The Future of Modern Money Movement

Episode description

What does the future of Modern Money Movement look like? Our guests explain how they’re un-breaking banking infrastructure and winning the battle for real-time, why local solutions are the gateway to realizing global payments, the unlikely friendship between cards and alternative payments, and what

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Episode Description

What does the future of Modern Money Movement look like? Our guests explain how they’re un-breaking banking infrastructure and winning the battle for real-time, why local solutions are the gateway to realizing global payments, the unlikely friendship between cards and alternative payments, and what global B2B payments has to learn from new technology solutions. Can we define the future of a movement in less than fifty minutes? Tune in as we do exactly that.

Episode Transcript

VO:

This is Forward Exchanges by Nium, what’s next? A Modern Money Movement, one global conversation at a time.

Siobhan O’Neill-Schwenk

Hello, and welcome to Forward Exchanges from NIUM. We know you’re trying to stay on top of fast-emerging changes in global payments when it’s all you can do to keep up with your day-to-day challenges. Hi, I’m Siobhan O’Neill-Schwenk, and on this podcast, we are joined by trailblazers and veteran players to investigate the real driving forces that are modernizing money movement and what’s building, or blocking, it’s momentum around the world.

Whether you’re new to global payments, a digital transformation veteran, or you just want to hear some great advice on what strategies create momentum in the global digital payments revolution, then this is the podcast for you. Today, I am joined by some very special guests, Frederick Crosby, chief revenue officer at NIUM, Rom Ramachandran, senior VP and head of new payment flows A-PAC at Visa, and Marcus Treacher, CEO of CB Investment Growth Holdings and board member at ClearBank. The trio are here today to discuss the future of modern money movement.

Good morning gentlemen.

Frederick Crosby

Hi, I’m Frederick Crosby. I’m the chief revenue officer at NIUM. NIUM being a, uh, global payments platform for h- facilitating modern money movement.

Marcus Treacher

I’m a director on the board of ClearBank and also a director on the board of RTGS Global. ClearBank is a whole new way to think about, uh, core banking of FinTech’s and, um, branch institutions and RTGS Global is a, a new global network supporting cross border payment. Uh, Marcus Treacher.

TR Ramachandran

I’m Ram. I’m the senior vice president and the Asia Pacific head for new payment flows here at Visa in Singapore. And new payment flows, when we talk about new payment flows, we are talking about all the ways to move money that fall outside the traditional consumer base and merchant with the Visa card. So it’s almost a definition of exclusion

and that’s what I do, which is cross border B2B, whole bunch of new exciting stuff that we are beginning to travel this space in.

Siobhan O’Neill-Schwenk

Excellent. Well, thank you gentlemen. Thank you for joining us. I could start by asking each of you about your roles or biggest accomplishments, but I think for most of our listeners, you need no introduction. So I’m gonna ask you something a little bit meatier instead. Global payments is where each of you have been cutting your teeth for 20 years. I’m curious in a, just a few words, what would you say the most formidable opponent that you’ve faced in this space has been?

Frederick Crosby

Yeah, I like to say inertia. So many people have just seen the world change and everything become much more global and still kind of work with old fashioned ways that cost them money, time, lose customers, upset employees, and just trying to make people more aware that there’s alternatives out there for them to, to really work on is probably one of the bigger ones.

TR Ramachandran

Yeah, I’d say the most formidable opponent for Visa is cash. Cash and the analog processes associated with cash. Even in the year 2022, as we speak, there’s still so much money movement that uses the same infrastructure from decades ago. And from my vantage point, the bulk of payment digitization has been in the consumer to business space, but peer-to-peer, B2B B to little B, government to consumer, there’s still too much friction while moving money. We are overcoming this by trying to expand Visa’s reach as a network to digitize these other payment flows. And the size of the opportunity is staggering, and I mean in AP alone, the markets, which I handle it’s about $80 trillion. So that’s, that’s a lot of, uh, pick and shovel stuff still to be done.

Marcus Treacher

I guess my, um, biggest opponent, challenge is awareness. So most of the market has kind of got used to things being substandard and really waking people up and waking, you know, market participants up to the, the kind of payment experience that really we should be demanding is, um, is quite a job. But once people are aware of what’s possible and can look at the current world objectively, you kind of see the problem and then we can move more quickly.

Siobhan O’Neill-Schwenk

I have heard the term modern money movement thrown around a little bit. One of the things that Frederick, you talked about recently as, as recently as, at money 2020. You’ve

sort of, NIUM has sort of been trying to come up with a framework to sort of define what money movement is today. And it seems like there are four specific aspects that you’ve been talking about. And I wanted to start with those as a sort of a basis for this discussion.

