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There is no denying that the payments space has been transformed in recent decades by digitization, and it’s clear that it’s not even close to being finished. Major credit card companies are allowing payments with cryptocurrencies, and many governments worldwide are experimenting with CBDCs. Add to that the mass digitization of retailers during the coronavirus lockdown, and it’s easy to see that we are in the midst of a transformation. What will the future of payments look like when the dust settles, and how digital will payments go? During the Paris Blockchain Week Summit 2020: Online Edition panel, The Future of Payments - brought to you by PwC, we invited experts to discuss what the future of payments might look like.
Marion Laboure explains that cash that isn’t in circulation is at an all time high, since people are withdrawing it to store value during the coronavirus crisis, but cash payments are decreasing. However, the Covid-19 crisis has also led many shops to stop using cash as a form of payment. The e-commerce market has also grown significantly since retailers had to pivot online during the lockdown periods.
The digitization and democratization of payments is helping to bank the unbanked population around the world by giving them access to financial tools and digital currencies. The majority of users are still using fiat currency, but can explore the new online payment options in order to gain access to crypto currencies and new online infrastructures. New technologies have also advanced in such a way that payments are not costly, it is actually the regulations and compliance that drives the cost. Working with regulators can also help to identify what roadblocks are in the way of improving the payments infrastructure.
Right now governments face competition from card providers that are experimenting with cryptocurrencies, but also governments. Also, since CBDCs would be digital transactions, they would be much faster and continuous, and cost less than printing cash. Although there are benefits for CBDCs, they can coexist with fiat currencies, it doesn’t need to be a choice. CBDCs can be thought of as a means to bring value, transparency and safety to payments instead of a replacement.
Since blockchain technology is new, CBDCs represent a risk because they would be introduced into extremely complex financial systems that already exist with advanced checks and balances. For example in the Eurozone, many of the benefits associated with CBDCs (greater efficiency, transparency, speed) are already present.
Stablecoins would be regulated more similarly to digital money, and would involve less risks because there would be more checks and balances still in place that are currently used for fiat currencies. There will likely be a relationship between stablecoins and CBDCs since governments will need to collaborate with the private companies that issue stablecoins. The future of payments might therefore be more diverse, with tangible fiat, cryptocurrencies, CBDCs, and stablecoins all coexisting and serving their various functions.
