In this episode of Payments Pros, host Carlin McCrory welcomes Jason Mikula, a seasoned fintech and banking advisor, to explore various topics within the payments industry.
In this episode of Payments Pros, host Carlin McCrory welcomes Jason Mikula, a seasoned fintech and banking advisor, to explore various topics within the payments industry. They begin by examining the implications of U.S. sanctions on global payment systems and the potential shift away from U.S.-controlled payment rails. The discussion then moves to the viability of pay-by-bank systems in the U.S., focusing on the challenges posed by entrenched card payment behaviors.
Carlin and Jason further discuss the sustainability of nonbank fintech businesses that rely solely on interchange fees, highlighting the necessity for diversified revenue streams. The episode also covers the adoption of real-time payments like FedNow, noting the limited consumer use cases compared to commercial applications. Additionally, they explore the innovation of network flexible payment credentials and the complexities surrounding consumer understanding of new payments products. The conversation concludes with insights into new types of financial charters and the potential role of stablecoins in international payments.
PAYMENTS PROS s3e10: Payments Medley: Navigating Trends in Payments With Jason Mikula
Carlin McCrory: Welcome to another episode of Payments Pros, a Troutman Pepper Locke Podcast, focusing on the highly regulated and ever-evolving payment processing industry. This podcast features insights from members of our FinTech and payments practice, as well as guest commentary from business leaders and regulatory experts in the payments industry. I'm Carlin McCrory, one of the hosts of the podcast.
Before we jump into today's episode, let me remind you to visit and subscribe to our blog, troutmanfinancialservices.com. And don't forget to check out our other podcasts on troutman.com\podcast. We have episodes that focus on trends that drive enforcement activity, digital assets, consumer financial services, and more. Make sure to subscribe to hear the latest episodes.
Today, I'm thrilled to be joined by Jason Mikula to discuss a variety of payment topics, including pay-by-bank, the potential for alternate payment methods, and the future of FinTech innovations. Jason is a seasoned FinTech and banking advisor, and he is the Founder and Publisher of FinTech Business Weekly. Jason previously served as a Vice President at Goldman Sachs, focusing on customer acquisition, marketing, and product management for Marcus, the bank's retail division. He also has extensive experience in small-dollar lending, private student lending, and credit card programs having worked at Enova, LendUP, and other financial institutions. Jason, thank you so much for joining us today. I am so excited to have you on the podcast.
Jason Mikula: Yeah, thank you for having me.
Carlin McCrory: Well, let's go ahead and dive right in. We're going to talk about, like I said, a myriad of different things. But let's kick it off with, what are some of the potential implications to things, like the US using sanctions as a foreign policy tool, and what about other countries' willingness to be reliant on US payment systems, etc.?
Jason Mikula: Yeah. I mean, I know that I'm sick of hearing about tariffs, and I'm sure anyone listening to this probably doesn't want to hear my personal point of view on what's happening, but I do think it's relevant in the sense that it has the potential to impact some of the US foreign policy tools, as well as payment rails, payment processing systems, right?
I imagine the vast majority of your listenership is in the United States, does business in the US, spends most of their life thinking and spending in dollars. But for businesses, for countries outside of the US, that role of the United States as the epicenter of the global financial system, both the role the US dollar plays as reserve currency, as well as systems like Swift, which is actually based near me in Brussels, but the ability to operate foreign exchange and interbank payments, there is, I think, a real threat, and I'm not saying that this is already happening, although there are signs, that the role of the US in running that global financial system could be undermined based on certain geopolitical things that are happening at the moment.
I think, the reason I bring that up is there are always unintended consequences of policy choices, even policy choices made with the best of intentions. I think it's something to keep an eye on, whether that is a change in the role of things like cryptocurrencies, or stablecoins. You've seen the EU, where I live, float the idea of building an alternative to Visa Mastercard, because they want to avoid having dependence on what are perceived as US-owned and US-controlled payment rails. Again, there's a lot there, and I know we don't have enough time to unpack all of it, but it's certainly something that's been top of mind for me.
