DAPPCON 2024: Visa And The Blockchain

Transcript

M thank you so much for coming I know it's a very far away uh for you yeah very excited to be here thank you so much thanks uh maybe for you guys to know a little bit more about Micah she had a very interesting career so far allow me to read her bio it's uh basically M Micah Visa crypto business uh lead for Europe in her position she's responsible for Coop sorry very difficult word which means she's going to help anyone that is interested in connecting with visa when doing crypto activities and at the same time she also worked for Visa in the part of a relationship with government

which makes her role even more interesting because she understands the regulatory aspect what people basically are worried about it and at the same time the technicalities to ensure that we can bring that billion users back to crypto so hopefully I didn't miss anything she studied in London with bachelor in Mast I've been to tberg so very familiar with the region and uh yeah so let's start so of course we're all interested in um um relationship of payment Networks blockchain the evolution banking 3.0 a little bit bias on that topic how is V

approaching the challenges of interoperability between you know traditional and crypto yeah um so at Visa we want to add value to all forms of money movement and that's um whether that's within the Visa Network within viset or whether that's outside of visanet uh outside of Visa n could be a it could be real-time payment networks but it could also be blockchain Networks and so um the way we try to to bridge It Is by connecting the crypto ecosystem uh with our clients and existing uh connections um so our 130 million merchant locations or our 14,500 financial institutions that we work with

um and we do so in in numerous ways right but it's really important for us to be that trusted bridge between the crypto ecosystem and the traditional world and as such we really study these new technologies go in and partner um with companies and partners on both sides and and how do you see basically traditional financial institutions um on like in the blockchain topic itself I mean still a big myth it's like oh crypto no no no please far away or is it something that they're embracing more and if so how are they embracing and and and how are those requests coming to Visa yeah it's definitely still early days for traditional finan institutions um I think probably the majority of people in

this room deal with crypto day in day out and this is not necessarily the case for um more traditional players but what we've really seen over the past year so we started the crypto team in 2018 that we had a phase where there was a lot of educational work um then there was a lot of distrust I think with all that we know that happened with FS um and now what has changed over the past 12 month is really an increased interest um not just from crypto platforms but also from traditional players Merchants fch so the variety of partners that reach out to us that want to collaborate and explore opportunities and Innovations in the space is really accelerating and has been accelerating

in the past 12 months and and what is the number one reason why why do they come to you is it uh uh cost is it uh basic I'm lost uh I have no idea if I'm going to lose my job uh so please please help us to to understand because I think one of the things that's quite interesting the more you understand why they're coming the more well the group of people in our community can actually think about solutions to connect those two worlds yeah I think the the reasons are very different but but what Stakes out is really the demand that they see on the consumer side so um when we talk to our clients we start by saying look into what's the demand on the customer side how many of your bank customers are

are actually using crypto today how much um activity do you see in the space and how much demand is there to maybe invest in crypto assets and so I think the um our business as well as our client's business is very much driven by demand um which is probably one angle um and the other angle is and I'm speaking more for for Visa than for our clients here but we're really seeing the pace of innovation accelerating in crypto so um there is a very different Dynamic and very different pays and the technologies that underly crypto really do have the potential to impact the way money is being moved in the future um and that's something that touches our core business but also touches Financial Services Commerce and

um The Wider space of where value is being moved across different networks yeah um you know it's very easy when you do not understand payments to kind of trying to find the bad guys against the good guys um but there's one interesting element of Visa or Mastercard Visa I mean in general schemes is that you are bringing that interoperability to millions of businesses which at the end of the day they need to sell and if you want to sell you want to make sure that somebody's going to take the goods walk away and you are certain that you're going to be paid so what projects do you see or what initiatives do you see that

could be helping more of those those inabilities that you know it it it helps you to move this money um to those merchants and and and and make them actually feel like okay there's maybe digital Assets Now that I want to I want to receive I mean Visa should not make a difference between euros pounds dollars or whatever the world is claiming right yes so I think one of the interesting projects is definitely diagnosis pay Visa card but oh no no no buy it um but if we maybe I can a a little bit about um the focus areas and how we sort of um entered the space uh and the Strategic pillars then and the activities where we are um active today so um we realized

