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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.
Louis (00:00.898)
Hello and welcome back to the Payment Expert Podcast, your source for the latest news, insights, and analysis on the payments industry. I'm Lewis Thompset, news editor at Payment Expert, and with me today I'm delighted to be joined by Vikram Bowani, CTO banking at NTT Data for UK and Ireland. Vikram, thank you very much for joining us today. Yeah, awesome. let's get into it, shall we?
Vikram Bharwani (00:24.23)
My pleasure, Luis.
Louis (00:28.588)
If we look at I I guess the new forms of money movement, digital money, whether it's stable coins, tokenized deposits, C B D Cs, they're all emerging and I I guess the conversation around them at the minute describes them as as coexisting. but I I guess in practice, which one do you think or at the minute and and how it looks how it's gonna look in the future, do customers actually hold and and pay with?
And which one do you think will end up being the the kind of invisible layer in the background as well? I is there any kind of dominance, early dominance you're seeing in the space between these these new form these new rails that are emerging?
Vikram Bharwani (01:10.308)
Well, I think the honest answer is that the customers will hold none of it consciously. Right.
Louis (01:18.061)
Mm.
Vikram Bharwani (01:18.652)
The winning design hides the money type entirely, as you've mentioned, right? It's going to be all behind the scenes. Now, let's talk about the three types of digital money that you just mentioned. The customers hold tokenized commercial bank deposits, right, as an example, but because that is what a bank account becomes. They will not call it that. It will just be their balance. CBDCs, for instance, the digital euro is capped, pays no interest. The business cannot hold it beyond the 24-hour sweep.
Louis (01:39.395)
Mm.
Vikram Bharwani (01:48.558)
this is a settlement instrument by legislative design, not a savings product.
Then comes my favorite sort of type of digital sort of money, stablecoins. It lives at edges, Cross border, crypto wallet, crypto adjacent, machine to machine, treasury, et cetera. And it is again, behind the scenes, not in the retail wallet. So the interface people actually touches the wallet and the banking app, which becomes the control point. It decides which rail settles which payment invisibly. So the exam question is the consumer
Louis (02:00.471)
Mm-hmm.
Vikram Bharwani (02:25.054)
The question is not which money they choose, it is whether the app choosing for them chooses well.
Louis (02:32.543)
Yeah, that that's a good way of putting it. I I suppose when you look o on the consumer side specifically and I suppose if things interoperate well then they don't need to know and th there's that seamlessness between whichever service they're using. If you look at I guess C B D C's in particular th
Vikram Bharwani (02:43.119)
Yeah.
Louis (02:53.035)
I suppose the the word hype might might be the wrong word, but I suppose the hype around it is a little bit subdued compared to perhaps stable coins. from what you've seen, is any kind of customer, whether it's retailer or even, you know, corporate, have they asked for the digital euro? We know the digital euro i is there, or is it, do you think, something that banks perhaps are being made to build for a problem that maybe the E C B has rather sort of broug brought upon them?
Vikram Bharwani (03:22.395)
Interesting question, right? I think there's...
never a consumer demand that leads to a payment change. Digital euro consumers have not asked for it, but I don't think that's the criticism people assume it is. Let's look back 10, 15 years. Nobody asked for chip and pin or faster payments or contactless. The payment infrastructure is almost never demand led. It is supplied and then becomes indispensable. This digital euro
Louis (03:30.199)
Yeah.
Vikram Bharwani (03:56.302)
And ECB has no qualms in admitting that. It's a sovereignty project. It's not a customer demand project because roughly 70 % of the European car transactions run on non-European processors. And the ECB has decided that is a strategic vulnerability rather than a market outcome.
Okay, but there is one angle to it. There is a real merchant demand though, right? And that is a part people mostly miss. Merchants are looking for cheaper acceptance route than the international schemes that they are currently on. Right, so when legal tender sort of status comes in, it compels acceptance, but not use. So...
The adoption is the genuine open question. I don't have the answer for that. And I would not pretend otherwise, right? So to come back to that original exam question that you asked, so customers don't demand rates, they demand that things work. Okay. And that demand shows up afterwards. then it is not an option.