Frederick Crosby

So modern money movement, what’s going on at the modern age? Well, it’s global, much more global than it’s ever been. There’s technology out there that you have to adapt to. We live in a API riddle, the universe out there where there’s a lot of automation and things that you have to connect with, though technology is another big component. It’s fast. We’re no longer the days of take three days to deliver to another country. It’s real-time, happen just in minutes, but all the things also add to a layer of complexity where it- to accomplish all those things and accomplish that all around the world, it makes it hard. So you have to make sure you’ve got a platform that can adapt to that as well.

Siobhan O’Neill-Schwenk

What I’m hearing is global. It’s a global aspect. There’s the technology aspect. Do we have the right technology in place for these systems and rails to talk to each other? It has to be real-time. It has to be right away. It has to be now. And there’s a level of complexity-

Frederick Crosby That’s right.

Siobhan O’Neill-Schwenk

… there that has to be accounted for. So let’s start with global. Frederick, you said recently, and then in the modern era companies and businesses are global by default. And I really liked that and I thought it was highly evocative. Tell me what you think that means.

Frederick Crosby

I think the world’s changed, like everyone would recognize in the last 20 years to an incredible amount where globalization used to just be for the biggest of big players, when someone would go ahead and move a- a company factory to another place, but it’s no longer like that. Everyone from the smallest to the biggest has so many components of their business in different locations of the world, employees, customers, suppliers, designers, everything. Marketplaces have extended that. So business is global, but money’s still highly localized, right?

Like it’s to, to have this facilitation of money moving between all these places, you gotta go through all the regulations and understand very risk levels and, and make sure you’re not involved in any money laundering or things like that. So it’s this really

challenging blend where you have businesses being global, and money being local, and the business is stuck in between trying to manage this gap in between, uh, their employee’s customers and suppliers of themselves,

Siobhan O’Neill-Schwenk

Ram I- this is where I think that your experiences in the A-PAC region that you’re currently overseeing can be instructive. Can you give us some examples of how this sort of fragmentation that Frederick touched on is, is playing out between countries? I was curious to hear sort of what some of those ways in which that plays out on a global scale that you’ve seen might be.

TR Ramachandran

You know, as Frederick said, it is a global challenge, but it’s also local. I mean, it’s, I would not underestimate the local problem as well. In 2020 when Singapore was in lockdown and people were being encouraged to stay home by the government, for 80% of accounting and finance staff were still going into the office to process paper documents. And this is a source from the Business Times in, uh, Singapore. And the pandemic has really moved the whole world into digital at a faster click.

I mean, let’s take a small business. If you didn’t have an eCommerce storefront, you weren’t going to stay afloat when all the shops had basically closed, but that was just the front end. On the back end, every- everything was, and most of it still is on paper. And now when you move it to the global sort of context, in terms of fragmentation between countries, this is something we encounter a lot in our region.

If it’s gonna be fast, secure, and convenient to move money, you need systems that are interoperable, that talk to each other. A business should not have to sign up for a whole new system every time they need to send money across a particular border. Right? And let’s talk about the fragmentation, what it means in real life terms, you know, in Asia, Pacific is very common for people in AP to work outside their home country and send money back to their families.

Of the $2 trillion or so in annual cross border flows to consumers and small businesses, AP receives mo- more than it’s fair share of about 45%. And we are the largest net receive region in the world for [inaudible 00:09:09], but even so we are dealing with processes that are complex, involve multiple parties, can take several days and there’s no certainty on whether you get your money or not. In a part of the world where we literally run our daily lives from our mobile phones day in and day out. And there are 2.3 billion or something like that mobile wallets, money movement still unfortunately has not caught up.

Siobhan O’Neill-Schwenk

Frederick, I know that the issue of speed has presented some pretty interesting and unique challenges for neobanks and the like, which are a lot of our customers who are trying to make real-time payments happen. What specifically is the challenge with speed?

Frederick Crosby

It’s just going back to the way things were built decades ago, which we can move fast, right? And it’s not just neobanks, it’s, it’s businesses wanting to pay the gig workers or freelancers or remitters as Ram said, who are just trying to connect one to another. The reason payments used to be slow and can still be, if you choose to go on slower rails is because there’s this old system called the correspondent bank network often referred to as using the swift network as well, where banks would trade with banks, would trade with other banks to get money from point A to point B, revolutionary 1970s. That was a long time ago.