Carlin McCrory: Yeah, that's really interesting. Also, the next thing I wanted to ask you is about pay-by-bank. We keep hearing in the industry, hubbub about pay-by-bank and where it's going and what we can do with it, but is it ever going to actually catch on in the US?
Jason Mikula: That's the million-dollar question, right? I mean, if I had to answer it in a single word, I would say, no*. Let's throw a disclaimer on there, since this is a legal podcast. For your listeners who don't know me, I am American, grew up in the United States, love my credit cards, love my credit card points. Transactor, don't carry debt, great deal for me. I moved to London and then on to the Netherlands, where I've lived for the past more than five years. Here, interchange is not a thing. The most popular network, Maestro, which is a sister network to Mastercard. Interchange is a flat 2 cents. There's really no business model in Interchange, or at least in debit Interchange.
Most stores that you would shop at in day-to-day life, many of them don't accept credit cards at all, and also, don't accept Visa or Mastercard badged debit cards. This is changing a bit because the Maestro network is being sunset, I think, in 2026 or 2027. That will change. The first time I visited and went to the grocery store, none of my cards worked, because I had Visa and Mastercard badged debit cards and credit cards. In the pay-by-bank space, to get back to your question, there's a system that's popular here in the Netherlands, as well as, I think, Belgium and maybe Germany called Ideal, which is just its account-to-account payments, or pay-by-bank. For e-commerce use cases, I think more than 70% of e-com is done through pay-by-bank.
You'll actually notice this in day-to-day life here. For instance, if I were buying a flight on KLM, if you use pay-by-bank, no cost to process the payment. If you want to pay-by-card, this is an interesting UX, but you put in, I forget if it's the first four, or the first six digits of the card, and then it will list a surcharge if you want to use that payment card based on the merchant discount rate, or the underlying interchange that that merchant is incurring. Here, you just have very different, I guess, economic incentives than you do in the US.
In the US, in a certain sense, pay-by-bank has always been a thing, where the biller has the power to, essentially, force you to do it, right? I've actually never owned a home in the United States, but as I understand, most all mortgage payments are going to be via ACH, right? That's pay-by-bank. A lot of utility companies, where you don't have a choice. When I lived in Chicago, you had ComEd for your electricity. There was no competition. You could pay by debit or credit card, but there was a surcharge. There was a fee to do that, pushing people, in that case, with a penalty to use pay-by-bank.
You have seen some interesting UX, user experience elements to try to encourage this. For example, in the ride sharing space, companies that will offer a bonus to sign up, or enroll. I forget, it's $5, or $10, or a certain percent or something if you set it up. I mean, the perennial question is, what is the necessary economic incentive to dislodge this very established payment behavior of card payments? People understand card payments. Generally, they like them. I would argue, would generally understand, or have a perception that they're safe. If something goes wrong, I can call my bank, or I can go in my banking app and I can dispute it and at least in theory, I'm going to be reimbursed, or someone's going to be there to help me.
It's like, what is the necessary economic incentive to dislodge this very established behavior and preference, particularly in the rewards card space? I'll pause there, because I know that was already a lot. I think it's an uphill battle and encouraging people to shift is going to require some incentive. We're seeing experiments with that already.
Carlin McCrory: Right. Yeah. From the consumer perspective, I'm just like you, I want my credit card points. Also, from the consumer perspective, I see plenty of businesses who have started to assess surcharges, or convenience fees for using methods of payment, some of which include having a convenience fee on an ACH payment, which in theory, doesn't make a whole lot of sense. I also appreciate from the business side, because we have plenty of clients who are looking to assess surcharges, or convenience fees in a compliant manner, because of their costs. I also understand both sides of that coin.
