The U.S. presidential election is approaching, COVID-19 cases are seeing a new wave that could crash through the global economy and bank earnings continued to tell a story about consumers surely and steadily shifting their spend. Karen Webster told Daniel Gouldman, co-founder and CEO of Ternio, in our latest “This Week In Payments” conversation that there’s important payments news every week, but this one seemed particularly busy.
Gouldman agreed, although he noted that since Ternio is a global FinTech blockchain platform, he filters the news through the view of cryptocurrency and the fundamental sea change he sees as underway in its use.
“Because of the nature of what we do in that we interact and [that] we’re interoperable between cryptocurrencies and traditional fiat currencies, from our point of view, it’s kind of like the tectonic plates are forming underneath the surface no matter what,” Gouldman said. “And they’ve accelerated and accelerated, and now it is an inevitability — there’ll be just digital money.”
He sees that inevitability play out across headlines and segments because Gouldman believes the crypto future isn’t coming, it’s already started.
The New Mobile Consumer
Webster said that what bank earnings this week pointed to is a shift in spending behaviors that we’ve been documenting all year. Consumers are trading credit for debit, spending less on travel and more on home goods and are buying things online far more often than in-store.
Gouldman added that consumers are simply becoming accustomed to digital spending and digital interactions with money. Mobile experiences are no longer exotic or unusual, they’re becoming day-to-day interactions with platforms like Venmo. He expects that acceleration to carry forward as it already has over the past decade — but at a faster pace because of COVID-19.
“Consumers are embracing [change] because the experiences are very good,” Gouldman said. “Your merchants are providing a good experience and it is something that consumers feel more comfortable with. So, transacting in a digital manner is something that I think now consumers take as just what they do.”
And he believes that’s something they’ll be increasingly wired to find a better way to do going forward, which should create an acceleration of blockchain technology.
Consider the growing use of gig workers in an on-demand economy. That will mean paying more employees instantly with a push to card, but Gouldman said that’s a low-cost system but not a no-cost one. By contrast, using a blockchain-based push-payment system would create true no-cost mechanisms to instantly move money to gig workers.
“Whether it’s Uber or Lyft or Postmates or wherever, they will have the ability to have a literal peer-to-peer connection between themselves and their contractors without having to pay a bunch of middlemen in between,” Gouldman said.
Building New Business Models
Gouldman said a long-time mistake people make when talking about cryptocurrency is mistaking it for bitcoin.
He said bitcoin is a use case of cryptocurrency, but major players are increasingly embracing the idea that cryptocurrency in general is a new, faster digital rail. An ever-lengthening list of big players are starting to realize they need to wrap their arms around that.
For instance, J.P. Morgan Chase has its proprietary Onyx coin that it’s now moving to commercialize. Meanwhile, PayPal is moving to make crypto spendable, as are Ternio and Visa via their recent fast-track partnership.
Even firms like Wells Fargo and Bank of America, that have historically been holdouts when it comes to embracing crypto, have been pushed to start seriously investigating it. Gouldman said that’s because banks are increasingly realizing that cryptocurrency is coming, so it’s a reality they have to adapt to — or risk being disrupted by.
“Crypto is happening no matter what, and now companies have to decide to adapt to this new reality that is already happening,” Gouldman said. “The train is on the tracks — it’s gone. So either you’re going to get left behind or you’re going to find a whole new business model that you didn’t know existed before.”
He said blockchain allows for startups that exist on an uneven playing field to compete in an asymmetrical way against the largest financial services providers in the world with solutions that are “better, cheaper, faster” — and now becoming more accessible than ever.
However, Webster noted that no matter how fast or cheap the new rails are, they aren’t better if they lack endpoints where consumers can actually spend their crypto funds easily and directly. She added that building an acceptance model and the necessary endpoints aren’t insignificant challenges. Rails need to connect to accounts, and without both sides of the network in place crypto can’t ignite.
But Gouldman said those connections are already under construction. For instance, Ternio’s recent partnership with Visa is building those endpoints, as is PayPal’s recent crypto expansion and the Chinese government’s embrace of cryptocurrency. From where Gouldman stands, it’s just a matter of time before we see full adoption.
Gradually, Gradually, Suddenly
That said, Gouldman can’t say what the exact timeline for what comes next looks like. As is often the case when big shifts are underway, progress moves very slowly before seemingly exploding to a place where everything happens all at once.
However, Gouldman said, when that explosive ignition point comes is anyone’s guess — and there are hurdles to overcome. For example, the privacy (or lack thereof) with crypto remains a nagging difficulty, as there’s a whole subset of crypto enthusiasts who value digital currency as a mechanism for protecting anonymity.
Gouldman said the problem is that blockchain’s structure actually allows for unprecedented transparency such that it would be easily possible for the government to track every single purchase a consumer has ever made via crypto. He said that’s unlikely, but the issue remains a tension point.
But despite such concerns, Gouldman believes changes are coming — spurred by consumers with digitized spending habits and institutions looking for a better way to move around funds.
“I think we’ll look back at this and in a couple of years — I don’t know how many — tapping into cryptocurrency to move funds will just become very normal,” he said.