Louis (05:07.733)
Yeah, t totally. interesting you mentioned obviously the the merchant side of things. Obviously as we know that, you know, interchange interchange fees on on card networks are there. But if you look at maybe markets like Brazil or or India where those kind of instant payments are kicked off and and they've c sort of cut that card interchange fee fee out, obviously things depend on markets and they've had sort of strong regulatory backing from from central banks.
etc. It's gonna be a bit mixed in in in Europe, I suppose, but between those different things. So do you think Europe maybe is the perhaps one the market where the most interoperability will be needed because there is that kind of merge of different payment rails and and methods in the market?
Vikram Bharwani (05:52.06)
It will be needed everywhere, but I think this is where, you if you look at the spectrum, US is on this side of the spectrum where they have said, we ban CBDCs, but we are good for stable coins, whereas on the other end of the spectrum is CBDCs where your digital euro is right now. I think UK.
Louis (05:57.463)
Mm.
Vikram Bharwani (06:13.589)
is at that junction where interoperability is handled, right? And I think the city is well-placed for it, in my view.
Louis (06:24.715)
Yes, totally. okay, so n not to put a crystal ball in in front of you, Vikram, but say in a few years time, maybe by by twenty thirty, across Europe, what do you think settles the most payment volume? Is it is it digital euro? Is it bank issued stable coins or or tokenized deposits? What do you think will emerge within within that time frame up until then?
Vikram Bharwani (06:47.451)
As always, the answer is, which way you look at it, what perspective, right? By volume, it's tokenized deposits, and it is not even close, right? But that is a wrong scoreboard in my humble opinion. So let's talk about tokenized deposits win by volume, right? By far.
because they sit within the existing banking infrastructure, right? Keep the same speed and the cost profile and crucially banks can still earn on them because banks will always prefer the instruments they control, The digital euro wins the anchor role, right? It's capped, non-interest bearing, mandatory acceptance, it becomes the settlement asset and everything else is priced against.
Small balance, but enormous influence in my view. And stable coins, they are, they've been the corridors, cross border 24 bar seven programmable as you know, we were talking about just a minute ago. So the winner by volume is tokenized deposits. The winner by consequence is the digital euro, because it sets the floor everyone else has to beat.
Louis (07:59.141)
Yeah, that's a really interesting way of of looking at it, I think. each each REL or e each method has their own own place in a way. looking at I I guess in the bottlenecks of today, because these are these are new innovations. I guess when a payment fails today because I guess two forms of money can't can't talk to each other, whether it's you know, when you're on ramping or off ramping from certain digital assets to to fiat, what w what do you think at the minute are are the biggest
Fail safes, and and whether it's that cross border argument or or something else, what do you think the biggest fail safe is and and th that needs to be fixed or it is being fixed gradually, obviously these things do take some time.
Vikram Bharwani (08:44.097)
I think there's multiple, and they're all being, at least if they're not being fixed, at least they are being addressed, right? So there's different solution for different things, right? Then there's fail saves for every different kind of a problem statement that we can think of. And I think there's a bit of anxiousness as well, because we are getting into...
CBT is going to lay that path, right? And when we get to that 2029, 2030 period, we'll identify new areas where we probably don't have an understanding of today, at least, of what the failsafe would be. And I think we need to see over the period what happens, right?
Louis (09:31.767)
Sure. I I guess again when it comes to that interoperability and and connecting those rails, you look at some big big players are doing it, but when it comes to who kind of does that first, is there is there a way in which maybe they're kind of handing the the customer relationship side to a competitor? Is interoperability really kind of the the engineering
Problem or is there do you think is there any kind of commercial standoff involved, maybe that that interoperability kind of absorbs as part of that that argument? Is there any am I being too cynical? Maybe.
Vikram Bharwani (10:03.931)
No, I don't think there's that. I'm an IT architect and an engineer at heart. So in my view, the engineering is hard, yes, but the commercial question is much harder.
And it is the one that actually decides the outcome. So we've solved harder engineering problems than this with ISO 222 and open banking. Standards are achievable when everyone wants them. And with AI, engineering will become less of an issue for most part.
and we can talk about that later sort of sector because it's a big topic in itself. But interoperability redistributes value and that is why it stops. If money can reach any wallet, the mode stops being the rail and becomes the orchestration.