There would be cutoff times, drop off times and then internal countries, but also, uh, internally countries would have a very slow disbursement network. I mean, the US is kind of almost infamous for, for taking so much time to settle funds. And that’s when you send from one country to another, take 1, 2, 3 days, was it unusual? Like, “Okay, I sent you money, be there in three days.” That, ridiculous in this digital age, right? It- it’s just not needed anymore, we’re, real-time payments are today. Like you can send money from point to point and many parts of the world have to settle in, in minutes or seconds even. And we- we enabled it to over a hundred countries on the NIUM system, for example.

Siobhan O’Neill-Schwenk

Okay, Marcus, you’ve been very quiet and you’ve been very patient and now I’m gonna pick on you. (laugh) So let’s start with some recent history, a recent headline that I read, and it sounds a wee bit alarming to me, but you tell me, “Citibank wired 900 million to a hedge fund by mistake, the cause a set of email approvals and legacy software that didn’t catch the error.” And this is in an isolated instance, companies spend millions of dollars pure in audits and many more in fines and less revenue for not tracking payments correctly. Email approvals, that struck me as unbelievable today, and you’ve recently been writing a series that starts with a very simple yet provocative thesis statement, why banking infrastructure is broken? And yeah, it sounds like it, (laugh) so-

Marcus Treacher (laughs)

Siobhan O’Neill-Schwenk
… broken how? From where you sit.

Marcus Treacher

Yeah, so as Frederick was saying, um, a few things are fundamentally wrong with the, um, the way banks move money today. First is the technology that links between banks, it’s 1970s, it’s based on sending messages, kind of carry a picture very quick now, but essentially you’re sending a message from one bank to another and often changing those messages together. When you do that, things can go wrong. When you’re messaging between each other, you can miss, you can misread. You can misinterpret. If you think of this podcast today, there’s information moving between, you know, all five of us very, very quickly in tiny packets, it happens. It doesn’t go wrong, nothing lands on the wrong laptop. It’s all coming to our laptops. It’s been recorded properly. And that’s because the digital world runs on the internet model, the IP model. And really we should think about moving money in the same context.

It should be possible to move money cross border from one end point, it could be, I don’t know, Zimbabwe to an end point in Chile, just like information moves today. Like it’s moving today with this, uh, this podcast that doesn’t happen in the banking world at the moment because the legacy of technology and the methods, the practices, the way people think are very 1970s and the world outside banking has moved on very, very quickly to become digitized and interconnected and global and banking hasn’t moved with it.

The other problem is the way banks think about themselves is as lenders, not as providers of technology to hold money and move money, which means they’re kind of conflicted about how they think about payment companies, innovation companies, FinTech companies, um, even platforms. On the one hand, they wanna help them. On the other hand, they feel like they are competing with them. So the future really lies in rethinking what banks do in the payment domain, and also rethinking payments as more of a- an internet concept whereby it’s okay for value to move across several currencies in a microsecond to get from the payout in country A, to the receiving machine, maybe in country B

Siobhan O’Neill-Schwenk

In all of the preparation that I’ve done for this and several other episodes, whenever I ask people in the abstract, why hasn’t this been fixed yet? It’s 2022, not 1982. (laughs) The first thing I hear is a heavy sigh. “It’s so complex.” And I hear that, but why is this? What, what specifically does complex actually mean? Because to me that could mean a lot of different things.

Frederick Crosby

Well, I think you look at it in a couple ways. One referring to what Marcus was talking about with this, you know, old bank technology, trying to make all move, banks move in one direction at the same time, that’s a feat. Like that’s hard to get all these various

countries with all this type of industry moving the same way. And then when the private sector businesses try to go in and solve for it, they think they have to do it alone. Or I gotta go find out how to taste the blob, but oh, shoot! Now I’ve got a freelancer in Brazil and now I’ve got a supplier coming from Thailand. That makes it like a really uphill battle. I mean I have to think about all those various unique, local payment methods that I was talking about into, when there’s solutions out there. People don’t have to make it complex, but they haven’t realized that there, there are other alternative methods that you could get money there that are still safe and regulated and fast.

Siobhan O’Neill-Schwenk

For you Ram and to you Frederick as well, B2B payments Ram, you mentioned earlier, and I know that that’s been a particular interest to you too Frederick, a- and there are some unique challenges there as well. I believe Ram, I can’t remember how you described it, but something about being in the dark ages. (laugh) Um, what is B2B up against here?

