Money 20/20 has done it again – it has gathered payment enthusiasts from all over the world (with attendees coming from 76 countries) to speak about payments, financial services, and techs that make the world work faster, be more transparent and inclusive.
The highlight of the event was the keyword #conversation, and what struck me was the need for the people in the payments industry to meet again, physically, to share laughs and sign new partnerships that consolidate this space and equip it for the future of money. This current edition marked my third participation at Money 20/20, and if in the past there would be a lot of buzz around the word competition – banks vs. fintechs, fintechs vs. other fintechs aiming for a bigger share of the pie, this year I noticed that it was all about collaboration and the urgency of developing new payment rails based on open architecture and support crypto use and adoption.
In line with new techs popping out and customers’ expectations, we all agree that money is changing. For instance:
Maria, 7 years old, Romania, reading naturally (as if it was a classical story about Little Red Riding Hood) about Bitcoin’s nascence from a drawing book (thank you Bitstamp for the gift): ‘Satoshi Nakamoto, whose real identity is still secret, created the first official cryptocurrency Bitcoin.’
OpenPayd employee, 21 years old, UK: ‘can I have my monthly salary in crypto’ (thank you Iana Dimitrova, OpenPayd CEO for sharing this example during your Money 20/20 panel).
The youngsters demand fast, game-like, embedded finance solutions, and we need to be prepared to cater for their needs. They don’t think about money per se, but about the experience it enables. For generations Z and Alpha, financial products have become a means of boosting your coolness among your peers, (they like to test new forms of money – tokens, catchy designs for cards and apps), while stirring your curiosity to try out of ordinary stuff. Also, let’s not forget the Millennials, who are often deeply involved in financial problems, showing an interest in investing in housing, savings, and travel, and sometimes distrusting traditional financial services/intermediaries following the 2008 financial crisis.
Are traditional financial institutions prepared to serve them? Some have already started to show a real interest in the efficiency and improvements that cryptocurrencies can offer, to enable these generational experiences.
The message some industry experts sent at Money 20/20 is clear: if we don’t use the services that they’re currently offered by a lot of financial services companies based on blockchain, consumers will never have a cheaper, more inclusive, and diverse experience. Plus, they will never have that transparency and security of their data, and control over their money, as they do with blockchain-enabled financial products. Let’s see what those products are.
Creating products you can’t imagine – crypto explained
Bitcoin first came into the scene in 2008, when a pseudonymous software developer, Satoshi Nakamoto, proposed it as an electronic payment system based on mathematical proof. In the beginning, Bitcoin was seen as a digital payment method that doesn’t require users to hand over identifying information each time they use it. It equalled universal money that doesn’t have to be exchanged at every border; and assured the fairness of a currency that even the poorest people in the world can keep in a digital account without paying hefty fees, rather than relying on cash. Moreover, it promised the convenience of a payment system that makes it possible for online services to change small amounts of money.
In a funny letter addressed to his mother, an IMF economist explains central bank digital currency (CBDCs) to her: ‘the cash you spend at the market may one day be replaced by a central bank digital currency. Think of it as a digital form of cash that you can hold on your phone, in an app called a digital wallet, a bit like the one we use to send messages to each other. You could transfer money there from your bank account, or simply hold balances you receive from others. Instead of sending you a picture via phone, I could send you those euros I didn’t spend.’
A stablecoin is a type of cryptocurrency whose value is pegged to another asset class, such as a fiat currency, like the US dollar, or gold, to stabilise its price. Usually, this is privately issued money (vs. CBDCs which are publicly issued money). Compared with country-issued currencies, stablecoins transactions are available 24 hours a day, seven days a week, anywhere in the world – without relying on banks. Initially, stablecoins were used to buy other cryptos, like Bitcoin, because many cryptocurrency exchanges didn’t have access to traditional banking.
