Building a Stablecoin Strategy: Steve Wasserman and Larry Pruss Weigh In

Episode Summary In this episode of Wrestling Payments, Joe Casali sits down with Steve Wasserman of Vments and Larry Pruss of Strategic Resource Management for an urgent conversation about the seismic shifts happening in payments right now. Stablecoins and tokenized deposits aren't coming—they're here, and they're already pulling deposits away from traditional institutions. Steve breaks down the critical differences between these technologies and why full-reserve models are creating both new opportunities and existential threats for banks and credit unions. Larry shares eye-opening data on deposit outflows and explains why institutions can't afford to wait while new players capture customer relationships. The conversation tackles practical challenges head-on, from building acceptance networks to preventing costly user mistakes, and explores how QR codes and programmable money are about to transform the payment experience. This episode is a wake-up call: the time to develop your digital asset strategy isn't someday—it's now.

Guests-at-a-Glance
Steve Wasserman Founder and CEO, Vments A leading voice in digital currencies and payments infrastructure, helping financial institutions navigate the strategic complexities of stablecoins and emerging payment technologies. LinkedIn

Larry Pruss Senior Vice President, Digital Assets Advisory Services, SRM (Strategic Resource Management) A strategic advisor guiding banks and credit unions through the digital assets landscape with practical, regulatory-ready approaches to emerging payment trends. LinkedIn

Key Insights

The Deposit Battle Is Already Underway Financial institutions are losing deposits to stablecoins and digital asset platforms at an alarming rate—in some cases, 3% per month. This isn't a future threat; it's happening now. Stablecoins operate on full-reserve models with public blockchain transparency, offering speed and efficiency that attract businesses and consumers alike. Traditional institutions that viewed competition as coming only from other banks are now facing deposit outflows to fintechs and digital platforms that operate with fewer intermediaries. The competitive landscape has fundamentally shifted, and institutions must develop new strategies to retain customers and stay relevant in this digital-first payments world.

Strategy First, Adoption Second The pressure to launch stablecoin products or tokenized deposit services is intense, but rushing in without a clear strategy leads to wasted resources and customer confusion. The winning approach starts with understanding user needs, building acceptance networks, and establishing the right partnerships before launching anything. Institutions need to map out how payments will be accepted, integrate with wallet providers, and ensure smooth conversion between digital assets and traditional money. This methodical planning manages risk, supports compliance, and prevents customers from defecting to better-prepared competitors. In this rapidly evolving space, strategic groundwork separates sustainable growth from expensive mistakes.

QR Codes and Programmable Money Are the Future Interface The next generation of payments is being built on secure QR standards and programmable money. Technologies like X9 QR codes let users pay across multiple rails—ACH, instant payments, cards, or wallets—with a single scan. This streamlines the customer experience while enabling programmable features like automated refunds and conditional payments that eliminate manual intervention. 

Transcript

Building a Stablecoin Strategy: Steve Wasserman and Larry Pruss Weigh In 

Wrestling Payments - Wasserman and Pruss

season 3, episode 25

[00:00:00] Steve Wasserman: you have all the non-bank entities that are now trying to become banks as well. and they're, or they're getting fed accounts, they're, they're looking to do that. so those are also threats. That you, they, you don't have time to wait to come up with a strategy and then, and you need that strategy then figure out how long I got before,you know, I need to be doing things that keep my customers, but also attract that next generation.

[00:00:25] Steve Wasserman: it is not just keep what I got, but how do I get new customers? 'cause I'm, I'm losing, I'm losing them in sieves right now.

[00:01:04] Joe Casali: Hi everyone. Welcome to Wrestling Payments. I am very excited. I have Steve Wasserman, who has been my number one podcast episode of All Time Biggest Hits, most attention, and, from the, the world of, you know, it's a small world. I got on a. Webinar to learn about stable coins and there was a speaker on there and his name was Larry Pruss.

[00:01:30] Joe Casali: And all of a sudden I am doing a podcast with Steve Wasserman and Larry Pruss. guys, can you introduce yourself? Larry, you go first. You're the new guy.

[00:01:38] Larry Pruss: Sure. So, obviously name's Larry. I've worked at Strategic Resource Management. I'm in the consulting space. we're an advisory firm. We advise primarily financial institutions, but also fintechs on all things related to payments. My personal responsibilities are around kind of the emerging disruptive payments.

[00:01:59] Joe Casali: Steve.

[00:02:01] Steve Wasserman: I'm Steve Wasserman. My organization is, Vments, and I've been involved in payments for many, many, decades, from a couple different perspectives from, consumer bill payments to to B2B payments and,been involved in the FPC since it started. and lately have been,Vments was started when.

[00:02:20] Steve Wasserman: I got very interested in digital currencies back in 2017, actually filed a patent for it. that would be, that was bank issued stable coins back then, or you can call 'em tokenized deposits as well. It's an interesting design. Someday, it might, might, be very valuable because the things that are going on now are finally starting to.

[00:02:40] Steve Wasserman: To scratch the surface on, on, on what was designed back then. And, but I'm trying to leverage my expertise and experience, more than my patent itself. and in, teaming up with people like Larry to, to help financial institutions with their strategy, and then later on with their execution of those strategies.