TR Ramachandran

You know, apart from the very valid points that Marcus and Frederick made, um, sort of messaging protocols and movement of money, I think the other, in distinguishing characteristic of B2B payments, right, is that movement of money and movement of data need to be synchronous. That’s a fundamental tenant of B2B payments, right? If I’m a importer sort of paying somebody in Brazil to get something over to Singapore, I- that person who’s exporting also needs to know what the payment is for.

And honestly, there’s 1970s, 1980s, I don’t recall when it was, but whenever these systems were built and this messaging protocols were built, they were built to transfer tiny packets of information, which is only saying, “Okay, debit my account, whether it’s Nostro or Vostro, whatever it is and credit something else, that’s it, debit something, credit something, right? Very often we find that our clients and customers are up against, “Okay, I’ve got the money. I don’t know what the heck the money is for.” Right. And I haven’t got the details of the invoice and I haven’t got details of the payments and gig workers Frederick, since you mentioned, right, do hundreds of jobs. For example, for Google freelance software developers, they get one account credit for $50.

Is it for the first job they did, 17th job they did, I have no idea. So movement of money and movement of data needs to be synchronous. And consequently messaging protocols need to address that issue apart from the real-time nature of it, which Frederick pointed at. That’s a key sort of problem to be cracked in the B2B space. Not only that, that data needs certain attributes to be valuable, it needs to be accurate, right? Sending party, receiving party need to get the same data without any loss in translation. It needs to be proprietary and lead to sort of embellishments that are hard to copy. And it needs to be expansive to create a network effect that enhances the experience, you know, very much like you would get on the B2C side.

Siobhan O’Neill-Schwenk

I personally am having flashbacks to my own career and having had a production company in Mexico and a post production company in Prague that we were working with and the team on m- in Mexico, we were supposed to start shooting. And they were just sitting there for a week because they were waiting for the check. They were waiting for their deposit to be transferred. Possibly, I have a little bit of PTSD about that incident (laugh) but-

TR Ramachandran (laughs)

Siobhan O’Neill-Schwenk

But I’m remembering that now and remembering what it took. And then when the payment finally got there, they left off a zero and it was just, it was a mess. Frederick, does that sound familiar to you?

Frederick Crosby

Oh yeah. Oh yeah. Look, it’s… What’s funny for me is I’ve been in cross border payments for nearly 20 years. I started on the consumer side with PayPal. One of the first people that really helped facilitate cross border payments. The consumer world’s been kind of figured it out, because there’s been these platforms that people can go work on independently. But what Ram has brought out is the fact that businesses have gone so automated and have so many other systems. And of course they have their invoice and PO things. You don’t have an invoice and PO in your personal life, businesses do.

So to connect all these things have kind of left them thinking, uh, it’s in the dust, that modern API world helps solve for that. Right? You can now have these systems co- integrated and have payments. Plus there’s larger amounts that you’re working with too, for a personal world. You’re, you know, selling 50, $25 here, $75. You just talked about a number with a lot of zeros in it. So businesses are also now looking for platforms that could support that.

Siobhan O’Neill-Schwenk

Marcus. I know that you originally came from the settlement side of real-time payments, which is a very little innovated area, which could probably stand a little more of it. And you’ve a pretty broad background in customer success and you’ve written at length about, you were writing about how payment rails are kind of the lightning rod for institutional change. So I was curious to know what you see as the way to success to fixing it, like, how do we, how do we get closer to this vision of real-time money movement that we’re talking about?

Marcus Treacher

Yeah, sure. There are couple of things, I think first off changing the foundation is hard, but it has the biggest impact. And again, going back to the internet model around, um, the year 2000, just rethinking how fundamental data moves, enabled everything to happen, this session, the apps, now phones, et cetera. The insider of things, et cetera.

So I do think that solving that deep, deep layer where money is held and money moves, they, between classical bank today using SWIFT that’s the key, the problem is how to do it. And as Frederick calls out, there are so many banks and so many connections and so many projects, so many ideas. Moving everybody along incrementally to a better world will take a very, very long time and cost a lot of money. So the key here I think is to allow the innovators to move quickly at their own pace and enable them to do that by the adoption of very, very simple, clear standards, again like IP.

So ISO 20022 is my favorite, bit of a mouthful, but basically it’s a way of organizing information and a way of labeling information. And that standard allows developers to create APIs, which are, you know, application program interfaces, allow programs to talk to each other as we’re talking today, rather than sending messages to each other. I think purely on those two platforms, you can then give the ownership of the problem to the creative people in play like the guys at NIUM, for example, who will very quickly come up with really high impact methods to move information and money together immediately with the API and delivering the information with everything required for that payment to be understood, interpreted, paid, or even queried in the moment without losing, you know, 900 million pounds or whatever the number was.

