypto are subject to a good deal of woolly thinking and generalisation. While it’s clear that there may be a role for stablecoins and crypto in cross-border payments, it’s important to distinguish between inter-bank financial transactions, where it’s conceivable stablecoins would have a role, and consumer payments, where their role is far less obvious, at least in the short to medium term.
At Vendorcom, we’ve long argued that merchants and banks should be looking to optimise their existing arrangements, rather than looking for the new or different. For instance, automating accounts receivable can deliver real benefit in terms of cost and time saved, and is a relatively secure, established principle today. The same could be said of optimising transaction routing to reduce fees, or adopting smarter approaches to foreign currency transactions.
ERIS: What do you see as the key hurdles towards the wider introduction of stablecoin and/or crypto transactions?
PR: The most obvious one at present is regulation. While much could be done to optimise existing payment flows, the Payment Systems Regulator seems more interested in promoting Open Banking (OB) as an alternative to card transactions – despite OB transactions being around 0.04% of total transaction volumes today.
We need a better understanding from regulators – and many banks – as to the reality of payments on the ground, rather than a continuous focus on what’s new or different. For example, the emergence of crypto to fiat debit cards in the UK requires a level of regulation that isn’t really there at the moment: meanwhile, one has to question where these cards fit in the current flexible, dynamic merchant payments ecosystem which typically involves a high volume of lower-value transactions – not a space traditionally associated with crypto.
ERIS: So where, in your view, might the benefits lie in crypto and stablecoin?
PR: It’s conceivable they could have a role in higher-value one-off transactions – for instance, in transferring money for house or car purchases – and, as I’ve said, in inter-bank transactions and trading. One could even argue there’s an attraction for merchants in stablecoin transactions, since they represent a significant uplift in the time taken to receive funds and are lower-cost than existing methods. However, these are secondary use cases compared to the inter-bank case – and there’s little obvious benefit for banks or intermediaries in stablecoins used for consumers’ purchase-based transactions as opposed to pure-play funds transfer in a traditional baking sense. The other case where there might be benefit is in cross-border transactions: but again, there are significant regulatory hurdles and in any case, cross-border remains around 10% of the total transaction base.
ERIS: How do you see the evolution of stablecoins and crypto transactions in the future?
PR: I think they will remain marginal for some time to come. It will take another generation – at least 20 years – before such payments become more widespread. And if and when they do, we should all reflect that their wider adoption will be in a much more diverse payments landscape that will include cards, likely some element of cash, digital wallets, BNPL and account-to-account transactions.
Frankly speaking, there are much bigger challenges facing us now – such as fraud in core payment flows – than the introduction of crypto transactions. At a regulatory level and when it comes to planning for the future, we need some original approaches to today’s challenges, rather than the myopic thinking we’ve seen in the National Payments Vision and other regulatory pronouncements. If we can find novel, creative solutions to the problems we face today – and solutions that work for banks, merchants and acquirers and intermediaries alike – then that will be of more benefit to the industry than focusing on the future, often to the detriment of the realities of today.
Paul Rodgers will host Vendorcom’s Payment Security Merchant User Group at the BT Group’s HQ in London on the 18th of November. For more information, visit: https://www.vendorcom.com/event.php?event_id=2008
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