The Next Payments Frontier - TOKEN2049 London 2022

hello um right so the next payments Frontier so before we get into it I'm a product manager with contests and for those of you who haven't had a chance to stop by our stand yet we're a Payments Technology provider so we very much look at digital assets through the lens of payments and so that's kind of what I want to talk about today um has any committed historian will tell you before you try to understand the future it's helpful to understand where we've come from have a bit of a look back at the past so that's what I want to talk about initially we will get on to the the future of payments so recently we've seen a very rapid evolution of the medium of exchange so for two and a half thousand years roughly we had physical currency now that was in many cases precious metals coins but in some cases shells beads anything that could be used as a counter anything that could be exchanged there's of value then about a thousand years ago there was a big evolution we got promissory notes and this was really significant because this was the first time that we had a currency that was actually not the thing of value but a representative version it was a representative of that thing of value just a piece of paper that was essentially in IOU then fast forward in the last 50 years this is where the the evolution really kind of took off so we started to see the rise of digital fiat currency now in the early days that was credit cards you know that was a piece of plastic that you could use that essentially just moved numbers around in databases then within the last 20 years of course we've got digital assets and then a little more recently we started to get stable coins as well and that is really significant because that went back to the original physical currency now I know that digital assets are of course not physical but they are the thing of value in in and of themselves so back the past before the uh the promissory notes if you own a Bitcoin you own a Bitcoin that is the actual thing of value now we're also starting to see cbdc's as well and lots and lots of countries looking at cbdc's not so many actually got them off the ground there are still a number of questions around what cbdcs will actually look like so I'm not going to dwell too much on those just because there's still a lot of unknowns there so this is a standard maturity curve the maturity stages of any new innovation obviously you start with introduction then you get growth it Peaks at maturity and then down into decline So Physical currency is very much in Decline will it be completely over do we expect to see an end of physical currency no probably not but roughly 12 of all transactions now are done in physical currency that's Global so that's really small you know that's not a big proportion of the overall Global Payments now digital fear I would argue it's immaturity but still at the very early stages so the left-hand side of that curve there is still room for growth in in digital fear and I'll come on to that in a moment according to us it's the stable coins very much in growth phase I think we'd all agree I think that's part of the reason we're all here huge opportunity lots more to do in this space and then of course cbdcs are very much at the introductory stage so as I said still lots of activity in digital theater I'm not going to spend too much time on this um but I think the most interesting interesting stat on that page two-thirds of adults worldwide now make or receive a digital payment now as you can see um High income economies that proportion is significantly higher we're talking 88 of adults now who transact digitally compared with developing economies where it's a bit lower you're looking at about a third of the population but there is still room to grow because there are still some issues there are still some areas that can be improved so banking Tech is is pretty old you know Legacy banking Tech is 40 plus years old so there's definitely room for improvement in terms of the technology underpinning Geo restrictions you know digital theater is not borderless there are difficulties in moving money between countries slow costly and high fees as well so certainly in Europe if you look at sepa you're talking about a euro per transaction in some cases and of course in a lot of cases as well it's based on office hours you know it's nine to five Monday to Friday so definitely still room to improve but we're we're nearing the the peak we're nearing the point at which we start to move into decline obviously cryptocurrencies digital assets very much in growth um I know when maybe not in the best climate right now but certainly if you look back to last year crypto use or the number of crypto users increased 178 I mean that's massive that is a huge increase in the number of people using cryptocurrencies uh I mean the graph here you can see this is the market cap of cryptocurrencies in Orange so you've got Bitcoin Heath usdt compared to some of the big um economies currency in circulation so still a long long way to go you look at you know United States dollar compared to bitcoin the still a lot of opportunity for growth there so crypto for peer-to-peer payments we have seen a lot of improvements recently there are a number of apps and platforms out there that do make peer-to-peer payments a bit easier a bit better but arguably it's still an inferior user experience to traditional payments methods it's not always intuitive there are often quite a lot of complications involved I I do recognize that there have been a number of improvements and there are some some pretty cool apps out there that make this a lot easier but from a