This includes identity, routing, evidence, exception handling, and such. This is the shift banks most need to internalize. Deposits stay with the banks. The movement of money becomes contested ground. So margin migrates because of this shift from holding money to orchestrating it. And that's a big shift if you look at it. And we're getting into that phase, and I don't know how they look like, but that's a big shift. So which is why I keep saying,
opportunity is the connectivity layer rather than the currency. The GBP euro corridor joining central bank money, tokenized deposits, regulated stable coins would be the first real test of the two philosophies of the digital money talking to each other. And as I said, the city is unusually well placed to build it. going back to your original point, interoperability is always an engineering answer to a commercial question.
Louis (11:58.09)
Yeah, that's yeah, that's that's a nice way way of putting it I think too. I I guess, yeah. Having that I guess communication a across rails. You mentioned AI, so I'll I'll obviously follow up with that because it is a it's a totally different talking point, but a but a major one. particularly around identity pay payments and, you know, who who owns the the agent, where it sits, I I guess.
Vikram Bharwani (12:09.499)
Yeah.
Yeah.
Louis (12:21.184)
legally, c commercially, what's the kind of view you have of it Vikram and maybe the the NTT point of view from it?
Vikram Bharwani (12:29.851)
See, agent-ticket and machine payments, they are, in my view, a near-term breaking point. An autonomous agent cannot route around an incompatibility the way human operators can, and they quietly do today. But it's a... So what has happened is, see, over the last six months,
things have evolved so rapidly, so exponentially that the capability of the AI agents that was possible maybe say in December of 2025, you're nowhere near that. You're just exponentially way above that today. And that's going to continue seeing that exponential curve.
I think we'll come to a point where it will not be the breaking point. know, autonomous agents will be able to circumvent some of the hurdles that humans do today and maybe in a better way, right? So what I'm seeing is from an engineering perspective, the problems that we used to face are going to dwindle down slowly, but surely. The...
issues that we'll start facing in terms of so many agentic AIs, know, running on so many different, you know, processes. When that fails, how do we handle that?
Louis (14:00.679)
Yeah, it's it's the felt I I've sp I've I asked this question a a lot recently, as you can imagine, and for some it's it's the models themselves and having, I guess, new kind of those foundational models coming through will help with I guess less hallucination and and things. But there there's still obviously th that risk of I guess the liability around w when things fell, if it doesn't do
Vikram Bharwani (14:06.084)
Yes.
Vikram Bharwani (14:15.619)
Yeah.
Louis (14:23.883)
doesn't complete the action it it should or th the intent that it's been given correctly and it's yeah. I suppose it's it it's something that that will take time, I guess from a regulatory standpoint to to figure out as you know the text there, but it it one of those that maybe takes time, particularly has different jurisdictions, different markets handle it in slightly different ways.
Vikram Bharwani (14:46.241)
For sure, and that's all part of that engineering and commercial. That's a part of the commercial aspect, right? Who's responsible? Who pays for it when it fails?
Louis (14:56.447)
Yeah, it very interesting stuff. I mean on on that topic I I suppose of regulation, if we touch again on on stable coins briefly, obviously you have micro in in the EU and there's the Genius Act over in the US. The UK itself, while being, as you mentioned, kind of perfectly positioned for this interoperability, maybe on the stablecoin regular regulatory front a little behind, but the Bank of England has introduced its its rules with a with a forty billion issuer cap, unrenumerated reserves, extra.
etc. I think live in is October twenty twenty seven. do you think the UK stablecoin market in particular i is something that's that's built to last? Is it it got trust or are they was it too slow to to get to where it where it is now before a a launch next year?
Vikram Bharwani (15:43.414)
Bye.
See, I think that, so we are in the second move or argument here, right? Clearly Bank of England and ECB, they've not taken that first step. They are in the planning phase. They are talking about the digital bound phase two. That's just recently a couple of weeks began and you've covered it really well in your previous podcast that I found interesting.
Louis (16:12.459)
Thank you.
Vikram Bharwani (16:13.275)
The real risk is the second mover argument and I would not dismiss it, but look at what UK has actually shipped in the last three months. And you mentioned some of it, right? The bank stable coin policy and the statement and the draft code, it came out on 22nd June and you talked about the 40 billion issuance cap, et cetera, but it's regulated sterling stable coins expected from 2027 October.
