The Future of Payments and Digital Money
A candid conversation on stablecoins, CBDCs and emerging opportunities
“The payments industry should be dull, boring, predictable, seamless, invisible. It’s none of those things. It’s dynamic, flawed and prone to rapid technological shifts.”
That’s how Alistair Brown, EPAM’s Head of Open Banking and Payments, opened this discussion. He was joined by Sasha Pitkevich, EPAM’s leading blockchain expert, and the two sat for a dialogue on the trajectory of the payments industry and the future of digital money.
The payments ecosystem is currently undergoing a seismic shift, driven by the emergence of new technologies like stablecoins and central bank digital currencies (CBDCs) and sweeping regulatory changes. Leveraging their extensive industry knowledge, Brown and Pitkevich outlined a bold, forward-looking vision for digital money, but one that emphasizes the need for clear strategies and use cases for these technologies, backed by user-first design principles.
For those organizations in the payments industry looking to generate value and drive a lasting competitive advantage, their insights offer a roadmap to meaningful modernization.
Evolving Payment Paradigms
“The more we regulate stablecoins, the more we risk centralizing them, countering their very purpose.” — Alistair Brown
Opening the conversation, Brown provided a brief overview of the evolution of digital money, citing the initial failure of the Libra attempt at creating a form of privatized digital currency. Brown notes, “Effectively, the central banking community looked at this and said, ‘We can't have Big Tech getting hold of digital money.’ This was the genesis of the concept of CBDCs. Central banks then spent several years with senior bankers, academics and other interested parties trying to figure out what this should look like. What we've got now is a very interesting next wave of thinking, which is the stablecoin; we’ve neutralized the volatility inherent in cryptocurrencies, and so again we have digital money issued privately rather than by the central banks.”
Stablecoins aim to reduce currency volatility by tethering tokens to fiat currencies on a 1:1 basis, offering stability and operational efficiency. However, much like the CBDCs that run in parallel to them, stablecoins are increasingly coming under global regulatory pressure. Ordinarily, that pressure might drive down demand, given it threatens to put a damper on some of the decentralized appeal of stablecoins as a payments tool. However, as Sasha Pitkevich goes on to explain, there may just be too much upside to stablecoins to keep a good idea down.
Payment Users Want Simplicity and Speed
“From a customer perspective, I don’t need payments to entertain me; I just need them to work fast and cheap.” — Sasha Pitkevich
As Pitkevich explains, there’s a wide appeal in stablecoins from a customer perspective. By and large, customers view payments as a utility; they care about speed, cost and reliability. Stablecoins have those in spades. As such, even if global regulations threaten to remove some of the inherent privacy associated with decentralized stablecoins, there’s enough appeal to continue garnering users. Capitalizing on this will be key for payments providers looking to drive adoption. They will need to prioritize user-centric features like low cost, speed and trustworthiness over backend architecture debates and privacy concerns. And driving adoption should be a major priority, because as the two experts go on to explain, the cost advantages are too promising to ignore.
Driving Faster, Cheaper Cross-Border Payments
“Cross-border remittances are no longer a clunky, error-prone system. Stablecoins make this dream look real.” — Alistair Brown
As Brown states, “Stablecoins address long-standing inefficiencies in cross-border payments, where delays span three to five days due to intermediaries and errors, offering a fast and transparent alternative.”
This is due largely to their blockchain-native nature. Stablecoins rely on decentralized ledgers, eliminating the gap between clearing and settlement. In essence, this removes any complex reconciliations and failures that are common in more traditional nostro-vostro payment processes. This makes the historically slow sectors, such as remittances and trade finance, prime candidates for stablecoin modernization. That said, the outlook for stablecoins isn’t all sunshine and roses, as there are some genuine challenges to adoption that must be addressed.
Key Challenges in Adoption
“The benefits of a reliable, fast payment system already look like the Holy Grail. Only missteps can derail this.” — Sasha Pitkevich
Touching on those challenges, Pitkevich notes that many of them have the potential to arise as self-inflicted wounds. Key among these challenges is liquidity concerns. As she states, “Stablecoins thrive when liquidity and trust are carefully managed.” Poor liquidity management can quickly subvert stablecoins, driving consumers away. There are also security and transparency concerns that must be addressed. If client interfaces are instilled with vulnerabilities, user funds can be left at risk. In addition, transaction visibility — particularly transparent in the case of CBDCs — can raise serious privacy concerns.
As Sasha Pitkevich points out, payments providers will need to be careful to avoid missteps. They will need to be deliberate about implementing robust security protocols for interfaces and networks, and they’ll need to promote transparency through independent audits to reinforce market trust. But when properly designed, the benefits of speed and reliability should outweigh these risks.
Unlocking Business Opportunities
“People don’t care about decentralization. They care about speed, cost and reliability.” — Sasha Pitkevich
To drive widespread adoption, the famous movie quote, “If you build it, they will come,” won’t likely be enough to push stablecoins over any finish line. As Pitkevich cautions, “Stablecoins will need significant marketing and trust-building efforts compared to CBDCs, where governments can enforce adoption through mandates like tax payments.” As such, payments providers would be wise to invest in educating retail users on the stability and benefits of stablecoins.
As Alistair Brown goes on to explain, there are some unique opportunities for innovation among payments providers that should help further drive the appeal of stablecoins. For example, they might look to leverage programmable features to deploy innovative applications across industries like hedging against local currency volatility, trading and liquidity on crypto exchanges, on-chain settlement and Treasury management, and more.
There are also some unique opportunities at play for banks. Brown advises, for example, that due to the decentralized ecosystem in which stablecoins exist, banks have an opportunity to profit via transaction facilitation or network participation models. Alternatively, they might look to offer custody services and manage cryptographic keys for users, opening new trust-based services. Regardless of direction, Brown states, “Now is the time for banks to explore innovative ways to monetize participation in stablecoin ecosystems by offering unique services.”
Global Lessons & Best Practices
“Focus on adoption from day one. Small, deliberate steps lead to success.” — Sasha Pitkevich
Pitkevich and Brown conclude their conversation by sharing lessons learned from their own experiences with digital currency implementation across various geographies. In this context, Brown advises starting gradually. “Payments providers should look to avoid big launches. Start with small, targeted use cases to reduce risk and ensure business cases are sustainable.” In other words, payments providers should look to prioritize pilot programs that align with immediate business goals.
Pitkevich then offers her insight, with a more user-centric outlook. “From the outset, it’s going to be essential to align any technical deployments with adoption strategies to ensure market reception.” And building on that notion, Brown goes on to advise, “It will be critical for organizations to maintain technology flexibility as this space is evolving in real-time. I would strongly caution against vendor lock-in. And as far as specific offerings go, organizations must ensure they remain adaptable to any new and emerging regulatory requirements.”
In Closing
In the emerging world of digital currencies, there are very unique opportunities for inclined organizations to build unique offerings, open new streams of revenue and build lasting differentiation from their peers. However, they need to approach the technology with the right mindset. As Brown makes clear, “Corporate FOMO is not a reason to adopt stablecoins or CBDCs. Organizations need to align these projects with clear, data-backed business goals to ensure a meaningful ROI.”