I think that’s the trait and I think if we can do that, not so much at the surface where, you know, we all see the apps in our hands and we make these payments on our phones, but right down in the mantle, right down into the bedrock of the payment and the banking landscape, how central banks hold money, how ledgers move between different currencies, how you connect currencies together using that direction, c- connection model.

How we move away from legacy messaging, which is kind of enshrined in health and SWIFT works today. And even how we move away from central clubs. So in a much more, uh, what’s the word balkanized world where the world is much less aligned and it will not, it will be global, but I think it will not be as aligned as it has been the past 20 years. You really gotta think in a much more open way about creating these paths so people can pay each other and work with each other all over the world without relying on central systems in Brussels or, um, or the, or the, or the east of USA. That’s really important. It’s the foundation standard and leveraging the APIs that the innovators do their thing, and not try and police it with these, uh, grand projects that, um, everybody likes in the banking industry.

Siobhan O’Neill-Schwenk

Because I’m kind of a visual learner. Frederick, I know that you probably have some concrete examples of where this is actually working right now. Do you have an example of it that you were comfortable sharing?

Frederick Crosby

Yeah. I mean, there, there’s different ways of, of doing this, and that was a great setup by Marcus. Like sometimes you just have to come up with your own innovation as a private company, like we’ve done with Indonesia. Other times, you know, at least chunks of the countries can move in lockstep like Malaysia. You know, it helps when they put together a facilitation to help settle locally in seconds, that we could just connect to and take some off of the work at our play. And we just have to keep adding those country by country opportunities into one platform. So they could connect with one group if you’re a business and have it settle everywhere in minutes.

Siobhan O’Neill-Schwenk

Ram, if I understand it properly, Visa has been fighting this battle on several fronts for over 60 years. From your vantage point, how is your team working to drive global payment innovation at the regional level in order to try to drive some of that change and fix what’s broken globally? It sounds like Marcus and Frederick are talking about this sort of top down, you know, let’s talk about the standards approach. Is that something you’re working with to try to drive that change? Or how are you approaching the problem?

TR Ramachandran

Yeah, first off, let me say, I completely agree with Marcus that standards are super important in terms of sort of not having a Tower of Babel situation where you have 50 different countries going to do their own little, not-invented-here sort of payment system, but you know, the crux of this problem is so interesting because for money movement to be effective, it has to be global, it has to be interoperable, but it also has to be local because ultimately it is the end users who decide what technology succeeds or fails. Right.

And we’ve seen that in the B2C space, time and time again, and people are reluctant to sort of embrace change at an end user level. Right? So if you think about what the problems of merchants are, for example, so let me give you a consumer facing example, merchants want to accept cross border payments because obviously you want, if you’re Amazon in India, for example, you want somebody in Singapore to sort of buy off your platform as well. But how do you prevent the fraud that comes with somebody unknown using it without a second factor authentication?

And that’s an example of what I mean by money can move, messaging can move, but you also need to solve what is the destination sort of pain point. So you have to be almost global by intent, but local by design. And that’s the sort of, I think the holy grail

and which is why we should not oversimplify the problem. It’s not because it’s just a bunch of 40 dirty bankers who haven’t figured out the solution in 35 years, it’s a little more complex than that, right. And which is what makes the prize so compelling, which is why there’s so many different people trying to solve it from so many different angles.

But the word of caution I would have is it’s like that old story of, you know, the five blind mind, blind men trying to describe a camel by touch and feel. And each of them had a sort of different description of what a camel looked like. So having commonality of standard, but having that local design is sort of Uber critical, in my opinion.

Siobhan O’Neill-Schwenk

I’m reminded of the VHS or beta wars back in the eighties. Okay. Okay. I’m dating myself here, but there was no argument that beta was kind of the superior as it were quality. You know, it was better picture quality, whatever, but consumers really liked VHS tapes. And that’s really what drove innovation in that space for 15, 20 years. So I’ve heard a lot of talk about alternative payments in all of this. Frederick, how do you define alternative payments? Cause it sounds to me like, like a lot of that VHS or beta question is kind of, is- is kind of replicated in this alternative payments landscape.

