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Welcome to The Payment Expert weekly podcast, brought to you by SBC Media. Each week we analyse the news driving the global payments industry forward; the innovation, the infrastructure, and everything that has to happen to make it all possible.
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Step outside of our payments bubble and you ask the average Joe on the street what a stablecoin is, how you would use it. I would say nine times out of ten they're probably not going to be able to give you a concrete slash correct answer. Hello and welcome back to the Payment Expert podcast, your source for the latest news, insights and analysis on the payment industry. I'm Lewis Thompson, news editor at Payment Expert and with me today is senior journalist at Payment Expert, Callum Williams and making her first appearance on the show is payment expert editor herself, Rachel Kennedy. Rachel, welcome along to the show. Lewis. It feels slightly strange to be on this side of the camera. Great to be here. Well, we'd love to have you on again. So if you'd like to get used to it, would very much like that. Callum, um I know we know you've been away the last week at MPE Berlin. How's it been over in the German capital? know Wiro, the emerging pan-European A2A payment scheme has been a particular point of focus. um For you, what's different about that compared to other A2A payment schemes that have failed previously? Yeah. Cheers, Louis. Well, yeah, obviously as you can maybe tell by my voice, was doing a lot of talking last week, lot of lively conversations around Wero and its viability and capability of becoming a true A2A payment rail that could go on and compete against the likes of some of the US based companies that Europe are trying to lessen their reliance on, should we say so. What makes Wero interesting is that it is actually being backed by up to 16 European banks and some of the prominent ones like BNB Paribas, Deutsche Bank and ING. It's already live in three key European markets. So Belgium, France and Germany, which, and it will also be rolled out in the Netherlands and Luxembourg by the end of this year. So there's five European key markets right there that will be em available. What also makes it a unique proposition is that it has an immediate cross border offering. And now this is not something that you look at the likes of Blick in Poland or Bism in Spain or Ideal in the Netherlands. Those local providers that are very, very popular in those specific markets, but have struggled to, to expand and scale those, those payment offerings within different markets across Europe. sure. No, I was just going to jump in Callum, because obviously, It's one of those now that's come up. It's got a lot of attention, but I mean, compared to other. A to a payment schemes in the past that have perhaps failed. You look at the European Alliance of payment schemes, the money project pay for they've all failed. So what is it really? That's different about where and you know that there seems to be this political wind behind it. Do you think it may be something to do with an over alliance on the likes of Visa and MasterCard? Well, yeah, I think that's one of the main central aspects of why banks and payment service providers are actually kind of pushing where I was because I do think it's, it does offer a significantly less interchange fee compared to the likes of Visa and MasterCard. And now you are seeing a lot of pushback now from merchants, especially with the interchange fees that that Visa and MasterCard continue to set in place. I know that they've capped in the UK now, aren't they? By not a 0.2 and not 0.3%. for debit and credit cards respectively. I do think it's coming from a political sense and a governmental sense of just being able to have a homegrown sovereign based payment method that Europe can call its own and that it can also just benefit the rest of the European payments landscape. And again, yeah, just reducing that reliance on Visa and MasterCard and even payment methods like Apple Pay and Google Pay now. Sure. Rachel, you think, do you think Wero's got legs? Do you think it's going to succeed perhaps where some of the other, the other payment schemes, the ATA payment schemes have perhaps not? Oh, you're asking me to look into my crystal ball now. I mean, I think Wero definitely has legs in terms of political backing. I think the question will come around whether people trust it as a payment method. So as Callum noted, sort of the talk around European payment sovereignty has been going on for quite a long time. And it's always been framed as, I would say quite bluntly. em And there's this view that if Europe builds its own system, it will solve the problem. em But I don't know, I get the sense this time, the conversations moved on a little bit more, and people are being a bit more realistic around what that actually involves. But I think there's also a debate going around about whether there is really a need to replace MasterCard and Visa because it does work, right? Like everyone trusts it, everyone uses it from a consumer perspective. There's no real need to replace it. do. I suppose if your Visa and MasterCard, you would also argue the same point. Exactly. And I mean, we published an op-ed actually this morning from Kelly Devine, who's MasterCard's European president. And she sort of framed it as the obviously payments is this critical infrastructure that underpins trust and economic activity and that the debate shouldn't really be around who owns the rail, which obviously is a point they're going to make. But should we be thinking more about what works reliably at scale, which is something that we're always