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HomeNordic MarketsEmbracing disruption to anticipate customer’s payments needs

Embracing disruption to anticipate customer’s payments needs

Crypto, perceived as a fringe movement in financial services only a few short years ago, has gained what previously would have seemed an unthinkable amount of traction. Starting from way beyond the outskirts of financial services, it has slowly attracted the attention of initially reluctant financial institutions and users globally.

A company that was early to jump into action, spotting an opportunity to better serve its customers with deep technical expertise and unmatched understanding of the fast-developing world of blockchains and digital currencies was Visa. Its swift response to market changes has allowed it to position itself as bridge between customers, merchants, and the fascinating technology that is transforming how we store and exchange value.

We had a chance to chat with Nikola Plecas, Visa’s Europe Crypto Business Lead to learn more about what cryptocurrencies mean for payment companies like Visa and how the payments giant is leveraging its capabilities, network of networks and partners to adapt to the changing world of money.

Nikola Let’s start by defining why we need crypto currencies and what problem they’re solving in the market?

At Visa we see crypto as a collection of emerging technologies and assets that are enabling new user experiences. We distinguish between cryptocurrencies like Bitcoin, fiat backed digital currencies including stablecoins and Central Bank Digital Currencies, and Non Fungible Tokens or NFTs that represent unique digital goods.

Depending on whether you’re looking at different aspects of the technology some of it may enable a way to invest or to save money, while others may enable new types of financial services. This is something that we have seen in the consumer usage activity survey we did last year. In the Visa consumer and usage attitude survey we have done last year there was almost universal recognition of crypto at 94%.

“Visa sees itself as playing a critical role and being that bridge between existing financial services players in this exciting new world of crypto technology, innovations and NFTs.”

Nikola Plecas, Crypto Business Lead Europe, Visa Crypto Solutions

42% of consumers see crypto as a way to save and invest funds, and right about the same amount see them as potential to create and deliver new type of financial services. These new technologies and capabilities can enable consumers to invest in a decentralized finance protocol and find new ways to generate returns by investing in crypto assets.

On the business side there are very interesting use cases currently being explored in various parts of the world. Specifically, the use of stablecoins to stream salary payments or micro payments. Some of these can also be used for cross-border payments more efficiently than some of the services we have today.

Does the recent crypto market crash vindicate the naysayers who advocate staying clear from crypto?

Let’s unpack this a little bit. We saw some stablecoins crashing. But not all stablecoins are created equal. There are fundamental differences between a USD and a digital US dollar that can be unclear in the mind of general consumers and businesses who see it as a one batch fit all. If anything, the recent crash has proven that some of the projects and ideas are very different. For example, we see that having a stablecoin that’s fully redeemable at par with fiat and that is recognized by the regulators is what is required to push the whole industry forward. Although in recent months we have witnessed moments of heightened volatility, these events have also served to move the debate forward, often sharpening some positions, ideas, and underlying requirements of what is necessary to push stablecoins to be used for every kind of money transfer between consumers and businesses.

Having the regulators involved and setting the ground rules is going to be very beneficial for the industry in the long term and stablecoins have the potential of becoming another way of settling obligations both domestically and internationally. Activities and use cases around crypto are already regulated to a great extent in Europe and other jurisdictions. With the incoming regulation we will have the right platform in Europe to help some of these companies, their capabilities, and use cases grow and expand, while fostering innovation and cleaning out illicit activities. To the point where we will use crypto technology as just another way to effectively invest our money or perform other commercial activities without even knowing we are using crypto. I think we’ll see a merge between the traditional finance and crypto activities rather than the two going in separate directions.

Since the emergence of crypto, we’ve seen the financial system going through various stages of grief. First there was denial, then anger, bargaining and now we start to see more acceptance.

In your view what has caused that change in attitude towards cryptocurrencies?

We have seen tremendous interest from our clients to actively talk about what this means for them and what strategy they should be pursuing. Visa founded its crypto advisory service to help clients answer questions like: “how should I enable crypto rewards as a bank?”, “how should I be looking at stablecoin settlement as an acquirer?”, and many others. This will only accelerate over the coming years with the underlying regulatory framework. Five or six years ago it was hard to open an account. Understanding what it means to own a digital asset, and how it all worked was difficult to grasp. Now you open an account with one of the exchanges and there is a full KYC process, you give all your details, passport photos… Some of these exchanges know more about me than my bank!