NFTs are unique tokenised representations of digital files that are exchanged on public blockchains. These are issued on a blockchain and are used to designate ownership of a certain asset. Each NFT is tied to some unique data, typically a digital content file of some kind and governed by a smart contract. According to Visa’s white paper on NTs, the process of converting a media file into a non-fungible token is referred to as ‘minting’ an NFT. NFTs are not fungible, which means that each NFT is unique and not interchangeable with another NFT. The interesting fact about NFTs is that for the first time, content on the internet in the form of an NFT can be definitively owned by a specific person independent of a centralised intermediary. At the end of the summer, Visa bought a CryptoPunk non-fungible token to have first-hand experience of the process, while also aiming to help businesses understand NFTs’ potential in engaging fans and boost loyalty.
Decentralised Finance or DeFi is a concept. DeFi aims to eliminate the need to trust centralised parties and thus makes digital services open, democratic, and permissionless. Most operations in DeFi are performed by smart contracts, which are stored on a blockchain and cannot be tampered with after they are deployed. This approach reduces transaction costs while providing high levels of security and privacy. DeFi is well suited to emerging economies and countries with limited access to traditional financial services, providing access to credit, exchange, and investment opportunities. (To learn more about DeFi application categories, risks, and benefits, check out our educational article from BCG on DeFi here.)
Defining a new cast – when traditional finance and crypto collide
The concepts we explored briefly are the most popular. There are some other initiatives in this space (tokens, digital assets, programmable money, etc.), plus variations (retail CBDC, wholesale CBDC, etc.), that stress the fact that blockchain technology and cryptocurrencies have started to transform the future (of finance). Now, not only have the old technology providers and traditional banks began to explore digital assets but also neobanks have started looking into crypto; and as they are figuring out how to get into it credibly, many search for a trustworthy partner. And events like Money 20/20 are the right place to do so.
This I learned from some insightful and inspiring discussions I had at the event with Bitstamp, Zumo Money, Mercuryo, Fireblocks, Copper, Crystal Blockchain, Chainanalysis, Coinfirm, Crypto.com, to name just a few. These guys know their business as many of them have a traditional banking background, most of the time they offer a blockchain-based ecosystem that comprises products that resemble traditional financial services – seamlessly built into applications, they strategically approach risk and embed it into their products, see blockchain/use of data as business accelerators, and are willing to cooperate and grow as a community.
During these three days, I also learned about one pain point they have: the market is very fragmented when it comes to crypto and payments regulations. The current situation we are in today is at an inflection point because we are leaping from analog to digital activity, which is creating new kinds of power and risk. A lot of crypto companies launched by just having a traditional placement services license or an EMI license which allowed bridging fiat spends in the crypto industry. Still, regulators across the world have started to catch up with the technology and they take a technology-agnostic approach to regulation. Countries like Singapore, Germany, Switzerland, the UK, the US, Estonia, Malta are quite advanced in this space.
The financial industry is a dynamic one; powered by politics, tech, economies, people, geographies, environment. With all the things that we have been through lately: COVID-19, payments digitalisation, the trade war between China and the US, states’ sovereignty and will to stay in control of their payment rails (avoiding centralised systems), important breakthroughs in tech (blockchain, DTL, quantum computing), it’s high time we design new payment systems. Systems that are open, transparent, built with risk management and safety rules, which eliminate intermediaries and redundancies, costs, and boost people’s wellbeing. Some bet big on crypto and blockchain tech. Time will tell, but for sure this is an important page in the history of money, marking a new era in finance.
There have been three full days of positive energy and productive meetings at RAI, in Amsterdam. We thank the Money 20/20 team for having us and their courage to organise such a complex event, given the current circumstances. And to you, our reader. Finally, I will conclude by quoting Jack Dorsey, CEO, Square ‘you should come to Money20/20 to meet new people and find those who are thinking about what you’re going after differently’.
About Mirela Ciobanu
Mirela Ciobanu is a Senior Editor at The Paypers and has been actively involved in drafting industry reports, carrying out interviews, and writing about innovation in payments and fintech. She is passionate about finding the latest news on AI, crypto, blockchain, DeFi and she is an active advocate of the need to keep our online data/presence protected. Mirela has a bachelor’s degree in English language and holds a master’s degree in Marketing. She can be reached at email@example.com or via LinkedIn.