[00:02:59] Joe Casali: Excellent. So it's really interesting because. there's always that, oh, the, you know, payments is changing so fast, the future is coming. Future's kind of here. the beginning of the year, there's gonna be a stable coin law. Maybe, maybe there isn't. Maybe there is. and all of a sudden we're now in, in the fall, there is a stable coin law.

[00:03:20] Joe Casali: You literally did this work years ago, eight years ago. and we, we've come. Kind of full circle. when we had a little pre-meeting, you guys said you were working with credit unions. I really just wanna step back and I'd, I'd love you to tell me what you're doing, what, what's going on, what, what are key points people should know, but bankers, credit unions should know about what's happening right now.

[00:03:49] Joe Casali: I'll turn it over to you.

[00:03:50] Larry Pruss: yeah, so, so let me go first. so it is not just credit unions, just credit unions, banks, financial institutions. one of the thing key things to know is, as you mentioned, the, the, the future is here. stable coins are already processing huge amount of value movement. Worldwide, it's about 49 trillion.

[00:04:10] Larry Pruss: Currently the circulating supply is about 315 billion. By the time your users hear this will probably be significantly more. it is largely been used internationally for cross-border transactions. P two p B2B type, transactions. And we haven't seen it here largely in the us but primarily because the Garnet Act hadn't passed or we didn't have any regulatory guidance.

[00:04:34] Larry Pruss: We now have that regulatory guidance. So there was a rush for everyone to learn about stable coins, tokenized deposit similarly, and get involved with them. And, and one of the main reasons for that is. That stable coins, essentially don't have any intermediaries, right? They're, they transact on kind of public permissionless blockchains.

[00:04:54] Larry Pruss: That lack of intermediaries, reduces kind of the economics associated with that. It reduces the number of intermediaries from, you know, four or seven, depending on the type of financial transaction to essentially one. And so we're seeing all of the players, whether they're. The merchants, the banks, the credit unions, the processing companies, the payment companies, everyone's rushing in To understand this and get themselves a strategy, you really need a strategy first before getting into market with a solution.

[00:05:27] Steve Wasserman: I can, I guess I can add to that.

[00:05:29] Joe Casali: add? Yeah.

[00:05:30] Steve Wasserman: well, I mean the strategy is definitely you have to have a strategy before you do anything. and you know, it's important now to establish that strategy. And be able to, allow your customers and your partners and, and all the other parties that you're deal with that you have this strategy and it's coming even though you don't necessarily go live with it right away.

[00:05:52] Steve Wasserman: And then you need to, you know, plan out the implementation plan of going out live. and then you, you know, the ex the execution plan, is the execution of that implementation plan. So, you know, you're probably still looking at, before you actually have something that's running for your customers in, in financial institutions, that it may still be, you know, late 2026 or, or even after that.

[00:06:16] Steve Wasserman: but you need to prepare now and not lose those customers. The, because there are, non-bank entities and fintechs and, and and such that are attracting customers away from your deposits, away from your transactions. And you need to be able to ca you know, keep them and retain them and it, and that, and that's the importance of it.

[00:06:35] Steve Wasserman: and, you know, now we talked about some use cases. Those, those are obviously key use cases. B2B was a big thing 'cause I was involved in B2B for many decades, in the ERP side of things. so I can appreciate, where that, you know, the value of with stable coins could be very helpful. The instant payments are also very helpful as is, you know, same day a CH that, you know, certainly our A CH associations,appreciate that.

[00:06:59] Steve Wasserman: That's, that's still there. But they, they also provide training on instant payments with AFPP programs. So, been involved in that. I'm an AFPP myself. and so believe in all of it. And, one of the other things I didn't mention in my introduction is I'm involved in, the X nine QR code standard and why that's relevant, and I'm bringing it up here, is because it crosses over traditional financial institution,payments.

[00:07:24] Steve Wasserman: like a CH, the latest in instant payments fed now RTP as well as compatibility with, stable coins. so that when you have a QR code, whatever the merchant or the biller might want to accept, that can come across, and you don't need a directory for that. That can come across with the QR code, interaction.

[00:07:45] Steve Wasserman: Along with that QR code also includes its own little request for payment. it's, it's not exactly the ISO 2 0 2 2 request for payment. But I made sure it incorporated some of the same terminology of the ISO 2 0 2 2 when I was involved in the collaboration of, of that standard. And so, it's, it's a really, very valuable, tool that I can have request for payment transactions to support any of those payment rails with a consistent, re request for payment across all of them, as well as a corresponding payment notification that gives me the remittance detail I need to do automated processing on the back end.

[00:08:23] Joe Casali: So that was an awful lot. we jumped right in with, stable Coins Garnet Act. I do wanna get to the QR codes and, and pay it, pay some respect to that. But backing up just for a minute, even before. The idea of you need to have a strategy. Stable coins are all exciting and shiny and ooh, ooh, how exciting. Why should institutions be thinking about or not thinking about getting into and processing stable coins? And you, you did mention it, maybe remember, the deposit part of that. So can you talk a little bit about, what, what should decide if an institution. Does want to really participate in the in the network.

[00:09:10] Larry Pruss: Yeah, Joe, I'll, I'll, I'll take that. one of the things that financial institutions should be looking at is their deposit outflows and, and where those deposit outflows are going today. And what they'll see if they look at that is it's primarily going to fintechs. A lot of those. Crypto exchanges and some of that stable coin volume.