Jason Mikula: Yeah, absolutely. I mean, I am actually a merchant, right? I collect subscription revenue for my newsletter using a popular pay fact platform. Do I wish I didn't have to pay that platform 3% of my revenue? Yes, I wish I did not have to do that. On the flip side, that money is not for nothing. I think it is both easy and understandable, especially for the smaller merchants that aren't a big box retailer, that are really trying to optimize to the nth degree, their payment processing cost. If you're a small business and you see 3-ish percent of your gross revenue is going to payment processing, that is understandably painful and something you want to try to mitigate.
I do think that it's easy to miss, or not acknowledge the value and the benefits that that 3% is going for, right? Protecting both the merchant and the consumer, as far as fraud, chargebacks, transaction monitoring, and all of that. Obviously, the networks are wildly profitable companies. The banks that are issuing these cards are for at least certain segments of those cards using Interchange to fund rewards. By no means am I arguing it's a perfect system. I do think that the misleading comparison that often gets made is to cash payments, but the presupposition being that accepting and handling cash is somehow free. It's not, right?
I mean, if you were a merchant and you were doing a fair apples-to-apples comparison, what you should be doing is, what is the actual cost to accept and handle a cash payment and have that as a payment option, versus the cost to accept certain kinds of card payments? I mean, I think you have seen certainly in other countries and even, I travel to the US fairly frequently, even areas of the United States where some merchants don't want to accept cash. I mean, where I live in the Netherlands, most merchants do not accept cash. Now, to be fair, I also think that's a problem in societies, or in countries where inclusion in the banking system is, let's just say, more uneven. That includes the United States and then, certainly, developing countries. I spend a lot of time in Mexico, and something 50% of Mexican households do not have a bank account. This is going to be highly variable by jurisdiction. What are the regulations there? Also, what are the consumer needs and consumer preferences?
Carlin McCrory: Yeah, that makes sense. We've talked a little bit about Interchange here. Do you think Interchange alone is enough to build a viable non-bank fintech business? I mean, we certainly see it. We have clients who tried to do that model of business. What are your thoughts on that?
Jason Mikula: Yeah. I mean, I think it's worth remembering what the original impetus, what the problem these non-bank fintechs that were at least originally built around Interchange, what was the problem that they were solving, right? I will not go into the whole 2008 Great Financial Crisis, Durban Amendment, etc., history lesson. Although, if your listeners are interested, they can get that in my book, which I'm legally obligated to plug. The reality is if you are a lower income household, banking at a major money center bank is often a very unpleasant experience, because you get hit with fees, overdraft fee, non-sufficient funds fee, minimum balance fee. By definition, you're incurring those fees when you are at least able to afford to pay them.
A lot of these non-bank fintechs, that was the core value proposition. I’ll just be very blunt, if you're poor, banking at a big Main Street bank is a pretty bad experience, because of these hard to predict fees. Our proposition is going to be no fees*, in most cases, except maybe if you do a no fee overdraft, there might be a tip, or you use it out of network ATM, there might be some fees. But generally speaking, no fees. Then we're going to monetize through Interchange, specifically sub 10 billion bank Durban exempt. Then more recently, you've seen some of these “credit building” cards that are actually issued as charge cards and carry even higher Interchange, in most cases.
To get back to answering your actual question, can you build a business, a viable, large business on Interchange alone? I think we've already seen that the answer to that is no. I'm not saying that it can't be a building block, or a material component, but of the companies in that space, I'll just use the phrase neo bank. One, we've already seen a consolidation, right? I mean, there's a crazy moment when it was neo bank for, I'm not even kidding, dog owners. I think there was two of those actually. I'm a dog owner. I do not need a neo bank designed for me as a pet owner.
We've already seen some consolidation, and some, I would argue, rationalization in that neo baking space. Then for the players that are at scale, that have survived that wave and continued to grow, you've also seen them diversify specifically into either loans, or products that look a lot like a loan, but legally might be something else. It's like, why are they doing that? One, the segments they tend to cater to are lower income and tend to either be thin file, no file, so they're hard to underwrite, or perhaps, they've had challenges managing their credit in the past, and they don't have a lot of other options of accessing credit. Those products, both if designed responsibly, help solve a challenge for that consumer and also, generate additional streams of revenue for the non-bank fintechs.