Today consumers have many options. They can invest in stocks but they can also invest in crypto. Over time, we will probably see more consumers unlocking new financial services built on the underlying blockchain infrastructure.

What does crypto mean for a payments company like Visa?

When we started in this space in 2018 our ambition was to become a bridge between our more than 15,000 existing financial institutions, over 80 million merchant endpoints and this exciting new set of technologies. We started off by focusing on providing experiences like using a Visa card to purchase crypto in one of the exchanges. We wanted to ensure a frictionless experience so customers could spend those assets anywhere they wanted through crypto exchanges that can effectively become issuers with us.

We see this as a big area of growth and opportunity. Today we have over 70 programs at various stages of implementation. Then we started thinking how we can enable digital currencies to run on our network. Today we can transact in over 160 currencies, settling in more than 25 and can move funds from Euros to Dollars, Dollars to Pounds, Pounds to Euros. Now we want to add the capability to move seamlessly between tokenized versions of the same fiats such as digital dollar to regular dollar. This is where our crypto treasury infrastructure work comes into play. It is still in early stages, but we are excited to see where this will go.

On top of that we are actively working with the NFT community. We launched programs to engage with them to find out their pain points and understand how we can enable this exciting new area of commerce. We are also working with central banks, discussing central bank digital currencies, the principles behind them and how we see these products evolving. Finally, we have our crypto advisory service. We’ve had hundreds of inbound requests across all our regions for support and discussion of what crypto can mean and what a crypto strategy should look like. At that point we just decided to formalize it and channel our experience and thought leadership into a new and exciting crypto advisory service.

Do you see crypto becoming a payment mechanism in the future?

If I think about what makes a great payment network, firstly technology needs to be secure, scalable, and resilient. Then you need merchant acceptance, it’s no use having a network if nobody is using it. And finally, you need to have ways to add value for consumers so they can use these products. If you think about Crypto networks when it comes to technology, you have some exciting innovations which have high throughput but are not very resilient. When it comes to universal merchant acceptance if you want to accept stablecoins that run on eight different blockchains you need to have ways to accept eight different formats over eight different networks and your provider would need to facilitate that. It requires a lot of thinking of what blockchain will come out on top and nobody knows. There might be even new ones which will take over so there is very little adoption today and everybody is waiting.

For consumers the question becomes: why would you switch? Will this add more friction to your day? Customers want a great experience, when they buy something online, they want to click yes and receive their goods and services. I would say we’re still some time away from any crypto products having those capabilities or even those hooks for consumers or merchants to switch over.

Can you tell us what you expect the crypto space to look like by 2030?

I think we’ll see several crypto primitives crossing the proverbial bridge and becoming integrated into the mainstream of financial services today. Specifically, I could really see a world where stablecoins become just another way to settle your obligations. I could also see a world where institutional DeFi becomes a viable option and a world where NFTs can unlock new types of commerce for new players and new experiences.

I think mass adoption means that we will just think about crypto as another payment experience, consumption of financial services, or loyalty experience powered by a blockchain or crypto technology. To get there we need collaboration between new technology and innovative players and existing institutions. Visa sees itself as playing a critical role and being that bridge between existing financial services players in this exciting new world of crypto technology, innovations and NFTs.

Chris Crespo
Chris Crespo
Chris is a Founding Partner and Chief Editor at Nordic Fintech Magazine, where he simplifies complex financial ideas into easy-to-understand content. With nearly 20 years of experience in management consulting and financial services, including leadership roles with some of Europe's largest banks, he offers profound industry insights. Previously serving as the Chief Futurist at the largest bank in the Nordics, Chris has sharp views on the Future of Financial Services, Money, Disruption, and Ethical AI in Finance. He is also a guest lecturer at Stanford University, Singularity University and Copenhagen Business School, where he frequently discusses the future of Money, Finance, and Entrepreneurship in Financial Services. As a Behavioral Economist, Chris is passionate about studying how human behavior and decision-making relate to risk. He also delves into the connections between psychology, leadership, and technology within financial services.
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