[00:09:29] Larry Pruss: we've talked to some financial institutions that are losing as much as 3% per month in deposit outflows to these companies. So that's one of the big risks is, is you're losing deposits. to kind of further support that, there was a treasury study, I think it was in April. Where the treasury, US Treasury had looked at the potential amount of deposit flight from stable coins in the US and it was 6.6 trillion, which is probably about 20% of the US deposit base.

[00:09:58] Larry Pruss: So one of the biggest reasons people need to look at stable coins is the risk of, deposits. Flight to the stable coins and you know, everyone goes automatically to payments, but it's probably deposits are the first risk that you're gonna see. And some of that has to do with the fact that stable coins are.

[00:10:18] Larry Pruss: Full reserve banking as opposed to fractional reserve banking. So these things are backed fully by treasury cash, cash-like instruments, as opposed to fractional reserve banking, which is what we do today where we lend those deposits back out. So that's kind of an important thing to know. In addition to that, there's this kind of open question around yield and stable coins, and the Garnet Act explicitly said you can't offer yield.

[00:10:45] Larry Pruss: Directly from the stablecoin issuer to the holder of the stable coins, but it didn't address intermediaries offering that yield. So there's often revenue share agreements with, say, exchanges, crypto exchanges, and they'll pass some of that revenue onto then user because they wanna see people using it.

[00:11:02] Larry Pruss: They, they. They get trading volume and they, they, they're basically paying for distribution, the stable coin issuers, and so there is something that feels like yield, call it rewards, call it whatever you want, getting from the stablecoin issuer. Then as these things start to get accepted, and we expect that they will, in that acceptance grows, you'll see merchants offer rewards because it's a cheaper transaction for the merchant.

[00:11:26] Larry Pruss: And then on top of that, because it's a stable coin, you can earn yield by putting into say, a defi. lending pool and earned yield on that. So you add all of that together and you've get got yield that could be anywhere from five to 15%, which is more than treasuries on a financial instrument that is fully reserved as opposed to deposit.

[00:11:46] Larry Pruss: So if that doesn't scare your listeners, I don't know what will, on top of the fact that these things will eventually maybe eat into payments and impact interchange.

[00:11:58] Joe Casali: Steve, anything I, I,

[00:12:00] Steve Wasserman: Larry said, said a lot there. And, you know, the, the thing is that it's, it's not just competition of, You know, it used to be that smaller institutions would worry about the big banks, that the big banks are eating them up, and, and they have been doing that for decades. so's fewer and fewer smaller institutions.

[00:12:18] Steve Wasserman: It's tougher. but you need, you need associations. You need, you need, you know, banker's, banks, and corporate credit unions and so forth to be able to help. Keep up with things, because you can't necessarily afford to do the types of things like a, like a city or a chaser or able to do with billions of dollars, that they're investing in.

[00:12:37] Steve Wasserman: They, and that's why they're out in the market out there already, and they're, they're leading the way. you, it's interesting, a city. Is for instance, they're not just doing one thing in the stable coins. They're doing stable coins, they're doing tokenized deposits, they're doing, lending, they're doing all sorts of things.

[00:12:53] Steve Wasserman: They're doing like five, six different things. And so is, so is so is Chase for that matter. And, you know, some of the other big banks are all talking about doing some other things now with, consortiums. and, whether or not the cons, those consortiums will li be limited just to the big banks or, you know, will, will.

[00:13:08] Steve Wasserman: The small banks need to have their own. Those are things that we're trying to help them, you know, navigate. And part of the strategy is do you do it alone? Do you do it together? Well together? in, in, in, it's hard to. It's hard to attack a Goliath, with just one stone. you might need a lot of stones being thrown at it.

[00:13:26] Steve Wasserman: So, you know, and, and then on top of that, you have all the non-bank entities that are now trying to become banks as well. and they're, or they're getting fed accounts, they're, they're looking to do that. so those are also threats. That you, they, you don't have time to wait to come up with a strategy and then, and you need that strategy then figure out how long I got before,you know, I need, I need to be doing things that keep my customers, but also attract that next generation.

[00:13:53] Steve Wasserman: I gotta, it is not just keep what I got, but how do I get new customers? 'cause I'm, I'm losing, I'm losing them in sieves right now.

[00:14:01] Joe Casali: Mm-hmm. So I'm gonna do a little, like commentator, recap, catch up. one of the things we hear at NEACH, we, we had a, kind of an introduction to, concepts just, just to keep everyone up to speed on stuff. So I just wanted to touch on a couple of things to make sure everyone's on the same playing field.

[00:14:22] Joe Casali: Fractional banking. You talked about fractional banking. That's the idea. If you ever watch the video, you know about how, how banks work is you go to the bank and you, you put deposits in the bank and the bank uses those deposits to loan them out, and then those people come in and make deposits and they use those deposits to loan them out.

[00:14:40] Joe Casali: So there's this whole cycle of lending out of money that's deposited. With the crypto or with the stable coin, there is no, that is not, you cannot lend that out. So if someone takes out a hundred thousand or a million dollars in crypto, that's less money a financial institution has to lend out. rewards, you talked about rewards.

