EBC22 | Web3 Meets Payments

[Music] thank you everyone thank you for joining us this afternoon for this panel on web3 meeting payments a topic close to all of our hearts something we've been involved in for some time uh i know we're going to be in for a an interesting discussion we've had lots of good chats before this even ending up down the nft rabbit hole uh a wood sporting a lovely t-shirt with his nft on there hello great okay like it [Laughter] it's awesome we all love it uh so three excellent panelists to join this discussion perhaps uh guys you can introduce yourself starting with you guy hi everyone uh my name is uh guy i'm uh the head of bd payments uh at fireblocks so for you don't know fireblocks firebox is basically uh the go-to partner if you have crypto or about a cheat or if you have any crypto offering uh you should use fire blocks because fire blocks allow you to securely and easily manage all your crypto operation um specifically about myself and my team so a few months ago fire blocks acquired our company uh first digital uh we were focusing on payments blockchain based payments and uh this is something that firebox seeing is a big growth opportunity uh therefore we were acquired by them and today we are leading all payments in in fire blocks and i'll be happy to share more about that after my friends will introduce themselves so hello everyone i'm francesco marotto i'm working in bbba in leading the blockchain discipline and leading the strategy and the different projects that we are implementing with blockchain technology and within the crypto space prior to this i headed the swift department in bbva so i'm coming from the traditional payment space or traditional finance now working on c5 on centralized finance and let's see if banks like bbva can reach d5 in the future yeah hello and my name is edward varving um i'm part of the crypto and web 3 team at worldpay from fis and we process for the largest exchanges and brokers in the world so we are purely let's say in essence a fiat on an off-ramp provider thanks for having us thank you thanks for the intros uh so we've got uh just under 30 minutes and i know we've got a lot to talk about so i'm going to dive straight in um i think ever since bitcoin appeared on the scene and early days of bitcoin uh satoshi showed us a new way to do payments over the internet uh the first use case on the blockchain um i mean we've all been working on blockchain based payments for a while um but why do we need blockchain based payments given that we've got traditional systems that work pretty well on the whole what are the advantages what are the disadvantages maybe guy if you want to kick off yes so um i think that it's not that we need to replace the current systems like the current fiat system or the current payment system we just need or actually we seeing a huge opportunity to incorporate uh different blockchains that actually blockchain can be viewed as a payment system and if you can these two systems uh can live alongside each other you can achieve great great benefits so for example we are working with psps today that are able to settle with their merchants 24 7. this is something that you cannot do if you're using only the fiat rails so actually it's an announcement we had with uh checkout.com a few weeks ago so i can talk about it but checkout.com is processing fiat uh for their merchants and usually the way it would work is that they will need to settle with them after they process all these fiat payments for them now when you doing the settlement using only fiat rails it's something that can happen only five days a week and when you're using stablecoin for example not necessarily bitcoin or ether or others you can do 24 7 settlement and this is something very powerful for a psp to offer his merchant uh 24 7 settlements so this is one just one use case real world use case uh using blockchain based payments and i can talk here for many other use cases um but the interesting thing here is this this use case is has nothing to do with the speculation or the or the volatility of bitcoin or other currencies this is a boring but very powerful use case for businesses to to leverage stable coins and and blockchain and guys let's not forget about the fact that whenever you start settling fiat especially when you start settling international the route that you need to take from one bank to the other to the other to the other it doesn't only have an impact on the time of settling but it also has an impact on the cost of selling and whenever you go across currencies it becomes an even bigger challenge right so this this this stablecoin settlement is perfect perfect solution yes definitely well we need to see it no i mean we think that the the payment landscape is really competitive it's a very competitive space there are different payment methods different payment rails we have seen how fintech has been entering the space since a few years ago providing new solutions faster more efficient and than the traditional rails and now we have a new kit on the block with a blockchain payments no stable coins or based in crypto or maybe with cvdcs in the in the future so so these new payment rails or payment system needs to prove the value added that brings to the ecosystem or for which use cases could be more suitable than the others and maybe we could have a combination in the future where we have traditional payments for certain use cases or crypto payments for other use cases an example of this for example in spain right now we have a bithumb which is real payment system based on mobile phones very fast free and it's working very well huge adoption in spain so if we create a cbdc a digital euro what value is going to bring to the user to the end customer this is going to improve business experience misum is already 24 times 7 times 365. so this is something we have we need to see of course payments in the blockchain ecosystem and i think it's much more efficient to use crypto or on payments no but on the real world we need to see which which system is better we've sort of gone straight into stable coins and touched on cbdc's uh why don't we address that now i mean where francisco where do you think we're heading with stable coins and cbdc's there is this like two tracks i suppose with the private sector and governments working how do you see that playing out yes so i mean stable coins is a really a reality right now they are working this mainly in u.