Carlin McCrory: Right. Tacking on earned wage access to some of these products and receiving fees, or income from that revenue stream is a way to make these products viable.
Jason Mikula: There are definitely examples of, to throw out another buzzword, embedded fintech. Embedded fintech, embedded finance. Companies who maybe their primary product is not a financial product. We talk a lot about vertical SaaS, so a platform for managing your yoga studio, or your hair salon, or barber. There, the primary businesses, I'm making a piece of software that's essentially an operating system for this specific business. Perhaps, in that case, you're charging some kind of, essentially, SaaS fee, or subscription fee. Then maybe, if you do build in some payment capabilities, or some banking-like capability, that becomes an ancillary revenue stream.
It's like, okay, my real business is making software. I sell to barber shops. I happen to also offer this branded debit card, or maybe even credit related products, whether that's to the company, or to their employees, or whatever. Those become ancillary revenue streams. Again, it's still Interchange alone as a business, as a business model. I think there's ample evidence to suggest that it's not sustainable, or not enough. But is it a component, both in a financial first business model, as well as the SaaS example I gave? Absolutely.
Carlin McCrory: We’ll switch gears a little bit and talk about real-time payments. When FedNow initially came out, there was a whole buzz about it. We're seeing a lot of banks onboard and start to use and allow their customers to use FedNow. We're still not seeing a lot of use cases for FedNow, particularly, there are very few consumer use cases in comparison to the commercial use cases for real-time payments. Do you think it'll catch on a little bit more in the US?
Jason Mikula: I mean, yeah. I guess, I have to equivocate and hedge every answer. FedNow, and I've had the opportunity to speak with Mark Gould, who is, I think his title is Chief Payments Officer at the Federal Reserve. I've had the chance to interview him and speak with him a couple of times. I think the Fed does amazing and incredibly difficult work building, maintaining, and operating core payments infrastructure, including FedNow, as well as wire systems, ACH systems. You've already made the point that in a commercial, or in a B2B use case, there are already examples of, oh, well, if I can do this, sending this via a FedNow enabled capability, is that faster, cheaper, more reliable than doing a wire transfer?
In the consumer use case, my argument tends to be that a lot of what consumers do either doesn't need to be real time, right? We were talking about pay-by-bank. If I'm paying my mortgage every month, I set up an auto debit and it just draws out of my account. If I'm paying my utility bill, or if I have a personal loan payment or whatever, that's a recurring thing that either I know is coming up and I need to go into my banking portal and pay it, or I've signed up to have it happen automatically.
For cases where, apart from that biller use case, if we think about peer-to-peer payments, those technically are not real-time, right? If it's drawing that money out of a linked bank account. But for the consumer who's using that app to split the dinner bill with their friend, it feels real time. They probably believe it's real time, even if it's going and debiting their bank account the next day. They clicked a button, their friend got a push alert, all done. In the consumer world, my argument would basically be, a lot of what consumers do either, it doesn't really matter if it's real time, or consumers already believe it is, or it feels real time.
I would draw, everyone loves to make the comparison to picks in Brazil. We do not have time to unpack every reason why that comparison doesn't hold, but it's like, one, picks is a consumer facing, it's like a retail facing brand. People know what that is and they use it. FedNow and Clearinghouse RTP, these are, I guess, you could use the terminology wholesale, right? It's like, my money center bank, it might be using this FedNow rail, or TCHRTP, or wire, or ACH. But as a consumer looking at my banking portal, there is no button that says, send this via FedNow, or send it this other way. Which, again, whole world of political and commercial reasons why what is possible in Brazil, or in India with UPI is certainly technically possible, but perhaps, not realistic in the US scenario.
It's just the level of adoption that other countries have seen with direct-to-consumer, or a retail facing real-time payment network just seems very unlikely to me in the United States, given some of the barriers I've just outlined.