when we when we started this that consumers as you mentioned want to have an easy way to uh spend that crypto or to use that crypto purchase crypto so we started by entering the space um in the on and off ramp side so making it very easy for consumers to purchase crypto or to purchase an nft using their existing Visa credentials something that everyone has in their pocket today um and to make it very easy for them to participate in that ecosystem and then obviously once you participated and once you in the ecosystem um you may have different reasons of why you want to purchase crypto or NS right it may be because you want to generate more wealth or because you want to make crossb payments or because you live in a country with a

high inflation the reasons may be various but there will be a time where you probably need to offramp again so where you want to spend your crypto um and maybe you don't want to use five steps in doing that right maybe you want to have it all in one place and so this is where crypto Link cards come in where we partner with crypto exchanges and platforms and players like nooses to issue credentials um that makes it very easy for you for you to spend from any balance any crypto balance in the back and the beauty of that is that on the merchant side um these 130 million merchant locations they don't need to be crypto fluent they don't need to upgrade their P systems um they can just use the system that they have today and so on

and off RS have really been the I think the first step into the space for us um but there are other elements of the technology which are very interesting and which can help on this interoperability side um which is around the infrastructure side so um today we transact in more than 160 currencies as you've mentioned um a stable coin or a cbdc in the future is just another currency for us another another form factor basically a digital form of a currency and so um there is nothing that should prevent us from um accepting those new forms of money on our Network um as we accept 160 currencies today obviously they need to have the necessary safeguards uh in place and

they need to meet the standards of a currency that we feel comfortable with um but so we experiment a lot on the infrastructure side to see how can we Leverage The underly blockchain Network um on which the currencies are running on top of so that's a third area and then um a fourth one is around um the existing client base that we have as you mentioned we have a Consulting practice uh within our Visa Consulting analytics that go in and really help um Merchants fintex Banks to understand currency and what are the trends what can they do with it what offering can they bring to Market um and then lastly um Regulators central banks they are also in this

journey um and they probably lagging a little bit behind um even the the private sector so how can we help and engage with regulators and experiment with them in when they develop their own digital currencies so um partnering and going in and developing um poc's and innovating jointly with central banks I mean there is one of course specific um I mean two two comments uh uh one is of course traditional uh regulators and uh traditional businesses takes longer to adopt technology I mean in payments we saw things like TSM uh being the first format of people transacting contactless and then later

on the contactless payments so between the first initiative 2011 uh or even 20 actually 2012 there was a project called Isis in the US which was funny um that involved uh Bank of America and large Telos the three largest banks three largest Telos trying to do payments with contactless and only in 201 what 17 16 when Apple pay truly created that easiness then you could actually see contactless payment taking forward but you guys actually took the effort to even provide settlement in Stables

um which is actually for me even though it's still of course A A A initiative it's a project but that actually says a lot about how much you guys are vested in in the technology itself or the possibilities of the technology so C can you comment a little bit of that sure um our the the pilot that you refer to uh is we uh called the digital currency settlement so uh we have started to test with selected group of um issuers and acquirers to test if they settle uh their obligation with Visa um in a stable coin um today it's it's usdc and so um I don't know how familiar everyone

is with settlement but it's a it's a truly backend process um where uh it really relies on traditional um banking rails today and so when someone ask you what's the benefit of a blockchain technology um you will probably all say instant settlement you will all say uh it's fast um you will say potentially it's cheaper depending on which chain you use oh it's definitely much cheaper and so with today is even though I think it's very uh our settlement system is very um efficient and we've been working very intensively on it for the past 60 years um there are still challenges to settlement uh today when it comes to um settlement windows so settling over the weekend is difficult

um has multiple implications not just technical implications um but also when you um when you're based in particular countries you may have different challenges and so we see a potential that blockchain Technologies can can serve to improve these settlement um pain points that we observe today so this is something we're testing we're very excited about um and uh I think which holds great potential on an operational efficiency point of view well I allow me to add one thing to it because it's um I mean of course in terms of interoperability connections is a it's you know all over connected everywhere extremely interruptible but settlement

is probably by far the largest cost we regular citizens pay in payment because you have the collateral which is has to be made available for the period that the money is not settled between the institutions and that money is just sitting in an account in case a institution fail to then take that money money and repay back so it the cost of that of course it adds up from all this financial institutions all over the world us has what 4,100 banks last time I checked so then add all the banks in the world all financial institutions all your money license all money transfer licenses then all this institutions