s dollars we don't have seen yet many other currencies but we are starting to to see the move we have seen just circle announced they are going into creating a eurostable coin and that's our partner yeah it will it will improve so stablecoin is a reality they are the base of defy of the centralized finance without stable coins i think d5 wouldn't be the same or at least have that much adoption they are they also the stepping step out for trading in crypto so they have a use case it's a reality and the next thing would be cbdc's cdc's there is a pilot in china with a with a digital juan and several small countries have live cbd's working but in general the rest of the countries are looking very thoroughly up to the need of cbdc and the form it will have the design the privacy if it's retail it's wholesale if it needs to have limits and why why are they taking so much time because they need to to be very careful with what they do and the design of the digital euro or digital dollar because it can have a big impact in in in monetary policy and in the financial sector if we have a bank run or deposit run from from bank deposits through stables or to cbdc's it could be a problem for the financial industry or you can also have spillover effects in other countries where there isn't a very strong currency and you bring a u.s dollar stable and the country might start working with this with this new option so so yeah we'll see how it goes one more question from my side how long do you think it will take for the first cbtc to be launched and which country do you think it will be as i said the small countries some of them in the caribbean have already live solutions in the u.s europe i would say three to five euros minimum i mean in europe they have already set five years two years now for testing three more for for going live and taking the decision in the states it should be similar they are for the conversations they are having there the policy makers they are trying to define what would be better to to support a private stable coin or to create their own public stable coin so that exactly because the market is developing so fast right now that if you talk about three to five years from now the question is like what will what will it be adding at that stage besides the fact that it will have a central bank behind it but that's that's one of the things where i'm like okay where is this going so i think that's good news for the private stable coins that they have time to develop to evolve to improve to provide and add value and then of course there is a question that when the digital bureau digital dollar arrives what value added is bringing to the ecosystem that's the question that needs to be solved yeah i think it's because what's interesting about the caribbean the story of the bahamas because the hurricane dorian hit the islands very badly and destroyed the banking infrastructure it was easier to put up mobile phone marks than it was to rebuild banks so that was there they had a real burning problem that they had to solve and that's that kind of drove that project um just going back to like the merchant payment use case uh that we kind of touched on there they would perhaps we can revisit that how do we realistically join this new world to the existing infrastructure you guys you know are obviously very much part of that world i mean all of us but just talk us through that how does that look from your perspective so the landscape of payments today is already a challenge because you have visa mastercard so you need an acquirer and then on a global level you have 300 now i believe it's even 500 different apms that you can use as a merchant so the question is which mix am i going to use to make sure that i can get access to the most potential market out there how can i get how can i reach all those users and how can i make sure that they can pay in their preferred payment method and now you've got web three coming along you got crypto coming along so the challenge becomes even bigger right because then now you need to combine it in two so i think as as a psp as an acquirer you need to be ready for that right research has shown that between the age of 18 and 35 40 of the the people that responded indicated that they want to pay in crypto in this year that that's 40 of let's say next gen payments yeah which is for me really interesting because it means you need you need to be ready for this right we launched what is called the metastore so guys if you want to check it out on linkedin it's called metastore by worldpay this is showing a really nice idea of where we think this space is going and how you can buy something whereby we combine web 2 and web 3 and even going into metaverse awesome yeah so if you're talking about pay-ins how a merchant is accepting crypto based payments so um there is a lot of complexity over there more than just presenting a qr code hey this is my address send me funds into my today that address and mastercard the card networks that provide for users and merchants um you know when you're paying with your visa you have context what you're paying for the merchant knows like who you are basically and you know what you're purchasing what's the price there is a lot of context to the payment and in crypto today you don't really have that um so again but there's also fraud with credit cards right so you don't always know who the who the card holder is so it works two ways yes so this is also something we're working on not only about the payouts part but only about the pains you know providing context to the payment itself which is basically combining the good things about car networks you know the trust and the context of the payments together with the good things that blockchain based payments can provide which is much cheaper rates uh instant settlement faster yeah so this is also things that we're working on um in firebox cool francisco yes so now what we are seeing is that as i mentioned before the base case was defined for crypto payments but we are seeing more and more how they are stepping into the traditional finance and they are going for the merchants and they are starting to build um payment services or payment methods that enable the possibility of paying with with your crypto with your wallet no and and the merchant can choose whether they they want to to receive the fiat or they want to or they prefer to receive the crypto and what we are seeing at least now is that most merchants they are willing to have this possibility or this this this option in their point of sale both in digital point of sale or physical point of sale the possibility that the customer can choose to buy the crypto or whatever they want and but we also still see a preference for fiat so they would be rather offhand scripted and on hand