mainstream adoption point of view that is certainly one of the the barriers to um more broader adoption and another issue with peer-to-peer payments with crypto's volatility we're all familiar with the Bitcoin pizza if crypto is appreciating do you really want to spend it on a cup of coffee that could end up being a very expensive cup of coffee uh and there's still a lack of widespread acceptance so we talk about the the plumber test if your boiler breaks down and you have to call out a plumber an emergency call out can you pay your plumber in Bitcoin or ease you might be lucky you might find one who accepts it but in most cases the answer is probably no until we get to a point where you can depend on any Tradesman you call out taking crypto I would say that we're not quite there there is still room for growth there's still room for improvement here I mean there are some case studies you know some examples here but by and large crypto is not used as much as a peer-to-peer payment method as it could be so one answer to this has been crypto cards our most major exchanges will see a quick well they offer a crypto card I mean it's technically still fit transactions most of these cards the crypto is being liquidated in the background and the actual transaction takes place in fear but from the user perspective it feels like you're spending your crypto obviously it's a in terms of user experience it's just the same as using your normal debit card why is the accepted with card schemes like Visa and Mastercards supporting these cards obviously you can spend it pretty much anywhere but volatility is still a problem do you want to spend your Bitcoin if it's going to be worth more in a few years time so that does hold it back arguably stable coins apologies arguably stable coins do um go some way to answering that and I will come on to that so stable coins obviously it works in exactly the same way as a Bitcoin or ether peer-to-peer payment but you have the advantage of not having to worry about volatility now there may be some exchange rate movement you know if you're in the UK transacting with usdc for instance there is still some exchange rate risk there but the volatility is massively reduced compared to transaction in Bitcoin ether you know any other big cryptos and another major advantage is instant settlement 24 7. you send someone some stable coins they've got them instantly that's it they don't have to wait for them to clear they don't have to wait for them to settle so really big advantages that must have moved forward and still not legal tender though can you pay your taxes in stable coins no I think in some jurisdictions and I think the Smithson started looking at it but in most cases you know you can't pay your taxes in stable coins cbdc's as I say still a lot of unknowns about cbdc's potentially 24 7. definitely legal tender will they be cheap to use probably but you know we don't really know yet the expectation is that they will be very cheap but we haven't actually seen that many working properly so you know who knows so I get on to the next Frontier then so we talked previously about the evolution in the means of exchange the actual medium of exchange the next big evolution We Believe will not be in the medium of exchange but it will be in the universe in which payments take place so the metaverse clearly offers unique opportunities for for payment providers for Innovative Innovative payment providers and we believe the critical success success factors will be user experience optionality the metaverse is not one single thing the metaverse consists of many different Realms if you will and each of those May opt for different payment methods and of course if you've got optionality then you need interoperability um interesting start here Bloomberg analysis uh estimated that by 2024 there will be 800 billion dollars worth of opportunity um in metaverse related transactions and also by 2026 it's estimated that 30 of all businesses will have a presence within the metaverse so huge opportunity as I say so what will payments in the metaverse look like I'd say the answer to that is it depends as I say there are many different or will be many different Realms within the metaverse it's not one single uniform thing so if you look at when if you look at it in terms of web 2 principles or web 3 principles I went to principal metaverse something like metairie's building and what would the payment methods look like there probably very similar to what we've got now paypals Visa Mastercard yeah apple pays your Android pays so external as in not native to that particular metaverse and intermediated there's still middlemen if you've got a web 3 principle metaverse Ben still liking to have external payment methods but peer-to-peer decentralized so Bitcoin Ethan usdc now number three is what I find really interesting because I think there's still quite a lot of questions to be answered here we're starting to see parts of it now so an internal payment method that's native to specific metaverse realms so we're seeing this in gaming um fortnite Roblox they have internal native means of payments you've got v-bucks uh Robux they still centralized now they're still managed The Ledger is still managed by the the game operators what about an internal native metaverse means of exchange that's decentralized could that use something like the same mechanism as Bitcoin could we have a proof of work say currency within metaverse Realms or proof of stake I think that's really where interesting things will happen and I think there's still more questions than answers but that's where we're looking now that's where we see the next big opportunity and that's it thank you very much