basically doing payments putting collateral aside that money could be then reconsidered once you have 24 seven access to to the cash to the settlement so by taking this initiative I think I mean payment enthusiastic for more than a decade in in payment is is massive and and hopefully this is scaling and we're helping to scale and everybody in this group is helping to scale and uh yeah we we we don't have to dependent on traditional settlement but anyway just maybe a small biased view on it um um but then what's missing to we widely spread get crypto to be number one

adoption I mean it reduces so much the complexity on money movement why not just using as a money movement instrument behind the scenes forget about it if it's ethereum Bitcoin dodgy coin I remove that aspect let's just talk about the technology so why not why it's so difficult yeah I mean even though it it um reduces the complexity of money movement it uh introduces a whole whole Suite of new complexity for the user right so um when you when you pay today you just want to you just want to go to a store and pay and it should be easy fast it should work you don't want your car to be declined um it

should be convenient it should be secure um that's not necessarily always the case in the crypto space right you need to bridge uh different change you need to connect your wallet sometimes it doesn't connect there's a lot of complexity and I think people in this room have probably uh been early investors in this technology and spent the time and energy to understand all of it and to our cures and go in and test and explore but the the day-to-day user um who uses who wants to pay and and doesn't spend that much time with crypto um probably finds it very complex and very difficult so um what we learned um from our experience in payments generally is that you need to like fully

abstract the complexity for the user when it comes to paying just like you um when you when you want to get water you just open up your your water tab right you don't look at the plumbing system that's behind the wall and that's the same that we need to achieve in crypto that everything that's so complex for users Gets behind the wall and the way um we achieve that or what are some of the aspects that I think we need to tackle is surely still on on the technology side um there is more to be done on security interoperability privacy um there is more to be done on the trust side I think the cryptospace had a hard time um so even if the network is such is decentralized you need to trust the

application that runs on top of it and so trust is a is an element um but also a a compelling consumer proposition so why should you be using crypto instead of your payment card today and your fiat currency today right what is the added value that it brings to you it may be privacy it may be the control there may be different factors but it needs to be a compelling uh consumer proposition um and then also the merchants they need to be ready to operate and and handle uh these new types of forms of money and so there are still many things that we can innovate and work on um to to solve the adoption problem I hopefully we basically help slightly different that

we do not touch a bit like Skype did back in 2001 um I I was basically user of Skype and I was living in Europe uh actually the us at that time that I had a palm phone with a Skype app and Skype in and Skype out so basically when my parents were calling me in Brazil in a landline I was basically getting that phone call in my mobile phone and a decade later every voice every call is actually with voice over IP so nobody actually had to learn anything different because the back end was changed I think the main thing is by having the car the way we have by having sat main tables as you have we hopefully can start offering

this back end to those that are offering the financial services as they are offering and then we go from terrible cobal Mainframe into you know different ways of organizing uh well blockchains and and then from there then you can have new providers and then hopefully then people get more sophisticated in their Finance but I find it that a little bit more difficult maybe I can return the question because I think I mean I've I've seen most of your presentation before um but I but I'm I'm curious on I think besides the like geographical expansion what can be done where do you

see the biggest point to unlock actually this efficiency um to to reduce the complexity for your customers today yeah so um I have I'm actually in a difficult Journey because I'm looking two customers one is the very sophisticated very willing web 3 uh which is part of our community and the other one I see as my dad every time so my dad every time talks to me he says that you have something in payment but I have no idea I never use and it's every time I try to use it's very complex I don't understand crypto and and and and so on um my main barrier believe it or not is none of those guys in fact is to prove that everything that exists in crypto and

everything that exists in payments or banking has been already set regulated and now we're trying to create new names for existing things I feel like the world is living Silicon Valley where every you know you don't have commercial officer sales officer is a chief Revenue officer renaming things that everybody should know it's you know I sell to those that want to buy um so Regulators have created e-money Regulators enabled monium with digital money Regulators allow Banks to display digital balances in phones for users and the only question is those

that want to have custody and those that do not want to have custody how do I treat them you have already one is called E money license or banking license that allows you to do those things and the other one you don't need anything it's more like technology provided can you ensure that the people that you're bringing to the party are allowed to be in the party and I think that's my main job right now help the party to start help the clean money to come in give like no criminal activities uh no sanction users if I can block them to come in everything else is already there so I I I think that journey of you know taking this myth