[00:15:06] Joe Casali: You know, I don't often think about this, but, and, and when I, when I. Shut my mouth. I'd love you to correct me. Redirect me, tell me where I got it wrong. with the reward, the idea is that if I have a stable coin, it's not just a piece of paper per se. It could have reward attached to it. So you could get miles, you could get dollars, you could get some sort of benefit, can't get interest, but you can, could get some sort of benefit.

[00:15:34] Joe Casali: You talked about defi a little. Now that's, that's really high end, that, that gets out there. It's the idea that I can take a Bitcoin, for instance, and I could sort of lend my Bitcoin to someone else to make a return on it. I could invest my Bitcoin as something lent out. And finally, I don't have an answer for this one, and I, I always hear the word and I nod like I know what it is.

[00:16:02] Joe Casali: But I'd love you to define the difference between a stable coin and a tokenized deposit.

[00:16:09] Larry Pruss: So I'll, I'm gonna let Steve do that definition and I can add to it. I do want to, I do wanna mention one thing. So, you know, there's a lot of talk about liquidity and stable coins and, and money go into stable coins and locking it up so that the banks can't use it or credit unions can't use it for capital formation and re lending and increasing the money supply and all of that.

[00:16:30] Larry Pruss: While it's true that those stable coins have to be fully reserved and you can't re lend or re ate the, the, those assets that they're backing them, that doesn't mean hypothetically you couldn't re lend a stable coin. So imagine a future where a. You know, today we take in deposit cash deposits and we run, we lend those back out on a fractional reserve basis.

[00:16:50] Larry Pruss: Well imagine a future where we understand stable coins are just a cash derivative, and we take those stable coins in and lend them back out and make loans with them the same way we do deposits. Now, a lot would have to change from the regulatory standpoint and accounting standpoint, and these things would have to be considered deposit like instrument.

[00:17:08] Larry Pruss: But there is a world where that could eventually happen and that would make stable coins very useful for capital formation the same way that deposits are today. So, so there is some hope for that. But I will let Steve answer the question about tokenized deposits versus stable coins, not add anything if he doesn't, doesn't cover it all.

[00:17:26] Steve Wasserman: Well, I'm gonna just con continue from where you were talking about the lending out. The lending out is not from the issuer of a stable coin. You can't lend out your own stable coins, and you can though, Have received in stable coins and be holding them and lend those out to somebody else. Stable coins or digital assets, could also be used as collateral for a loan.

[00:17:51] Steve Wasserman: Back in the day, they had something called the, a. you know, a book, all your bank book, you used to have bank books back in the days, and you'd able to do a, a loan against your bank, you know, the deposit in your, in your bank book. so Stable Coins is, is a similar type of thing. You know, you have your Stable Coin Wallet account, and I can.

[00:18:08] Steve Wasserman: You know, you can, you can borrow against that as collateral, you know, or it doesn't have to be stablecoin, it could be Bitcoin or any of those other things in your wallet. but going, go, going through the, the question about the difference between stable coins and tokenized deposits really comes down to a couple of things.

[00:18:24] Steve Wasserman: The first is the reserves. We, we already covered this in terms of, you know, stable coins are a hundred percent, or more. a reserve because you, you, you, there's this whole thing about the variability of the assets. It's backing those, those reserves, the, the variability being the value of the underlying, treasuries.

[00:18:44] Steve Wasserman: certainly the cash portion of it is, is very stable. and then you have, repos and reverse repos that are, that, are for it. These treasuries have to be short term treasuries. Larry could fill in or forget how, how long it could be under the Garnet Act. but,you know, the, the others have to be more liquid.

[00:19:03] Steve Wasserman: the liquid is in terms of what may be redeemed at any point in time, is a certain number of days that you need of redemption capability, to cover the liquidity of, basically a run on that stable coin, equivalent to like a run on a bank. You know, if a bank then has their fractional reserves, where are they gonna get the money?

[00:19:22] Steve Wasserman: so, the, that's where FDIC comes in for them. to protect them, but then they, you know, they go into default. That's not a good thing. In the case of the stable coins, it's also the,the Garnet Act addressed this by saying the stable coins have to be done in a separate entity that, or at least the account has to be somewhat segregated so that, any, any bankruptcy related to that organization, the stablecoin holders have first divs.

[00:19:51] Steve Wasserman: On the assets from, on those reserves. So, if they're a hundred percent reserves, they're almost pretty much a hundred percent,guaranteed to, to have the money, unless there was some, you know, malicious activity going on with the stablecoin issuer that didn't follow the reserves. But the stablecoin, you know, the Garnet Act addresses those.

[00:20:11] Steve Wasserman: Periodic, audits and make sure it's, it's really there and there's, you know, some other ways that can be monitored to, to track that. That's a stablecoin, a hundred percent reserves. Well for, you know, regular deposits. Tokenized deposits are like regular deposits. They have fractional reserves. they have the FDIC coverage insurance.

[00:20:30] Steve Wasserman: And, tokenized deposits can sit in a wallet similar to sitting in a bank account. So the wallet in that case is the bank account. and every bank should be able to, issue a wallet. In that wallet. They should be able to not only have the, the, tokenized deposits, but let them also accept in stable coins.

[00:20:46] Steve Wasserman: and then there's a whole bunch of strategies how they can work with those stable coins. Convert them to deposits, maybe concurrent to the tokenized deposits as well. So, you know, many things there. I, hopefully I gave you can give some more differences. I didn't cover Larry.