Frederick Crosby

Yeah. That, it’s a good point. So most of our discussion day has been really bank to bank type facilitation. One other element of modern money movement is this plethora of alternative payment methods, often E-wallets. I talked about PayPal back in the day, this is one of the original ones, but the world’s adapted so many other local or mobile wallets out there where they wanna hold their funds. You look at a country like China, Alipay becomes this ecosystem that people move funds through. And of course, Visa has created capabilities to connect to a lot of these different methods as well, or move money into, to, uh, a virtual card, into a credit card. Money moves in so many different ways now than it used to. Uh, the world banks is 45% of global consumers use a mobile wallet and 18% rely on credit cards online and offline to facilitate these kind of B2B payments out there.

So it is changing a- and cash hasn’t gone yet either, right? While we like to think everything has moved and gone digital, cash is still really relevant in our lives, it’s not always like the, the countries that are more on the merging end, and Japan’s still a very… Oddly, Japan, one of the most advanced country in the world is still very cash oriented. So many different things going on out there in terms of how money’s gone, that it, uh, to borrow markets in a balkanized world is not just in a standards is on the preferred method of local delivery that Ram referred to that also makes this an interesting dilemma to fix.

Marcus Treacher

No disrespect meant to those of us who are considering putting our money in our mattresses after all of these conversations. (laugh) I kid, I kid. Ram, did we forget anything about alternative payments? I know that this is an area where A-PAC has been driving a lot of innovation.

TR Ramachandran

Yeah. And look, I’m a huge fan of alternative payment and we should not call them alternative any- anymore because we should call them, you know, the here and now real- time payments. Here’s the problem again, and I’m, I’m, I’m biased towards [inaudible 00:29:38] so forgive me for that. Again, you have a thousand flowers blooming in the real- time payments world and each of those and some of the sort of institutions beat the BIS, beat a whole bunch of others, sort of advocating for standards, but nation states quite rightly think that their standard is the best there is. So you have this unique problem where there’s very, very innovative and very clever, real-time payments architecture in most of Asia Pacific, right. Which is the region I’m familiar with.

Now, problem two, you’ve stopped using traditional payments and using a real- time payment, which works super well in your own geography. Now you’re a domestic worker from Philippines, residing in Singapore, you wanna send money back home from one mobile wallet to the other, using an RTP network. How does that work? How do RTP networks connect to each other and what sort of common protocols do they have? So that’s sort of a second order problem, which is got created now.

So again, it’s back to, okay, it’s my system versus your system and then you need a translation layer or an alias directory, which converts sort of, you know, my language into your language to help recognize the movement of that money. And I’m not a sort of, um, you know, soothe-sayer but doesn’t make a rocket scientist to tell you that, that’s not gonna work. So you need interoperability of that standard and almost like a network of networks writing on top of that in order to facilitate seamlessness of that money movement, both for mobile wallets and for real-time payments. So that’s the sort of, the more we, uh, dig into it, the more, the second order and third order problems that will, uh, come to the surface.

Siobhan O’Neill-Schwenk
Marcus, I see you nodding, did you wanna weigh it in here? (laugh)

Marcus Treacher

Yeah, totally, um, completely agree with the, the, the points you’re making guys. I think one of the exciting developments in the, um, the past few years have been the idea of interconnecting country ledgers, ’cause ultimately when you move money across border, nothing is moving. Ownership is moving, but, um, what’s happening is, is an equal and opposite movement of bond currency in one geography with another currency in another

geography kind of coordinated. And that’s where most of the problems lie in managing that, that flow.

So ideas like connecting those central bank ledgers together so that the money fundamentally moves at exactly the same time. Maybe even cryptographically proven and controlled so that there’s no message, nothing to chase, nothing to worry about, nothing to go wrong, the dollars move if the Yen moves and if the Yen doesn’t move, the dollars won’t move. And that’s something that’s happened, uh, or is being worked on in a number of experiments, projects and, uh, pilots around the world.

My time at Ripple, we worked a lot on what’s called the Interledger idea that just, does just that, connects together. And what I like about the idea back to my other soap box is that it’s simple. I think the danger with the current or trying to improve the current situation incrementally is that we’ve inherited lots of stuff, how banks work, how they think, how they connect together. The dangers layering on that stuff and creating something that really is quite difficult to manage going forward. I think the, a great way ahead would be to kind of go back to basics, correct where there’s something fundamental we can do better, like connecting together different currency ledgers of different countries and use that to kind of restructure a much simpler, uh, model for moving money around the world.

And that’s how you get that shift between things being complex, difficult, troublesome today, and the real Nirvana of a media, you know, low cost, very high volume, intrinsically reliable movement of money and value across border.