away away from um uh you need to be a bank in order to do banking that that that is my biggest and most difficult uh path right now and hopefully we can open it yeah so maybe two more questions because I would love to had some questions from the audience it's a fire chat so we need some fire um so the stable coins of course is living this moment um for good or for bad it's still very USD based um and of course Visa if I recall correctly 25 types of currencies that

you can settled on maybe 25 maybe 23 I heard so many maybe 19 uh but effectively one of the important things is the schemes they basically help us or financial institutions to transact in multiple countries not having to settle in that given C currency because you do that and in fact a lot of people think that's very expensive but normally is very reasonable uh compared even to large chunks of of of money uh change but USD still 99.99 is there anything that you guys can do is there anything that you feel like it's happening out there that could uh help because I think this is one

important element you are in Europe you want to spend Euros you are in Switzerland you want to spend Swiss frank you're in Brazil you want to spend R so how do you see that yeah first I think stable coin has been a really great thing for crypto um a really if you look at the growth trajectory the users I think we have 19 million users of stable coins today um I think it has been a a great push for the or making the technology usable um now it's true the majority of um highly used stable coins in are USD uh denominated the question arises what are you using those stable coins for right so um again different use cases in some of these countries where you want to hatch

against inflation um you want to you may want to have the dollar um or digital version of the dollar um you may want to use it for crossb payments actually a large chunk of stable coin uh payments come from B2B payments cross border um and then um I think a last element is is the settlement element which is an infrastructural one right and so um for different use cases you may need different underlying fear currencies um so it's yet to be seen um which use cases emerges for for which one um for Europe particularly I mean this is the the region where I work in and where I try to to drive the business um I see a lot of potential with the incoming regulation with MAA um we

already seeing um almost every every month a new big um company announcing a new stable coin a EUR stable coin um we also don't know what's going to happen to uh dollaro stable coin in the Euro area so I think the regulation is going to or is can potentially change a lot of the Dynamics um but it is true that in international um payments crossb payments the dollar has been a dominating one um and is is probably likely going to to continue to be one but we are seeing new um stable coins emerging and um there is technically no no reason why we shouldn't also allow these new um underlying currencies on

our network if they meet our standards for um stable coins right which has also not always been the case without regulation there have been many stable coins out there where um we didn't believe they they meet the standards of security reserves etc etc on a opinion base is stable coin the next banking deposits I think it's a it's a question of how we Divi Define a stable coin if a if a bank um issues a a bank stable coin a bank deposit it's technically also a stable coin so um I think the the whole topic of tokenized deposit has been a big a big Topic in in the banking world

in the in the past six month and I I think that comine combined with the idea of tokenization more widely is definitely um an area where we see a lot of opportunity um for the more traditional players to to come in maybe a final question on my side um do you see Visa's role in stable maybe on the settlement presettlement if we can call that or during clearing and settlement do you see a role that Visa could help with a Visa stable uh or is that far away no something we have not thought about it it's a question I've been receiving um from the very first day

okay um but I I'd like to say we're we're not in the currency business uh right as I mentioned before we transact with 160 currencies um and and settle in various currencies so um that would probably be my answer for now okay um fair enough fair enough I mean the network inability First Security trust I mean it's it's fair but I I I would always of course see this as a something that can help a lot uh the middle men right sorry the middle layer which is very costly as well and I think we'd be very interested in in seeing where uh the the demand comes from what is it that businesses and consumer want to use which which types of stable coins um

again I um how many how many stable coins need to coexist um there is um an aspect of of currency that the gains on as many networks they run on and as many usage they have so um I think that's that's yet to be seen how different stable coins will um yeah act besides each other okay good questions to the audience or please lots of questions to Micah please is there anything Reg sorry could you is there anything that Regulators could do to facilitate some

of these things that you're uh proposing so I think generally regulation is is good in that space so the more um clearance there is the easier it is to to operate for our partners in that space as well so um I mean it's not just Visa but it's also the partners who need to feel comfortable so I think um Banks as an example now with MAA they becoming more more interested in offering um digital currency offerings or products so I think um we're actually in a in a in a good place in Europe compared to let's say the US for example so um I think that's a that's a general um aspect which which which helps um to engage and to talk about and