[00:21:00] Larry Pruss: Yeah, just real briefly too, for stable coins, they op operate on open permissionless blockchains, which tend to lend themselves well for a, a global uses use of stable coins where tokenized deposits are typically closed loop blockchain system. Permissionless blockchain tend to be domestic only.

[00:21:23] Larry Pruss: Although you could set up a tokenized deposit network where it was would be international, the use cases also differ. So because of some of those differences that Steve and I mentioned. The use cases for stable coins tend to be B2B cross-border consumer, whereas tokenized deposits, more interbank institutional use cases.

[00:21:44] Larry Pruss: And then from a regulatory standpoint, stable coins are covered under Garnet Act and tokenized deposits are covered by existing banking regs. So you could do tokenized deposits today. It, it's just, it's gonna be more limited unless you've got a consortium of a lot of users or a lot of banks or a lot of credit unions that get together to allow those things to operate in our interoperate.

[00:22:06] Larry Pruss: Whereas stable coins, you've got some of that already today, but we can talk about interoperability and the, maybe the, the idea of the concept of a stable coin clearing house or a tokenized deposit clearing house.

[00:22:20] Joe Casali: Awesome. Awesome. I want to, catch up with a, just another fact and then jump into the challenges folks are facing with, with all of this. so I didn't realize, you know, I thought, oh, Garnet Act stable coins. Oh, people are gonna start using stable coins. People are using stable coins. I think I just saw a report.

[00:22:41] Joe Casali: That not only was it volume already up there, it's kind of exploded since the passage of the law. Is that correct? And can you just go right into the challenges after that?

[00:22:53] Larry Pruss: Yeah, so it, it has exploded, but it, but stablecoin has been growing at a pretty fast pace, over the, the, probably the past five years or so in the last 10 years. I think the market cap went from 200 million to three point. Or to, to 315, billion. So it went from 200 million to 315 billion. So it's been a, a big increase in market cap.

[00:23:18] Larry Pruss: again, I mentioned before the amount of transaction volume value moved internationally is about 49 trillion today, which is a really large number that is expected to double in the next year or two, which would make it around 80 trillion, which would put it on par. With a CH volume. So it's, it's really exploding.

[00:23:39] Larry Pruss: it has exploded in, at least in the US Post Garnet Act. You've got a number of stable coin issuers, like Circle and, PayPal, which has PYUSD, number of others, Paxos out there. And then you're seeing a lot of partnerships. Most of that use case is still, kind of international commerce B2B type of activity, not consumer activity.

[00:24:00] Larry Pruss: A lot of people in the US still have never used a stable coin. There are some frictions to that, but that will likely change, particularly again as an alternative to deposits.

[00:24:13] Steve Wasserman: Yeah, this is, this is where we are today. But don't blink your eye too much because tomorrow could be different. Tomorrow being, at least sometime in 2026, you are gonna see more use cases. And if I have anything to do with it, those use cases are gonna be point of sale, e-commerce, and bill pay. But in the, in the opposite order, I think bill pay first the fis and made a little more sensitive to,

[00:24:35] Steve Wasserman: the, the e-commerce and, and, point of sale where bill pay, a lot of bill pay today is, is a CH and, and,you know, in other, in other means some of it's backend wires, even when it's mass settlements through, you know, all the processors for, for bill pay on the backend, like RPPS and the FIS and Fiserv have major, major efforts and,those are things that are behind, online Bill pay today.

[00:24:59] Steve Wasserman: when we could talk about QR codes, I'll talk about how that can change all the things that can change with, with, that, that could enable and when that enables it for not only for instant payments as well as a CH, but also stable coins. It doesn't matter, you know, that's where stable coins will, will find their way and it'll be up to the merchant or the biller as to what they accept.

[00:25:21] Steve Wasserman: And maybe they'll have preference, they'll give more incentive to, if they feel that, you know, they save more money or they, they like the idea of receiving stable coins as opposed to directly in their bank account. They may feel in their wallet. They, they, they may have better access to use of it. And, and at some point they become one.

[00:25:38] Steve Wasserman: Your, your bank account. Your wallet become one.

[00:25:41] Joe Casali: so a little bit more on the challenges. I did that same article that really had a dramatic increase over the past few months. I think it was from the Brookings Institute, and I skimmed it. I didn't read it. They, they indicated, you know, well there, there's things that can go wrong. any thoughts on that?

[00:26:02] Joe Casali: Any, any what? What, I. Traps cannot, financial institutions avoid as they look at this new ecosystem.

[00:26:14] Steve Wasserman: You are on mute.

[00:26:17] Larry Pruss: I'll talk about what financial institutions could avoid, but lemme start with some of the traps or some of the problems from a consumer usage standpoint. So anyone that's ever tried a stable coin transaction will know that it is not frictionless. It, it's not an easy thing to do. It's easy to make mistakes.

[00:26:32] Larry Pruss: You can send it to a wrong address, which is almost like imagine an email, but a lot more complex. you can send it on the wrong blockchain. You can use the wrong, stable coin. That complexity can be a real hindrance to consumer adoption Now. We know that all technology over time gets easier to use, right?