That's roughly the timeline, but you can assume a couple of months here or there. Then on 30th June, the SCF finalizes crypto rules. Finally.
Right? And in mid August, phase two of the lab commenced. So this shows that the UK sequencing those deliberately. Again, that could be a cynical part of me, but I think I think this is where we can sort of get a sense of where we are going as a country when it comes to digital money. The genuine risk is build order. Not regulation, Dave. Yeah. If the US has genius and you has digital euro, as you mentioned.
a global bank built for those first and later port to strutting. Britain becomes version two. But the mitigation is not speed for its own sake, by the way, but it is making UK the market where connection happens at that interoperability.
I'm big into that because I believe that UK is right for it. If the UK owns interoperability between different architectures, banks would build for it later because it is the layer that joins the things that have already been built.
Vikram Bharwani (17:48.604)
So in my personal opinion, UK does not need to beat Europe to a digital currency. It needs to be in a place where different digital currencies meet the regulators and the regulators are giving all the indications that this is the direction that they are taking at this point in time.
Louis (18:05.246)
Yeah, I I really like how you paint the U I I guess the UK's role in i in that kind of interoperability hub almost. It kind of parks to I guess those kind of if you look at Brit British history and trade and and sort of being a hub for the world, maybe in in the digital world, acting as a hub i in a way for for payments interoperating as well too. I guess then just lastly Vikram, looking at some of the perhaps
organizations you you've worked with. are there any kind of mistakes you're seeing across the market? Maybe spending heavily on on something before regulations are in place, or, you know, maybe moving into something generally where I suppose their internal infrastructure doesn't maybe support it? Are there any kind of genuine trends that that you've seen where people have made mistakes and now maybe looking to to get things get things cur corrected?
Vikram Bharwani (18:33.647)
Yeah.
Vikram Bharwani (18:57.767)
I think it's table stakes to make mistakes. think there's, and there's a few, and I will talk about the patterns rather than institutions if that's all right. But the patterns are consistent enough to be useful, right? So the first thing that comes to my mind is the blockchain proof of concept error.
Louis (19:10.761)
yeah, n no one specifically, obviously. yeah.
Vikram Bharwani (19:22.587)
Back in 2018, I was roaming around Europe, talking about how blockchain, sidechains, this, that, and the other can help sort out some of the problems that the banks have or even non-banks have. So enormous spend on pilots that were never designed to reach production. The technology was really the problem.
Nobody had answered who would operate it, who would be liable and who would pay. Going back to, Luis, what you were talking about, the commercial aspect, right? And that is a business question that needs to be answered before the technology comes into play, right? And there's a lot of things that had to be, you know, wound up to go back to where they were originally, right? Second example is the front end over the boring stuff like plumbing.
There is recurring mandate mistake I've noticed over the years. Over invest in wallet interfaces and onboarding journeys. Under invest in the boring stuff like the identity, the consent, evidence, intraday liquidity, et cetera. So what happens? It looks fine in the year one.
but it starts billing you in year three onwards, right? And that's the common theme that I've seen in banking more so than others. And the third thing I think is, and this is something that some institutions are falling foul of, is picking up winning money type too early.
This is where a lot of institutions invariably find themselves in. Several institutions bet hard on one instrument and have to unwind it later on. The durable position is model agnostic orchestration, or in this case, money agnostic orchestration. So if you go back to the pattern of the three examples that I've just talked about, the answers are...
Vikram Bharwani (21:19.405)
If the institutions are answering a question of, can we build it? They are wrong. The valuable ones answer who operates it, who is liable, and who pays.
Louis (21:34.174)
Yeah, fascinating stuff for it from it's very I guess concise for putting yeah. Maybe yeah, as you say, a commercial learning that's that's taken place over the last few years to to get to that to get to that understanding. Well, it's been very great talking with you for this episode. fortunately we are out of time, but thank you very much for joining me. If you've been listening or watching and you're not already subscribed to the Payment Expert Podcast, make sure to subscribe wherever you do. Get your
Vikram Bharwani (21:41.712)
Yeah.
Louis (21:59.647)
Podcasts with plenty more insight and analysis coming over the weeks and months ahead. And for the latest news as it happens, head over to paymentexpert.com. We'll see you all next time.
Vikram Bharwani (22:10.832)
Thank you.