script and they prefer receive their fiat and leave their client the option to pay with with fiat or krypton and yeah a clear example of this is how mastercard has just announced they are connecting or enabling enabling payments directly with credit cards in openc or meta versus no thanks say we're all in a building phase right now is is my sort of impression um and obviously there are things live out there and we're all working on things so but are there specific initiatives that you guys are working on that you're able to share with us that you feel uh particularly transformative in the future you know there's all sorts of things happening we mentioned the metaverse we sort of joked about nfts but it is if you were to sort of pick out one thing that's a direction of travel or initiative that you can talk about maybe guy we can kick off with you yeah so um something that we as i said already launched and are very excited about is basically allow psps payment companies a way to settle 24 7 with the merchants only that is a huge huge offering and a huge market for us um but if you imagine that five percent of all settlements on a global level by psps would move to this world that's like mind-blowing yes um yeah so settle but for example another use case which is similar but not exactly the same is you know psps are processing fiat for their merchants and they they need to settle with them maybe they don't ready yet to settle with crypto and they want to settle with fiat but it's a cross-border transaction right you're processing in one country and then you need to settle in a different country um you can use crypto in the middle of it or stable coins so you have fiat stable coin fiat and by doing that you can achieve great things for example faster cheaper but even more interestingly is that you can have full visibility to where the money is in transit so today when you're doing uh uh using swift or other like doing cross-border transaction you don't really know where the money when the money is going to land there are a few correspondent bank in the middle of that you're not really sure about it it's expensive and today you can do it by combining those uh crypto rails together with smart fiat rails bcb for example um you as a company can see the entire flow of of funds which is dramatic for for these companies so this is something we're very excited about very cool francisco well i mean that's just to answer a guy and traditional payment systems are also improving so free swift has three apis with gold that you can already track all the all the life cycle of the of the payment no so they are trying to improve and in the blockchain space which i agreed could be potentially improving the system there are shelter and risks that have to be taken into account not technology risks blockchain is yet as technology that is maturing speed cost scalability depending on the option of blockchain you use could be a problem or not or you might need to use a layer two or try to to find a way to to make it really level and fast and cost efficient in terms of you know when lots of people are playing at this at the same time could generate a problem for for certain layer ones so so yeah we'll see in the future in the case of of vba um and it will improve and it will be better i'm sure this is why we are here to working on improving the systems and the blockchains in case of vba we've been working in the space for six seven years now we have been focusing mainly in transactional banking so payments and supply chain financing and also global markets so free trade post rate of securities bonds etc etc that's our main area of focus and also crypto we have been one of the first traditional big banks to enter into the crypto space we offer now buy sale and hold um in bva switzerland so our private banking customers can now access crypto within a traditional bank and combined with a traditional portfolio and with the same user experience and security that the bank can provide no and we are now working on seeing how we can expand this service to other countries because we have demonstrated that a traditional bank can also operate securely and in a compliant way in the crypto space going back to payments in the transactional banking space we started testing ripple and we moved payments real payments from mexico to spain and we have been working with swift and with everpay which is the spanish clearinghouse to create apis that connect the blockchain ecosystems with traditional real-time payment systems in order to do the settlement from a blockchain ecosystem through the traditional payment rails and we are also working now with the rest of the banks in spain and developed again in creating digital euros we are the smart monies initiative and we have been working in in generating digital euros both from an account based perspective and also from a tokenized based perspective by testing paying online offline to start understanding how it would be to manage a digital euro and we are now trying to move forward and start testing programmability and other use cases on top of tokenized euros so not very busy too no no no yeah it's a really good question but you should actually take a step back and realize that today within the fiat world still a lot of people they drop out because they don't see their preferred payment method right and that's just with fiat so whenever so whenever i try to explain my parents on the next generation of payments that we are all working on they drop out so at the end of the day it comes down to having the combination of the preferred payment methods available in your checkout stage and yeah we're building our products like pay by crypto so you can pay with crypto with any of our merchants we can settle in stable coins there's a lot that we're trying to build now in the web3 environment but it always needs to be linked to the demand out there right you actually need to have those users that want to use it because otherwise yeah it's great to build something because it has the term blockchain connected to it but with payments there's actually yeah there's definitely a benefit of offering this and then that's the direction that we take but also think about uh issuing cards cards that are linked to let's say crypto assets all stuff that we can also do because we are actually known as a payment company like a pure psp but because of fis we can also do banking and capital market products specific for crypto so it's a lot of products and services that we can do but it always comes down to you know what is the demand out there yeah and i think we touched on this during our chats it's an evolution rather than a revolution i think guy you you said that so um let's just go on that point about payments and uh francisco you mentioned ripple um