Carlin McCrory: Yeah. I mean, it seems like it would catch on maybe a little bit more and payments flowing B to C, right? Whether that's payroll, or receiving something like, Social Security benefits. I could see the use case there easily.
Jason Mikula: I remember when FedNow was rolling out, one of the examples, I believe one of the examples they gave was around disbursements of something, like insurance payouts. Imagine there's been a natural disaster, there was a flood, or hurricane, or tornado, or whatever, I would hope that most of that in steady state would be dispersed electronically. But, I mean, we know the US government still mails checks.
Carlin McCrory: Yes.
Jason Mikula: Plenty of businesses still mail checks as well. The ability to say, hey, instead of mailing a check, we can do this, whether it's same day ACH, next day ACH, FedNow, TCHRTP. Frankly, any of these mechanisms are going to be more efficient and less prone to error, and particularly, given the resurgence of check fraud in the United States, they're still a more secure way to do these disbursements. Yeah, I think the B to C case has more realistic examples of where this would be meaningful.
I mean, you mentioned EWA, earned wage access a bit earlier. I will not pretend I'm an expert on payroll and all of the various reasons why most companies operate on a semi-monthly, or bi-monthly payroll cycle in the United States. It's certainly not only because of the overhead of dispersing that payment. There's all the other stuff, as far as tax withholding calculations and remitting things to the federal government and state government and insurance companies and all of that. I think, certainly, something like the gig worker space, if you're driving a ride share, or delivering burritos, the ability to do real-time disbursements more economically than some of the other real-time rails, like push to card, I think makes a lot of sense.
Carlin McCrory: I'd love to hear your thoughts on potential use cases and impacts of network flexible payment credentials. If you can tee that up a little bit for our audience as well.
Jason Mikula: Yeah. This, I do think is actually one of the more interesting innovations in recent years. The two major networks in the US, Visa, Mastercard, both have deployed what, I think Visa literally, it is named the flexible payment credential. Mastercard, I believe is referring to it as Mastercard 1. Basically, it's the idea that a single card, and that includes virtual cards, could basically be pointed at, or linked to multiple funding mechanisms. Basically, you could have one card or one pan, 16-digit card number, and that could operate as both debit and credit based on how a consumer wants to be transacting, or how they want to fund that transaction.
I think we've seen some interesting innovation that predates this, the rollout of these credentials that has the potential to benefit from this enhanced infrastructure. I'm thinking specifically, the by now pay later space, and some of the major players in that BNPL market have over time, moved from their original innovation, which was delivering credit, specifically in online checkout flows, were very intuitive, very seamless. But in order to grow, I’d also increase, I guess, availability, or flexibility. You've seen some of these BNPL players roll out card products that can operate, essentially, in a similar fashion, right? You're either using it basically as a debit card, where you're paying now out of money you hold, using it as a short-term credit, where it's like, that pay and for formulation that became very popular. Depending on the transaction and whether or not the user qualifies, potentially even converting it into a longer term interest bearing installment loan.
I think these flexible credentials should make that more widely available, including to issuers who maybe historically wouldn't have gone to the work to offer that type of BNPL experience to their checking account holders.
Carlin McCrory: Do you think a barrier to entry with a product like type that is having, particularly in the US, a consumer that understands and appreciates the difference in those two payment types, right? We're so historically ingrained in paying with a debit card, or paying with a credit card and that those are different, having a product that contemplates both debit and credit. How does that work for the end consumer, do you think?
Jason Mikula: Even just discussing it with you, it does inherently sound confusing, right? It's like, oh, well. I mean, I think ultimately, a lot of it will hinge on both education and awareness. People need to know that this is even a possibility, right? Despite living in Europe, I still have way too many American credit cards, mostly because I open them to test them out and I still have an American bank account. It's like, in both of those cases, I'll see push alert, or an email, or something in my online statement that's like, oh, do you want to select this transaction and convert it into something else? Take this debit transaction and essentially turn it into a credit, so you're paying over time, or take this typical revolving credit card transaction and turn it into this installment loan.