Siobhan O’Neill-Schwenk

Ram, I wanted to ask you, this is kind of where you come in. You’ve been recently writing a little bit about innovation across the payment processing value chain. And it’s mainly about moving beyond the form factor of the physical card to these rails of networks. Can you contextualize this maybe a little bit for us, particularly in light of what you’re seeing across A-PAC. I was curious about one of the things that you wrote about was there’s, you know, innovation in areas of low card penetration. For example, you were talking about some markets where cash is still king and where people may not be comfortable using cards. Are these the kinds of use cases you’re trying to solve for, or is it something different?

TR Ramachandran

That is certainly one use case, but the, let me just step back and tell you the underlying philosophy behind this, right? Even Visa as a network wouldn’t put this as we are, right? We realize that there are credentials or containers of money, which customers want to dip into to send money somewhere else. We’d love it if the origination point and the endpoint were both Visa, but you know, that’s not the way life works. So we want to be sort of not owning the entire value chain, but participating in that value chain.

In other words, let me bring that to life with a concrete example. So let’s say somebody in the UK right. Wants to use their Visa credential to send money to let’s say somebody in India, right? Who has one of the hundreds of millions of mobile wallet that are there in the country. So there are two, three stages to the movement of that money, right? It’s from that UK bank into the UK container, from the UK container to an Indian financial institution. And then the last mile from that financial institution going into somebody’s bank account via RTP or via a mobile wallet. And we are saying, if we can facilitate one end of it, we are happy to collaborate, co-create, partner with folks on the other end of the sort of ecosystem such that the customer’s transfer him.

Because you can’t go looking around for who’s got a Visa credential, I’ll send the money. Otherwise I’m not gonna send, that’s not the way it works. Right? You should be able to do it in a ubiquitous fashion. And so we don’t want to necessarily take control of the last mile. I think it’s a huge shift in thinking. And the more we think about it, the more sort of partnership becomes really, really important to this game, right?

I mean, just Frederick you know that even our partnership with NIUM, for example, I mean we support guardrails, we support non guardrails and that’s the way it’ll play out and it’ll take some time for this sort of mindset to change. But I think the philosophy of it is as important as the technology of it, of not wanting to own soup to nuts of the entire origination and receive endpoint, but to be a sort of rail, which sort of branches off and has various junction boxes, which connect into various different endpoints. That’s really the difference in thinking and I- and, I must admit that it opens your eyes to all kinds of possibilities, which did not seem practical as recently as a couple of years ago, once you reframe it like that,

Siobhan O’Neill-Schwenk

Marcus, this area of the conversation is reminding me a little bit of your recent thoughts about how the, and you use this great phrase, the fabric of money has changed. I love that phrase. I’m watching Ram’s eyes light up in this conversation and it’s, it’s infectious. What kinds of innovation are you excited about in this space?

Marcus Treacher

Yeah, I think, um, the clear factor today, money is a dead thing. Money, you know, the units of money, they have no intelligence, it’s nothing they can do. They’re just units on a database somewhere in the world. With, um, blockchain, the advent of crypto industry, the whole idea of creating digital assets, you, you know there’s a potential to give money intelligence, to give it, um, you know, the ability to participate much more actively in how it’s moved. And that I think would have a- a huge impact on what we can do with value, how we move value.

And, um, Ram you were calling out, the global scene is never gonna be governed by one network, the world’s too big. And if anything, it’ll become much, much more

fragmented. The ability of money to be able to root its way through many, many different networks seamlessly and carry the intelligence, I think would be very, very important to support the kind of volume and the kind of usage that the world will need for money value going forward.

So for example, you imagine a driverless taxi in New York, at some point in your future, you’ve got in the taxi, you’ve paid a higher fare, and in return that taxi will ping the other taxis tiny amounts of money, as you’re racing down Manhattan to, um, go your way because you are paying a premium to that, uh, driverless cab to get you to the UN very, very quickly. You live in India, So all of your micro micropayments and moving, um, physically around the world to hit that wallet, that’s in a bank in Cincinnati supporting the, uh, the machine that you are sitting in the back of in New York.

That those models have fantastic, you know, day-to-day value for people, but it’s impossible today because to do that kind of thing, your job requires different networks, that don’t talk to each other, you’re handling dead stuff that just sits there and can’t participate and can’t actually help you with the, um, the transactions, the likes of Ethereum’s, you know, smart contract thinking, I think could be very, very powerful and do watch out for stable coins and CBDCs as they start to, you know, adopt and, um, kind of like inculcate this way of thinking about money.