[00:26:51] Larry Pruss: The early days of the internet were pretty complex and now it runs in the background, so that's going to change from an, from a financial institution standpoint. The complications are, and, and, and where you could have failures would be probably around. Custody and security and stable coin usage, your tokenized deposit usage and where that's going and, and is it with a, a sanctioned individual or, or an illicit activity?

[00:27:17] Larry Pruss: Those are the kind of things you'd worry about from a, from a, a, a financial institution standpoint. The other thing to worry about would just be the complexity from a technology stack. You're talking about applications. Orchestrators and infrastructure providers. You've got liquidity providers out there.

[00:27:34] Larry Pruss: You've got the issuers themselves, you've got various blockchains. So it's, it's fairly complex and there aren't a lot of one-stop shops where you can go to get that type of solution. So it's a matter of, you know, if you're a financial solution, you have to understand. How are your users or members using this today?

[00:27:51] Larry Pruss: are they using it today? How are they gonna use it tomorrow? What's the volumes look like? What's the impact to our financial institution? What's the strategic importance of doing this over time? and then consider, you know, those use cases, and how you, from a strategic standpoint, you're gonna build this out so that you know it, it works with the existing monetary system and the existing banking system today.

[00:28:19] Steve Wasserman: As far as you're on mute now. as far as, challenges is, what institutions have to be, careful with in their planning is they may, some of them may jump, say, well, how do I start issuing stable coins or tokenized deposits? It's like, that's putting the cart before the horse. I mean, not only you need the strategy, but part of your strategy is, Before you can issue anything, you have to have an acceptance network. Well, who's gonna be able to accept it? So you need, you need the wallet providers, and we need a clearing and settlement, ecosystem, that, you know, be able to convert it back to fiat. so that some use cases that are currently people are used to, they're gonna continue to be able to do.

[00:29:01] Steve Wasserman: put it back in their bank account so that they can, use it for the payments that they're using today, or, you know, and certainly, you know, be able to easily be able to issue or send it to you know, their cust people they wanna pay, based on how they want to accept it. So the,you know, we talk about mistakes and, the wrong things.

[00:29:19] Steve Wasserman: Another topic under the QR codes is how it's gonna help prevent those things. so

[00:29:24] Joe Casali: Let's, let's, let's, let's jump into QR codes again, talking about the future is now I remember the stories of, folks would tell us they went to. Someplace international and there were no payments. They just had QR codes and people I could go up and buy, you know, fruit with a, using a QR code and that was, you know, that was like science fiction.

[00:29:47] Joe Casali: It's not anymore. Right. What's going on, Steve? I.

[00:29:50] Steve Wasserman: So I mean, QR codes, maybe QR codes are not new. In fact, you know, they actually started exploding with the, you know, during the COVID time where we, we were using QR codes for menus and, you know, nobody wanted to touch anything. We also scan everything, and a lot of QR codes for payments. Which is different. There's QR codes for not payment trend, you know, things. but QR codes for payments. there's static versus dynamic codes. Static codes is like, you walk up to something and maybe there's a parking meter or there's, somebody has a, a stand that says, yeah, you get. This product and it costs this much, and here's a QR code for it.

[00:30:29] Steve Wasserman: and that static code, the, the problem with it is that you're gonna use your camera app, you're gonna try to scan it. Well, you don't know if that QR code has got a malicious website. It's gonna try to take me to. and so with X nine, tackled this together with like six. 60 other, people from the industry that I've been, a part of that tackled it to say it has to be very secure.

[00:30:50] Steve Wasserman: So the first security aspect is it doesn't work with a camera app. The QR code for X nine only works with a payment, app that the user has been already authenticated user, and the, the apps are able to have appropriate certificates to be able to access the information. The information passed along is all done.

[00:31:11] Steve Wasserman: Proper security methods that X nine is, is a master at. and the way it works basically is that, a merchant or biller. Who wants to, receive a payment? They give the per transaction information or the bill information,feed it in to be able to generate a, a dynamic QR code. And that QR code is, is, is then either printed on the receipt or print displayed on a terminal or print it on a bill and the consumer is able to be able to scan that QR code only in the payment app.

[00:31:45] Steve Wasserman: And that payment app. Now, the first thing the QR code does is it retrieves the information about the transaction. and that's not in the QR code. QR code doesn't contain any of that information. It now has a secure communication between the app service and either the biller service that generated the QR code or the bill might have generated themself.

[00:32:06] Steve Wasserman: Okay, so now that information that's equivalent to request for payment. That I have the transaction information that could be presented like e-bill presentment or, you know, you see your transaction on the screen. Do I okay it? Yes. Yes I do. and now, now I have, from that I can execute that transaction and it could be paid.

[00:32:27] Steve Wasserman: Any of the ways that, that, that payment, request information includes also all the payment acceptance methods and information to be able to settle that transaction through those payment methods. So if it accepts a CH, you have routing account number. Same thing for. Fed. Now an RTP if you, if you push a card is the method you want to exceed, you know, accept a payment view micro merchant that has a debit card that has pushed a card capabilities.

[00:32:53] Steve Wasserman: You might wanna say, that's what I want to, how I want to accept it. Or you may say, I have a stable coin wallet and here's my wallet address information. so I never, the user never has to touch any of that information, never sees any of that information. but the service that they're, the app that they scanned it off of, matches up any of the payment.

