Digital Currencies
Changes Challenges Choices
  • Public cryptocurrencies (notably Bitcoin and Ethereum) have demonstrated, despite their pitfalls, that digital currencies can provide an attractive alternative to fiat money for certain use-cases
  • In the coming years we will see CBDCs launched
  • Private digital currencies avoid many pitfalls of public digital currencies (energy usage, criminal activity) but raise new challenges around privacy, as all digital transactions will leave traces
  • Given the huge array of use-cases that can be supported through digital currencies, it can be difficult for a given business to identify which ones are worth pursuing
  • How could cryptocurrencies, stable coins and decentralised finance impact your business strategy?
  • How ready are you for these changes and how ready are your suppliers and partners to support you?

Applicability and use cases

Financial system participants and stakeholders are at the centre of the present-day disruption, such as acquiring and correspondent banks, retailers, and public offices that currently interact via existing payment instruments (credit card schemes, SWIFT, SEPA, ACH, etc.). Financial services companies could benefit from the advantages provided by digital currencies, including lower costs, improved privacy, zero fraud and increased resilience. They can apply this to practically all business operations.

Other verticals that would benefit from digital currencies include insurance and travel. Travel and insurance companies could elevate their existing loyalty programmes by making relevant data (e.g. information, analysis, assessment, profile) available at the start of an experience. In the case of insurance, relevant data could be made available when an event is triggered (e.g. car accident in a hailstorm, house on fire).

Opportunities will arise in which agile payment service companies can help organisations move into the digital currency space either by assisting them to implement a particular use case (e.g. migrating loyalty programmes to digital currencies), creating a representation of value through crypto tokens (non-fungible tokens) or by redesigning a process using digital currencies to remove friction. Digital currencies can also help forge new partnerships in emerging markets where there is limited trust against the background of poor governance and weak control measures.

Three aspects of digital currencies offer numerous potential services:

  • Cryptocurrencies leveraged by banks, FinTechs and service providers as a payment instrument or to hold digitised assets.
  • Stable coins where public and private bodies create a new closed-loop payment rail that facilitates online and real-time physical payments and easy issuing (for example, as a replacement for local vouchers).
  • Decentralised finance where FinTechs and tech companies allow end-users to create decentralised alternatives to privately provided services, like lending or insurance. In the words of Tallyx CEO Aditya Menon:
“We wanted to take banks out of the game of charging a premium for being a trusted provider but give banks the full opportunity to use their balance sheet and their ability to raise capital cheaply.”

 

Opportunities and threats for financial market players

Cryptocurrencies create an opportunity for financial institutions, retailers and others. Despite the controversy around cryptocurrencies, their usage has massively increased beyond a specific niche market.

To assist merchants wanting to accept these currencies, payments companies should support them to minimise the risks for them and the consumer. An example of this is the crypto payment solution launched earlier this year by Worldline and Bitcoin Suisse which enables more than 85,000 Swiss merchants to accept payments in either Bitcoin or Ether.

Stable coins can offer access to a stable digital currency with instant transactions, an increased level of security and the ability to transact across borders seamlessly. 

Decentralised finance brings the possibility to provide services beyond the established perimeter of the financial services sector. These new products and services would allow a more significant part of society to participate in the financial system. Yet, there is a risk that these services could jeopardise sections of the current banking ecosystem.

 

Strategic outlook

Companies that have been able to detect and adapt to change, regardless of the technology used (cash, cheques, debit cards, credit cards, wire transfers, instant payments, wallets, etc.), have emerged as clear market leaders. Agile partners in the payment space are structured to rapidly and sustainably continue operating and processing billions of transactions per year, regardless of the payment infrastructure. 

Digital currencies can be seen as new payment rails that will compete with and potentially replace some existing rails. For those who wish to maintain a competitive edge, it is paramount to understand the pace of adoption and quickly develop and deploy the best new competitive, and disruptive services.

It is paramount to understand the pace of adoption and quickly develop and deploy the best new competitive and disruptive services

Payment rails that come to the fore allow businesses to offer more alternatives and services to their end-users while also creating value, often by reducing costs through efficiency gains, providing greater transparency and reducing the potential for fraud. 

More chapters about Unification Taming Diversification

New Business Models

With the shift towards servitisation, pay-as-you-use and pay-for-outcomes, many businesses will have to adapt their business and operating models to match consumers’ expectations. Fintech 2.0 will bring major changes, with the most significant successes coming when incumbents and new entrants combine forces.


Learn more about New Business Models ›

Context Aware Services

The rapid growth of available data sources will demand responsibility, relevance and quality from AI-based automated decisions, maintaining ownership and confidentiality of data and ensuring fair and loyal decision-making by autonomous processes.




Learn more about Context Aware Services ›

Green Payments by Design

The digital world represents a 7th continent in terms of water and energy consumption. Actions are needed to reduce its footprint. This also applies to digital payments. An effective reduction of the environmental footprint of payments can only be achieved by working across organisations and taking a full end-to-end life cycle assessment approach.

Learn more about Green Payments by Design ›

More resources

Stablecoins, Towards A Trusted Digital Currency

A new wave of innovation is transforming not only how we pay but what we pay with. One could say that the era of the stablecoin is dawning.
Learn more ›

Worldline partners with Gold Global SA to launch the "DaVinci Gold" token

Worldline and Bitcoin Suisse launch WL Crypto Payments in Switzerland
Read the press release ›

Central banks take up the cryptocurrency baton

The promise of cross-border crypto.
Is crypto currency ready for prime time? ›