Siobhan O’Neill-Schwenk

Frederick from where you sit, what kinds of develops in, uh, alternative payments? A- and that could be consumer or B2B since it seems like it exists on both side of the coin. What’s gaining the most traction for customers at NIEM?

Frederick Crosby

So just looking at NIEM, uh, kind of build on what Marcus says about all these various different types of formats just trying to all talk to each other. We’re seeing this great advancement of cash digital, and particularly in the gaming industry where people wanting to buy digital goods. A lot of these alternative wallets that we’re talking about are the means that countries have to take their cash and enter it into a digital world. We’re seeing that explode all over Asia, Latin America, Africa, it’s a really cool transformative moment for consumers.

Siobhan O’Neill-Schwenk

What do you think the most interesting innovations of Global Money Movement in the next five to 10 years will be? Pie in the sky if you had your way, what would be the most interesting things to take flight and shape would be Marcus?

Marcus Treacher

Wow. Well, at first I think it’s gonna happen in the foundation. I feel very strongly that, that’s where you’ll see most, uh, innovation. And I think it’ll lie in the interconnecting of ledgers. I’m gonna be selfish, share the work of ClearBank. It’s all about that. It’s about interconnecting, no clearing bases in different parts of the world. And that’s where I think we are gonna see the big shift coming from. And I think that’s gonna move more quickly than the bigger industry initiatives that will take time to, uh, roll along, that and the intelligence of money with stable coins and the adoption of, um, free floating I would say crypto.

TR Ramachandran

To put it very, very simply I think in the next five years, if we can make cross border money movement as intuitive, easy and certain as domestic money movement, I think that is the holy grail. I mean, there are various sort of facets of looking at it, but I would say that’s the sort of big price to claim.

Frederick Crosby

Look, I think with all the missions that the companies the three of us represent are doing, just the hopeful ubiquity of Global Money Movement to just feed into our digital worlds, into our digital platforms, our digital systems, whether it’s APAR ordering, giving your customers access to funds, they want to give you, or you want to give them, it won’t become this laborious thing of trying to interconnect. It’ll just be there, like, look how far consumer payments have gone. I could look into my phone and make a payment. You don’t have to do that for businesses, but you should make anything that you’re working on there and just have that click to make a payment and have all the data go to where it needs to do to help facilitate that. Well, I think we’re on the precipitous of that and I think we’re gonna see it just become very common thing. Thanks to the work of all these great companies.

Siobhan O’Neill-Schwenk

Okay. One last question before we break for time. What do you think that this vision for modern money movement needs in order to become reality? What is the one thing that it needs most?

Marcus Treacher
Execution and just it’s people to pick the basin up and go for it?

Siobhan O’Neill-Schwenk
I love that. (laugh) I love that. Ram, do you agree?

TR Ramachandran

I can think a- a- absolutely, I can’t disagree with execution, but if I had the three whole points, but if I had to pick one, I would probably say interoperable standards because I mean the real sort of secret sauce is the standards, right? And technology will… I have no doubt that technology will sort of find a way, et cetera, et cetera, but to program, to watch standard. And that interoperability of standard is almost the foundational of rail for all of this to become a reality. So that would be one I would pick.

Frederick Crosby

I think for me, I’ll end up with comprehensiveness. We talked about all the various ways money moves and all these various platforms. And if you have something that’s only 30, 40, 60% complete, it won’t allow it become ubiquitous. So you have to really think about all those ways that local money needs to be held or given and make sure that’s part of your solution for this to work.

Siobhan O’Neill-Schwenk

Ladies and gentlemen, you’ve heard it here first. (laugh) And to you gentlemen, thank you so much for participating today. Thank you so much for being here and for giving your time.

Marcus Treacher
That’s great talking. I enjoyed it thoroughly. Thank you.

TR Ramachandran
Lovely to catch up with your gents as well. Siobhan thank you so much for organizing this.

Siobhan O’Neill-Schwenk

That is all the time that we have for today. I wanna say thank you so much to Frederick, Ram and Marcus for joining us to give us some insight into what the future of modern money movement really holds. On this show we’re investigating the real driving forces that are modernizing money movement and what’s building or blocking its momentum around the world. Make sure you’re subscribed. Check us out at nium.com/exchanges or wherever you listen to podcasts. And if you’re enjoying the show, leave us a review and tell us what you like. We’d love to hear from you. I’m Siobhan O’Neill-Schwenk and this has been Forward Exchanges from NIUM.

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