and to and then there is um this understanding element because I think very much of Regulation is done in a in a in a way that is following existing principles and existing thinking and some of that doesn't work as well any anymore for the new um for the for the new crypto ecosystem so what how do you how do you reg how do you regulate a blockchain network these are some of the questions that Regulators are facing and so I think it just needs we continue to work with um and exchange with regulators and I think that's also what's needed and contined to be to be done um with all partners and stakeholders involved yeah I mean Europe is very famous for regulating before even thinking and then the US is

normally taking the time to regulate when things already collapsing so I don't know some whatever whatever best time is I I can comment but it's definitely happening that way there will there will surely be a MAA 2.0 at some point so hopefully okay more question in the back hey thanks both for a great panel um something you said Mike really resonated with me which is not only we should work on obstructing away the complexity from users of crypto and I feel like probably 90% of the people in this room are working on that but the second key

component is about creating compelling narratives and reasons for people to adopt crypto can you elaborate that a little bit more and maybe talk about the drivers is this just cost or what are the possible components that can make us successful there I I don't think it's NE for for end consumer I don't think it's necessarily cost because um if you pay today it's it's for free um I mean there may be fees Associated to your bank account or things like that but you um your payment you're you're paying and you don't pay anything for that um and so I think it's really convenience um and and safety which are the core elements so a reliable system that you know when something goes wrong

then you will get your money back um or there are mechanisms in place that help you um to reverse a transaction or to do something that space I think um that's at least from the experience that we have convenience and security is always like two important factors um I think an additional one that comes into play with with crypto is probably the aspect of privacy and control which is something that has been driving crypto users um which is something maybe that couldn't be um delivered in today's um world it at that standard or that promise that crypto um tends to convey and and hold um so there may be different elements and different users may have different

preferences uh but it's really I think about you know finding out where where is your consumer and meeting your consumer where it's at I mean crypto doesn't equal crypto it's also um different I think where you meet your customers is um you you you match a non-custodial wallet with a card so you match the convenience with the control that you have and that's brilliant um so I think it's these type of value propositions that you need to figure out um in order to meet the consumer where they're at thank you one more question final one please um hi uh so it's a question for actually both of you guys because um I I

know that you're focused uh in Europe and even in your uh nosis pay card there was no uh us colored on the map so I'm I'm uh curious to see if you both feel sort of optimistic in terms of making a payment use case with stable uh stable coins essentially uh happen in us maybe this year or early next year or something of that sort should I take first you can go first then I'm happy to tell you that already works in the US no so I I was in New York last week and if Denver of course we spend with the card and you are able to spend perhaps

issuing to us customers uh and making them able to spend with uh uh Stables so look um maybe maybe not to overshare but we have validated a thesis that is possible and with uh license holders in the US that are willing to do this with us in a similar setting as Europe there is one element that it's not truly self- custodial because the funds would have to be settled to noses pay and then noses pay then settles to the payment schemes so that that door was not

necessarily the ideal one and there's multiple reasons why they wanted to do that and and therefore we have decided not to move forward yet with the US uh setting we are exploring different ways to issue in the US it is possible technically it nothing is preventing us we have all the Integrations necessary to do so probably with some limitations around ATM withdrawals and things like that uh but to transact Us customer having balances and spending in the US yes um do we get clearance from Regulators in the US to do a this here bluntly if I would start now probably yes um do we want to do that in the US this year that's something else

and I think that's a question that I don't think it involves much on the technical Integrations and and the complexities uh with Regulators it has more to do with scalability cost of growing the business in the US which is a world itself but I I think it depends on the regular regulatory environment and no one knows how how fast and in which direction it's going to move I think the the latest week weeks have been positive um so excited to see how you know how we how we'll leave this year um but ultimately we're we're we're driven um and and always very closely monitoring these regulatory developments which which

Drive our decisions of what we do in particular markets yeah well but good point good question I would like to thank you Micah for coming you're pregnant taking all the energy to one and uh and and yeah 75% uh ready uh baby with you um we really appreciate actually all the help that you guys have been giving us especially you um for for not only launching the card but accelerating with a bunch of things internally so happy to have you very excited to um see where the parip gets us and how we can grow it further so um it's a great

partnership thank you for that thank you thank you guys