[00:33:11] Steve Wasserman: acceptance methods to payment, send methods that they can do and may, they may automatically do it for them, you know, to, to do that match. certainly all of them certainly can, can push it via a CH. but you know, they're probably also gonna be able to, if those who do, fed Now or R RTPs send, they can do that.

[00:33:29] Steve Wasserman: And if they've already been set up with wallets for their customers, they can push a, a payment tool, you know, to another wallet. Go ahead Larry.

[00:33:43] Larry Pruss: I, sorry about that. I'm, I'm a huge fan of X nine, but I also wanna add, especially as it relates to stable coins and probably eventually tokenized deposits, you know, wallet transactions using your, your mobile phone, particularly the tap to go, using the Near Field Communication (NFC) and secure element is something that opened up fairly recently, particularly with Apple.

[00:34:04] Larry Pruss: And there's a number of providers. flexa Circle and others that are looking to bring that to the market. So the familiarity of, of tapping your mobile phone and having that transaction run off of your, your, mobile wallet is, is here already and, and, and further being developed. So. Users are gonna have lots of different options.

[00:34:25] Larry Pruss: So the X nine, which again is a secure QR code, they're gonna have tap to go, they're gonna have things that feel very familiar that they do today, which will make that use case in, in, in user interface a lot easier than say it is today. For, for most of the, those of us that are familiar in the crypto world with, stable coins.

[00:34:43] Joe Casali: Mm-hmm.

[00:34:44] Steve Wasserman: glad, I'm glad you brought that up because, this is really important, this, because the design of the QR code, the message that comes across and the information communicated for the QR code. It can be implemented through a tap to pay experience too. So all those payment methods I talked about can have a tap to pay experience that covers pay by bank.

[00:35:07] Steve Wasserman: That covers push to card, that covers pay to wallet, all with the same standard that is either scanned or tapped.

[00:35:16] Larry Pruss: Great point.

[00:35:17] Joe Casali: so I did just want to recap, come, come, you know, translate a little for folks who aren't, you know, all up to speed. X nine is the Ansy Standards Organization. It's a subpart that talks about financial transactions and you know, the same folks that define how many, how far apart the screws on a light bulb are, are defining how payment's gonna flow.

[00:35:42] Joe Casali: And this is not new, right? This is working off of an existing model. And I don't mind mentioning is, is that material.

[00:35:52] Steve Wasserman: Yes, I mean, mate has been involved in the X nine effort as well as the FAA payments council. and there's a collaboration between FAA payments council and, and, X nine. and so Mate is, is actually. The, the firm that,helped bring their experience of doing this already for billions of transactions a month, in Brazil, where the, the instant payment methods there, have been, PIX, but now they're opening it up to stable coins as well.

[00:36:19] Steve Wasserman: and, mate ce kind of leading the, the, the way there and them trying to bring that experience, but through the X nine extension in, and part of my influence in it is that. We've gone a little further even than they've done in Brazil. and we're gonna be able to do even more. We have a whole roadmap.

[00:36:35] Steve Wasserman: Of additional capabilities that eventually include even line items, tax details, incentive options, refund options, and the, the sky's the limit on what this communication enables. in this, in this basically service to service communication between the app that scans it and the service that generated the QR code and has the payment and acceptance information that they're communicating.

[00:37:02] Joe Casali: Yeah. And, and I only know enough to be really dangerous, but, this, this is not, it's not an idea. This is not fantasy from across the sea. This is a real payment mechanism that works today and is smart. It's not, you know, it's not just like a check, right? Where there's information on a check, anyone can take a check.

[00:37:21] Joe Casali: There's, there's actually coding in the background codes that tie this payment, through iso. Two, two other systems. It's, it's so, it's, it can be smart, correct.

[00:37:35] Steve Wasserman: It, it can, it can be smart in terms of the, when the payment is made, the payment can go through the rails and carry the information, like in an ISO message. But also the, the, the iso, the, excellent standard includes a payment notification message that says, here's what I've sent you. So if I sent you via a CH, I want to give you that notification.

[00:37:54] Steve Wasserman: Yeah, I sent it to you via a CH. Especially if I'm a merchant,you know, I know I'm gonna get my money, so I know I'm not getting it, but, yet I don't have it yet, but I know I am getting it. So a payment notification could tell us that, but even with an instant payment, it helps with the reconciliation, the payment notification could have some.

[00:38:10] Steve Wasserman: In, additional information that doesn't necessarily come through the ISO message, that the, the payment might have been paid through an instant payment or pushed a card. So, but you talk about programmable things in, in logic, and I'm sure Larry wants to talk about one of the major differences with stable coins and tokenized deposits, for Progressable payments.

[00:38:32] Larry Pruss: Yeah. Yeah. So, so, so that is a, is a big differentiator, particularly with interoperability and the ability to make money automated. And so think about all of the things that we do today where we involve people in the payment process and all of the steps and all the intermediaries in all of the failure points and places where fraud can get introduced well as we move to programmable money. goes away because we can automate a lot of that, particularly as we start to move into the world of ag agentic payments, where we're starting to turn it. Payments over to the AI agents on our behalf. They need a way to do that cheap and efficiently because a lot of those transactions aren't gonna be big dollar transactions.