looking to tackle. I mean, you mentioned the, angle of the consumer and trusting a kind of eight way payment scheme. A part of Wiro is that they've included chargebacks as part of the offering, which is, course, a very consumer friendly thing to do. But I mean, is it a smart move? I it's just going to drive adoption, but it may undermine, you could argue, the core proposition of what an A2A payment scheme is, which is essentially cheaper and faster than card rails, but chargebacks can often be expensive. So do you think they've they've struck the right line there or have they maybe gone too far into the consumer friendly lens and almost left the price part a bit on the backbone? mean, consumers have sort of been conditioned to sort of expect that level of protection, right? So we now know that if we use a card, there's that automatic safety function that if you don't receive your goods or the goods are faulty or not of the quality that you expect, you can immediately press a button and your bank picks up the dispute for you. And that has largely been defined by card networks. So, Wiro probably had to introduce a similar style feature and in doing so has acknowledged that trust isn't optional when it comes to introducing these new forms of payment. And I don't think you can really disrupt payments without replicating some of those safety nets. don't know, Calum, if you agree. Yeah, no, I think it's... I think David Rintle, who did a keynote speech in regards to not just Wero, but all the local and eight-way payment methods that have arisen in Europe over the past decade. He did say that the charge batch feature with Wero is a true novelty, which obviously kind of like Lewis said them before, it's going to be maybe caught a bit more costlier for the merchants and maybe some of the acquirers. They may have to start attaching some premiums on pricing. Um, they also could be disruptions within settlement times as well. Uh, but it is a double edged sword because I think they are trying to mass, they are trying to scale Wero out. And I think they have obviously identified the consumers over the merchants potentially as the, as a core, um, adoption driver. Um, but yeah, I think it will, it will be interesting to see where Wero is in the next five years and where that adoption has come from. Yeah. I mean, playing devil, devil's advocate. slightly uncomfortable question they're going to have to ask eventually is the more features that you add and the more that you start to resemble the network and systems you've already got in place, are you really being viewed as a competitor if you're doing the same thing? m that's true. That is a very good question. I also, I do think that um if you look at it from the regulatory lens as well, you've got someone like the ECB who you would imagine would be the biggest cheerleader I mean, they've said publicly that they, you know, they're glad something like we're a exists and they're hoping it, you know, comes into fruition. But when it comes to its interoperability, I think that's where they've expressed doubt. Although then the argument on the other side again could be, well, interoperability is a wide ranging problem for many rails and for many banks to grapple across different markets. But perhaps more the sentiment that the ECB hasn't fully, fully endorsed it. Can you guys see that as a potential issue going forward? I don't think it will be an issue long term. mean, the ECB as a central bank is going to be slightly more risk averse and I'm sure it's got one eye watching what's going on with Wiro. But obviously the ECB has been around for decades and it's seen that Europe has no shortage of payment systems. I Calum. listed off a couple that were sort of country specific and they don't always speak to each other particularly well. so unless WIRO becomes something that can sit across that ecosystem, which is something that ECB will be really keen for it to do, rather than sit alongside it, I think there is a risk that it just becomes another layer rather than a unifying one. And so it's probably not going to throw its weight behind it. until it can see that it's going to meet those sorts of baseline recommendations. there are obviously a lot of layers at play already. is adding another layer to the, to the equation, um, a particularly good idea. Um, I suppose you could almost argue that it's success is contingent on other things dying off or, or becoming slightly obsolete, um, in the real space. Um, Callum, what'd you think about that? Yeah, I think, I think. Just harkening back from last week and some of the conversations that were being had around Vero is that I do think that the banks backing it and the EPI as well, I think they are looking at this as a consolidated payment method. One that can stand on its own two legs in multiple jurisdictions. And in regards to interoperability, I mean, it's barely two years into existence, right? So there's plenty of time before anyone can truly say. This is a competitive payment method that can sit alongside the likes of an Apple or a Google pay. But I do think if it starts to become more visible in checkout interfaces and consumers are starting to see it alongside the likes of other payment methods, I think it could grow legs. But then again, it's, it does have quite a lot of backing. Whereas like a Blick in Poland or an Ideal in the Netherlands haven't really got that same type of central bank backing, but unless they obviously have that in their in their home, their home market. So, yeah, it's a bit of a, it's a bit of an interesting one. can't really answer it at the moment. Well, I mean, let's go back to the, to the mastercard point you mentioned earlier, Callum, and you as well, Rachel, that