I should know the answer to this. I'd be really curious to see what conversion rates, or what uptake those features, or those capabilities have, because again, somebody needs to know it exists, know that it's possible, and then understand how to actually go about doing it. They have to take an action to turn this from whatever the default was into this other transaction. Again, I think a lot of it is going to depend on how that user experience is built and whether, or not people even know that it's available. Then, let's say, secondary or longer-term factor is just generational change and generational preference. I'm sure my dad will not hear this.
My dad sent me an email recently. He is retired and his advice was, make sure you balance your checkbook. I still do. I noticed some debit transactions that were fraud that weren't me. Again, it's like, my response to him was, why don't you just turn on push alerts for your debit card? Then you would see those immediately, instead of waiting till the end of the month when you're apparently balancing your checkbook, which I'll admit is something I did learn how to do growing up, because I had a checkbook. It's not something I've thought about, or done in probably, 20 years.
There is just these ingrained habits of how people use and think about bucketing their money, that once you've developed those behaviors, become very sticky. Again, we've been talking about BNPL. I certainly am very aware of what it is as I work in this industry. I have never, apart from doing it to test, I would not use that product, because I don't really have a need for that product. Then, you look at whether it's a generational thing. Gen Z, or people who are younger, and/or access to credit, there are per CFPB research that was published, I think at the beginning of this year, or end of last year, plenty of people they classify as heavy users of BNPL, who are using, essentially, I think it was every two weeks, essentially it was on a pay cycle. Using 24 BNPL plans a year, or even more.
A lot of factors that go into this, but I think it's awareness, I have to know it exists, UX, that user experience of going through it has to be fairly intuitive. Then, there has to be a need for it. I think you're going to see people who are more credit constrained, or credit seeking are going to be the ones who have that drive to take advantage of these offerings.
Carlin McCrory: Definitely. I also want to talk briefly about prospects for new types of charters and licenses. I'm located here in Atlanta, Georgia. The Georgia now, as we've been calling it, Merchant Acquire Limited Purpose Bank, has been a hot topic and something we've been helping clients with. Would love to get your thoughts on that and other charter types.
Jason Mikula: Yeah, absolutely. I also talk about this a bit in the book, just given that I live abroad and I work with clients outside the US as well. This construct in the US is either you are a bank, you hold a bank charter, or you are not a bank. Particularly, you referenced the MALP. In order to be a principal member of the card schemes in the United States, my understanding is you have to be a bank. Whereas, in other countries, in the UK, in the European Union, you have these other kinds of charters, or licenses, including e-money institutions, payments institutions, which are non-depository, right? To the extent that they bring in customer funds, those funds are required to be safeguarded. There's actually a couple of ways of doing that, but pretty much everyone does it by then parking those customer funds at a insured depository institution, which actually starts to have certain parallels to the US non-bank fintech with bank partner, except it's codified.
If you hold that e-money institution, or that payments institution license, you have a direct relationship with your regulator. There are clear frameworks of how you're overseen in a way that just doesn't quite exist in the US. Certainly, we're seeing a resurgence of interest in the ILC, the Industrial Loan Company Charter. That has been a very highly partisan issue for reasons I frankly don't entirely understand, where during democratic administrations, or democratic control of the FDIC, basically, the window has been closed. During Republican administrations, it seems like the windows is open again.
I do know that at the tail end of the Obama administration, if anyone can remember that far back, I believe it was comptroller, or acting comptroller, Thomas Curry, who'd floated the idea of some fintech charter. We saw that come up again with acting comptroller Brian Brooks at the end of the first Trump administration. The state banking regulators, CSBS conference of state bank supervisors really don't like that idea. There was a whole bunch of litigation. I honestly can't remember all of the details. The piece that always sticks in my mind is the argument was basically, the OCC lacks authority to charter a non-depository institution. The business of banking is holding deposits, making loans payments. I'm not saying I agree, or disagree with the argument. That's just my recollection of what the argument against this “fintech charter” was. I do think that there are interesting things happening. The Georgia example is an excellent instance of that with now two companies that have either been approved, or in the process of being approved.