given the current price pressure in the markets in the crypto markets or markets in general can we trust crypto to be a former payment and do we see bitcoin really uh being a form of payment um guy perhaps um i personally don't think bitcoin is a good form of payment when you think about it when you're trying to purchase something online you're not trying to purchase a shirt with your i don't know apple stocks or your tesla stocks or whatever uh financial asset you have you're trying to pay with your u.s dollars or wherever you are with your domestic currency so i don't think i think the volatility of bitcoin i'm not talking about the uh capabilities of the network to process um thousands and millions of transactions like the other card networks uh so i don't think it's a good form of payment although if you're talking if you consider stable coins as a crypto um so yeah stable coins are very suitable for that specifically when you're using them on the right chains so not your ethereum is the right chain for it but others uh are suitable for that it would yeah it really depends on which coin slash token you use for this right some some tokens or coins you can't use it for a payment i i definitely don't want to use my bitcoin to buy shoes or whatever but again yeah that comes down to the decision that the that the user wants to make but can you do it yes of course you can do it there's definitely change and solutions out there today that offer a very good fast secure cheap way of paying well i will add that it depends it depends on the country you live in no maybe you live in venezuela argentina where you have a huge inflationary currencies and you are used to volatility maybe bitcoin is a good option or if you don't want to go through the on-ramps or off-ramps or fiat and you want to work strictly in crypto it might be an option if you do if you too off-ramp you need to pay taxes you know certain issues that you might have in mind when deciding to pay to pay with bitcoin but i obviously agree that for day-to-day payments it would be better stablecoin that don't have this volatility risk no yeah the uh the first interesting use case i heard about bitcoin payments was my son's computer science teacher uh who paid his rent in bitcoin because the landlord lived in australia and so he was paying his rent each month by using bitcoin but so the landlord is really happy right now i bet yeah and by the way another use case that i heard the other day in consensus a few weeks ago edward snowden was saying that he was able to achieve to move this information from the nsa outside thanks to bitcoin because he used bitcoin as a mean of payment to to exchange the information with with the press and all these things so there are certain use cases where you might want to use bitcoin excellent um i think we can't talk about payments without touching on regulation we did sort of chat about regulation um how will payments work with new uh forms of regulation such as a travel rule and things like this we know that regulators are looking at it um who wants to take that maybe francisco you want to kick off okay you're gonna start so so the the crypto space in general uh was not regulated at least in several countries so something like switzerland were pioneers and they started doing it before and and that's why regulation is coming we are seeing how in the states there is has been executive order from by the administration to all the different supervisors to start regulating the space and there is a strong debate there whether they have to start with stable coins and then go for crypto defy et cetera et cetera in here in europe we have and we have pilot regime for the use of dlt just being approved in the second of june we have mika marketing great assets coming hopefully this summer into place and we have also the travel rule which is bringing and you know traditional financial standards to the crypto ecosystem and even dora dora the operational resiliency is law that is coming also impacts the crypto world so so there are many regulations that are trying to regulate the crypto space and basically what what they are doing is bringing the crypto space or bringing to the crypto space financial standards so in terms of resiliency security systemic rigs risk no and this is a challenge a challenge because it's not easy we are talking for example if we go to extreme and talk about doubts decentralized autonomous organizations and how are going are we going to control this or how is regulation going to support or to supervise this for example bitcoin bitcoin is a doubt if everyone use bitcoin as a payment system it could be systemic if it's systemic how are we going to control it now all these type of debates are the debates that are going on in within the different supervisors and regulators in the different countries excellent we're uh we're running close to time so i did want to leave the remainder of time to ask each of you what you believe will be the biggest opportunity an emerging theme in the world of web 3 and payments mine if i may sort of throw mine out there in-game payments i think is a huge world that's ahead of us but uh maybe guy you want to kick off i think there are a lot of opportunities obviously specifically i think the biggest opportunity at least what we are going to focus on is you know allow any business to um accept the blockchain-based payments and also not necessarily will he will need to to convert those into fiat but then he will be able to do the settlement with his paying out to his vendors paying out salaries um maybe getting settled with his psp or other payment providers so imagining uh running your entire business on on stable coin rails i think this is a big opportunity okay thank you francisco yeah so in my case i think that the web 3. you know if we are building a new internet that's a huge space for that will need financial services that we need payments so it's a huge opportunity for traditional payments to connect to that new ecosystem and also for the new blockchain payments to serve that ecosystem or to go outside to the traditional economy i agree with your gaming could be the first thing big big best thing big first thing in the web 3 space great stuff and lastly i would yeah a bit boring but i'm going to shake your hand definitely stable coins for now which is sitting in the bigger group of d5 and i think that d5 will be bringing a lot more it's going to disrupt so more let's say centralized organs and that's strange me saying that working for a centralized organ like a psp but i think there's a lot of room a lot of opportunity in that corner but yeah we need regulations that don't kill innovation i think that's key excellent uh time's up unfortunately thank you gentlemen and thank you all for listening [Applause]