they have called for collaboration rather than pure competition in the space. But I suppose if you look at it objectively on paper, despite what they may say, I mean, it is a direct challenge. There are other direct challenges to them as well, not just obviously in the EU. Do you think it's, I mean, do you think your approach is genuine in that, in that they genuinely like the collaboration or what's your view? mean, MasterCard has to collaborate, right? It's in its best interest to be abreast of these emerging payment methods and to at least be part of the discussion. I mean, we ran a piece a couple of weeks ago when there was Rumors that consortium of British banks were going to put something together to rival Visa and MasterCard. And we actually spoke to them and they said, no, no, we're fully part of the discussions. Like we're not sitting on the sidelines. em And I think MasterCard are also getting their hands dirty as well. So they're not stepping aside and letting new systems take over. They're integrating with them. They're investing in them. They're acquiring parts of them in certain instances and essentially making sure that whatever direction payments take, they're there, they're still at the table. um And something that um the op-ed that we ran today mentioned, it was all about sort of openness and innovation sitting alongside sovereignty. And there's this idea that obviously Europe needs its own infrastructure, but it also needs to remain connected globally. um And I think what a MasterCard has been quite clever is that it's positioning itself as that bridge. So if it's quite a powerful place to sit if it works. But it then does raise the question of, is it collaboration from the outside looking in maybe, but from a business perspective, if you're being quite cynical, is it just them maintaining influence in a market that they don't want to let go of? think you've got to the heart of the point there, Rachel, because if you look at, mean, recently MasterCard has acquired BVNK and what they get with that is the sort of underlying stablecoin infrastructure layer. So if they're calling for collaboration, but then when you look at the next generation, the next wave of how people are going to pay, if they're calling for collaboration now with AIDs to A payments, and then when it comes to stablecoins, they're moving ahead with acquiring that infrastructure underneath, they're moving beyond just the rails. One could argue that, uh you know, the genuineness with which they've made that claim, but um Obviously that's up in the air. They would obviously say, say no to that and assume the position of being that bridge that you've, um, that you've characterized for them. Um, Callum, I wonder what you think of it. Yeah. Well, I think the acquisition of BVNK was one that kind of caught everyone off guard, right? Because if you harken back to November, Coinbase were reportedly like on the verge of completing a deal for like $2 billion. And obviously that fell through. Mastercard were originally interested in BVNK even back then so The fact that they've came back to renew their interest in BVNK and then obviously ultimately acquired them. They're not just acquiring a Stablecoin payment company. They're actually acquiring part of the stablecoin market. I mean BVNK processed 30 billion dollars in annualized stablecoin payment value in last year so they're one of the largest stablecoin payment processes and I think What MasterCard has now in BVNK is an opportunity to really start to in the ability to offer infrastructure, stablecoin payment rails alongside fiat rails as well. then, yeah, just kind of popularise stablecoin payments to the larger consumer bases across the world, really. Yeah. I mean, I I don't want it to sound like I'm holding master got up to some level of extremely high scrutiny because obviously, you know, stable coins, you know, it's subject to future regulation, things may change, it's still quite fragmented, its use cases seem to be best placed for those cross border international payments. So it is in a way taking its taking its punt on what the future will look like. um Do you think that there are still risks in its approach when it comes to the kind of things that or the company sorry that it is acquiring? I mean, think the BVNK acquisition makes sense. em But arguably, it's probably more defensive than it looks on the surface. So I don't think anyone thinks that MasterCard is going to try and become a crypto player. em But as Callum mentioned, BVNK sits at this really unique point in the market where you've got your stablecoins, your B2B payments, and your cross-border payments. And taken together, that's a very powerful place to sit. And I guess the risk is that regulation, as you've hinted at, will probably be the biggest hurdle for them. There's still a lack of global consistency around stable coins, where you can use them, how you can use them, what is even classed as a stable coin. We've seen the debate in the US go back and forth between sort of players in the market and the banks in Europe. The discussion hasn't moved along quite as far. um But in order for that sort of payment method to scale, you're going to need to get some sort of clarity. Otherwise scaling is just going to become too complex, um especially for a network that operates across multiple jurisdictions. And then I would say the second biggest risk is probably again, around that trust piece that we mentioned earlier on. I think we've obviously seen the headlines and the reports that show that stablecoin usage volumes are increasing quite dramatically, but it's for very niche use cases still. I don't know how many consumers day to day use stablecoins. I've never made a