I know that Connecticut also recently rebranded their specialty charter as the innovation charter. Of course, in the crypto space, we've seen Wyoming with the SPDI. I mean, ultimately, making use of these specialty state charters depends on what the business that is acquiring that charter is trying to do with it, right? In the MALP scenario, the point is we want to be a principal member of the card schemes, because that is going to either give us more flexibility, not having to work with a bank on the merchant acquiring side, and/or be a creative to our margins.
In the crypto SPDI case, what they really want, at least as I understand it, is a Fedmaster account. The firms that have tried to do that have so far not been successful. It's like, you can have a specialty state charter, but then if you're still blocked from getting the benefits that go along with it, then it's not helping you.
Carlin McCrory: Which was the original issue with the Georgia MALP charter and getting access to Visa and Mastercard.
Jason Mikula: Yes. Yeah. Correct.
Carlin McCrory: Which now, it appears that's changing. Yeah, getting access to the ACH rails is a different story.
Jason Mikula: Absolutely.
Carlin McCrory: Then lastly, I want to talk briefly about stablecoins and your thoughts there. We recently released an episode with Alexander Barrage and Ethan Ostroff from Troutman about stablecoins, but would love your take.
Jason Mikula: Well, I'm intimidated if I have to compare my take to Alexandra's, because she's surely much better informed on certainly, the law than I am. I mean, I will say that after seeing several, what I would describe as fairly absurd hype cycles in the last, I don't know, three to five years, I'm thinking, when we were all talking about CBDCs incessantly for 12 to 18 months, or even worse, web3 and the metaverse, which I was highly critical of the time. I think that that has borne out. Stablecoins feel like they have a critical momentum forming behind them, and some real practical use cases, setting a side for their origin, which is as a mechanism for facilitating crypto trading without moving the proceeds of your cryptocurrency, so Bitcoin, Ether, whatever, back out into the “fiat,” or traditional US banking system.
Frankly, I'm not terribly interested in that use case. I'm sure plenty of people are. But you have seen, particularly in the international payments, international remittance space, a lot of interest around, is this a mechanism that can be more efficient, faster, less expensive than traditional international payments? I mentioned Swift earlier. Sending an international wire tends to be slow, tends to be expensive. We don't need to go to correspondent banking and why it's slow with expensive. Let's say, there's a perception and an argument that stablecoins could be a realistic competitor, or solution to some of these “legacy methods” of doing international payments.
I will say, the counter argument I hear is analyzing the full end to end time and cost of those transactions needs to incorporate the on-ramp and off-ramp in local country, local currency. What I mean is if I am holding regular old American US dollars in my bank account, and I want to use a stablecoin to move them to whatever, Mexican pesos, and the person receiving those wants to receive them as Mexican pesos, there are still multiple steps before that stablecoin rail, right? Dollars in somewhere, dollars become some USD backed stablecoin. That stable coin moves over whatever blockchain rail it's on. Then in the destination country, or destination wallet, it now needs to be off-ramped into that local currency.
I haven't spent enough time digging in and researching to understand when you look at that full end-to-end transaction. Does it really end up being faster, safer, cheaper? I don't have an answer for you today, sadly.
Carlin McCrory: That's okay. Jason, I do want to give you a second. Please go ahead and plug your book for the audience.
Jason Mikula: Yes, I will egregiously pull up my book, Banking as a Service: Opportunities, Challenges, and Risks of New Banking Business Models. It touches on a lot of the themes we've been talking about today. You can grab that on Amazon. If you do, please leave me a review.
Carlin McCrory: All right. Well, Jason, thank you so much for joining us today. Thanks to our audience for listening. Don't forget to visit our blog, troutmanfinancialservices.com, and subscribe so you can get the latest updates. Please, make sure to also subscribe to this podcast via Apple Podcasts, Google Play, Stitcher, or whatever platform you use. We look forward to next time.
Jason Mikula: Thank you so much.
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