[00:39:16] Larry Pruss: They're gonna be small dollar transactions. Like say if I was gonna order from Amazon every month toilet paper, well what's the pluses cheapest toilet paper I can get? I'd turn that over to agentic payment. Agent and what kind of payment would I wanna use for that? A cheap payment? Well, that would be stable coins, which, you know, those payment costs might be two to three basis points versus, you know, could be 50 basis points or more depending on the size of the merchant for that transaction through the, through the card network.

[00:39:43] Larry Pruss: So I think Ag agentic payments we are gonna see not only with traditional cards, but also with stable coins. And so there's that connection there to the, programmability component of it.

[00:39:53] Joe Casali: That was awesome. I am going to close now and I'm gonna flip my clothes because I'm gonna let set you guys loose. I think we should meet again and talk about, Agentic commerce. 'cause that is fascinating. but I don't wanna, we could go another probably half hour, hour, but, I'm gonna close, for, for the listeners, you know, please share this.

[00:40:15] Joe Casali: I think this is a great episode. I think you guys should come back. not, not far from now to talk about that 'cause that's fantastic, but I'm, it's been so good. Is there anything else either of you would like to share? Thanks, everyone.

[00:40:29] Larry Pruss: Joe, if I could share some sources for, for valuable information where to, to get some information on this stuff. I mean, our company, srmcorp.com has a lot of white papers and, and blogs out there. a good one for tokenized deposits is the Regulated Liability Network white paper or the RLN network.

[00:40:49] Larry Pruss: also look at, and we didn't talk about it, but the idea of a, a stable coin clearinghouse. There's the USICS white paper. And then, if you wanted to find some good information on stable coins, look to the April US Treasury report called Digital Money. That's another great source.

[00:41:07] Steve Wasserman: I will add another resource in there and something we could talk about with the agent payments that has to do with, it solving another issue and that is irrevocable payments, with instant payments and stable coins. how do you get your money back? And there's a firm, that I'm starting to talk to called, called Coin, coin backs, COIN dot, CoinBacks.io.

[00:41:30] Steve Wasserman: and they're addressing this issue. and it's very interesting, how they're doing it. And, it's, it's really,something that is also, you know, would be a major, a major factor in the adoption of, instant in all types of instant payments

[00:41:45] Joe Casali: Larry, I think that, I'm sorry, Larry. Sorry, Steve. I think that warrants a, can you define a little bit more about why Irrevocability is an issue?

[00:41:55] Steve Wasserman: Well, so if I sent the money. I can't, I can't call the FI and say,I need to get the money back. you know, you could say I was scammed and all that, and you know, they, they may be able to try to help you get it back, but it can never be pulled back. The only way to get it back is, is like in a cash transaction.

[00:42:13] Steve Wasserman: How do you get your money back in a cash from tax? You gotta go back to who you gave the money to and you gotta ask them for it and hope they give it to you. Now, that's where you want some rules of the road, that in every transaction originally when you initiate the transaction, that request for payment data should include what are the re refund terms.

[00:42:32] Steve Wasserman: That's one of the things I'm gonna make sure it gets into the, a future version of the X nine standard is the refund terms. I've shared that, you know, concept with them, and the refund terms would say whether or not. You can, the refund should be sent. It doesn't force it to be sent. Then if it's not, if, if, if it was able to be sent and it wasn't done, then, then an intermediate can get involved to say, Hey, you know, you were legally supposed to be able to return these funds according to your terms.

[00:42:58] Steve Wasserman: you know, why didn't you do it? And, you know, then they, they can go a, they can try to talk to the FI on the other side and say, this party's, you know, irreparable and causing harm to our customers.

[00:43:10] Joe Casali: And am I, am I wrong? Could someday that be an agentic commerce discussion between two ais?

[00:43:19] Steve Wasserman: Yes,

[00:43:21] Larry Pruss: Yeah, I, I, absolutely, absolutely. Hey, well, one more thing.

[00:43:26] Steve Wasserman: we're gonna have fun with this topic when we

[00:43:27] Larry Pruss: Steve and I would be remiss if we didn't add one more, one more resource in there, which was the US Faster Payments Council. It's a great source for all of this, whether it's X nine, whether it's stable coins, tokenized deposits, traditional faster payments like RTP and Fed Now.

[00:43:42] Larry Pruss: It's really a phenomenal organization and Steve and I are both blessed to work with that organization.

[00:43:49] Steve Wasserman: Yeah, a lot. I've been involved in that in many papers, and, and blogs coming out, and other resources as well. That, Larry and I collaborated on some, and he, each of us have collaborated with many others on, lots of deliverables. so great resources there. I can go on and on just talking about that.

[00:44:08] Steve Wasserman: And of course there was my Smart Instant Payments book that, originally talked about division of some of this, and has some details, about the instant payments in general.

[00:44:17] Joe Casali: Yep. No, that's part of my, that's part of my, content for the, the AFPP certification. The I know the article or the chapter on ISO was fantastic, so it's all good. alright. Thank you very much for joining me. This is great. I

[00:44:31] Steve Wasserman: Thanks for having us

[00:44:32] Larry Pruss: Yeah. Thank you for having us. Really appreciate it.

[00:44:35] Joe Casali: No, thank you.

[00:44:35] Joe Casali: Thank you. thanks. Bye.