payment in stablecoin. I don't know whether you guys have. um Generally consumers are still using cars. They understand them. They know what protections they get with them. They know how to distribute payments. Whereas stable coins for most people, including myself still, they still feel quite abstract. So there's definitely a gap there that needs to be addressed, both from sort of maybe a financial education standpoint, but also if consumers are going to trust them as a payment method, then there's a role that the market needs to play in bridging that. gap to ensure that they move beyond the sort of niche use cases that we're seeing them being used. suppose you could also argue that the market doesn't really, well hasn't fully decided the best use cases for them. Whether it's sort of, you know, uh private sort of crypto wallets as they traditionally stand for the private market. And then when it comes to cross border transactions only, that be the only use case that stable coins have their use and then Um, sort of domestically, you're looking at a two a payments as a way forward. The market hasn't decided and it goes to that sort of crossover. Doesn't it? Who, who decides really, is it the consumer or is it, is it the market? And normally it's somewhere uh in between. would definitely say the consumer drives it. I think there's a place for innovation and we're seeing banks sort of. drive innovation a little bit more alongside the big sort of networks and the tech companies that are coming through. But ultimately, if people don't understand how it works, or people don't trust the method, they're not going to use it. And it might take time for it to sort of build traction within a market. But I think we're still a fairly long way off stablecoins becoming a mainstream form of payment. your point is if If stable, if the kumas don't know enough about stable coins yet adoption, despite the hype that we see working in the industry is not going to pick up because of that disparity between the people we know that talk about it and the everyday consumer, person on the street. I mean, we go to events sort of week in week out and we hear about stable coins and Callum wrote extensively about it during his conversations at MPE. Step outside of our payments bubble and you ask the average Joe on the street, what a stable coin is, how you would use it. I would say nine times out of 10, they're probably not going to be able to give you a concrete slash correct answer. And I mean, even the other day I was in, I can't remember which coffee chain I was in, but there was a guy paying with cash. again, you've got people who distrust the current digital methods of payment. we've got that are well acquainted, you've got your cards, your banking apps, your kind of contactless payments, and you've still got people using cash because they don't fully understand how they work. So to then think that you're going to get people using stable coins, I think is just a leap too far right now. I'm not going to be the person that says that stable coins are never going to kick off because I feel like that would be tempting fate. em But yeah, I think we're still far, far away. Oh, come on Callum, what have you got for us? you have a view opposed to that? This is where Callum comes out and tells me that he bought his coffee this morning with a stable coin. Yeah, I have like £500 worth of USDC. No, I do agree with the fact that they are very, very niche when it pertains to the use cases. It's predominantly B2B cross-border payments at the moment. But what's interesting about Massacar acquiring BVNK is that they are one of if... Well, one of the most trusted card at works and, and, um, cards in the whole world. And I think if they, if they were able to, they've also launched a crypto partner program with about 85 digital asset and a few traditional finance firms in regards to collaborating and finding best use over new use cases. The digital, digital currency payments as well. So, um, they can almost now set the standard when it pertains to, em digital currency payments, new use cases, how consumers can start to learn about the benefits of near instant settlements and cheaper remittance fees. And I think they could potentially become a leader in this respect as well. I think it was clever of them to come in after the Coinbase deal failed because they kind of taken a share of that market now back into the traditional realms, whereas it was mostly held in the, in the DeFi area as well, stablecoin payments that is. So, all in all, I do think it's, when it pertains to stablecoins and stablecoin payments and yes, we heard about it, it's like far too much last year and the event circuit, but there's genuine real, there's genuine use cases and real world use cases that are being developed right now. It's also important for financial inclusion. You've seen a lot of use cases happening out there in Africa at the moment. for the underbent populations in those areas. So yeah, I believe they will start to increase in adoption. Let's say, let's say 2030, let's say, let's put a date in it. Had it here first guys, 2030 stablecoins are your mainstream payment marked it in my calendar for 2030. Callum's prediction of stablecoin adoption. Well, thank you guys both, Rachel and Callum. We're unfortunately out of time today. Join us next week, of course, where we'll provide reactions from on the ground at pay 360, where Rachel and I shall be attending. And if you're not already, make sure you're subscribed to the payment expert podcasts wherever you get your podcasts, as we bring you plenty more insights and analysis over the coming weeks. And for the latest news as it happens, head to payment expert.com. See you next time. you