In the 1950s, a businessman, looking for a new way to settle his lunch tab, sparked a payments revolution and paved the way for today’s cashless economy. Now, the growing use of stablecoins like USDC is leading businesses and consumers to an era of digital payments that’s even faster and cheaper than a credit card.
For generations, credit cards have set the speed limit for digital payments made by consumers and businesses around the world. From metal “charge plates” used to run up a tab at a department store; to the Diner’s Club card, which created a groundbreaking, cross-business credit network for everyday purchases; to the rise of digital payments connecting all corners of the world… nothing has felt more frictionless than paying with credit.
Until now. Because stablecoins (cryptocurrencies that are pegged to a fiat currency) are making digital payments faster and cheaper than they’ve ever been. And they’re changing what’s possible at every scale of our payments ecosystem — from an international corporation making B2B payments, to a small business selling artisanal tree pots, to a parent sending remittances to family members across borders.
We’ll learn how the rise of the credit card changed consumer expectations of what it means to pay for goods and services. Then we’ll dive into the concrete uses of stablecoins that could signal a new revolution in the speed and ease of payments and open up new tools for growth and stability across the world.
MAGGIE: I never set out to make a radical lifestyle change. I couldn’t even tell you when it took place, exactly.
It just… sorta happened.
I went cashless.
I remember when I’d have to hit the ATM on my way to work.
These days, I pay for my morning coffee with my phone. And I tap my credit card when I pick up my dry cleaning. In fact, I hardly ever touch paper money… and this cashless system makes paying for stuff feel totally seamless.
Until I start spotting the seams — like a sign at the corner store, telling me that I'll be charged an extra 3% if I pay with a credit card.
Or that painful moment when a client's just paid me for the work I did, but the bank needs another week to get that money to me.
So I’ve been wondering: Is this the best our cashless system can do?
And thankfully, the answer is no. It turns out the payments industry is moving into a new era of the cashless economy.
This is Evolving Money, from Coinbase and Bloomberg Media Studios. I’m your host, Maggie Lake.
On this podcast, we take a different look at cryptocurrency. It’s been cast as a radical departure for the monetary system.
But what if it isn’t radical at all — just the next logical evolution of how we pay for things and store long-term value?
Along the way, we’ll explore how money has changed over the centuries, and look for lessons that might predict its next evolution.
In this episode, we’re talking about stablecoins. That’s the term for cryptocurrencies that are pegged to a fiat currency like the U.S. dollar. Which can make them a powerful medium of exchange, changing the way people move money around the world.
Today, companies are using stablecoins to dramatically shrink transaction fees and cut settlement times – as they take customer orders, pay their suppliers, and cover day-to-day costs.
To learn how this works, I’ll talk to Jose Fernandez da Ponte, Senior Vice President of Digital Currencies at PayPal, about how stablecoins are helping multinational companies and small businesses match the 24-7 pace of today’s financial world.
To understand how we got here, I want to share a 75-year-old story — about an innovation that set us on the path to a cashless world.
In 1949, businessman Frank McNamara walks into The Major’s Cabin Grill.
SEAN VANATTA: He's taking a client out to a lunch in New York City…
That’s Dr. Sean Vanatta, financial historian and author of the book Plastic Capital: Banks, Credit Cards, and the End of Financial Control.
So in the story, the check arrives for Frank and his client. Frank pats his jacket for his wallet…
SEAN VANATTA: And realizes that he's left his wallet in his other suit. It's back at home in Long Island. What is he gonna to do?
Okay, so this story’s more of a marketing myth than literal history…
I’ve heard urban legends, where Frank has to do the dishes, or wait for his wife to bring the wallet from home — but whatever happened, the idea of paying with credit was all Frank could think about.
SEAN VANATTA: McNamara was a kind of credit executive, so he knew something about consumer credit… And he thinks to himself, well, you know, shouldn't a business executive like me have access to the credit that I deserve?
Why do I have to carry around all this cash? Why do I have to keep track of my wallet? Shouldn't I just have a card that can do this for me?
Now, prior to 1949, charge cards did exist, but not in the way we think of them today.
SEAN VANATTA: If you were well off, you shopped at fancy department stores…
You would be familiar with metal tokens that were called charge plates, that you'd be able to use to charge goods.
But it was always built around the fact that individual relationships with specific stores that you had to build up over time.
Frank came up with a simple but powerful change: What if people had one credit account at all the restaurants they went to?
SEAN VANATTA: His vision was to create this kind of universal system.
The next time Frank turns up at Major’s Cabin Grill, when the bill comes, he whips out a little piece of cardboard, which he calls “The Diners Club Card.”
The Diners Club Card is often credited as the very first credit card, as we understand them today: Something that you could use at multiple businesses, who were all in the same ecosystem of payments.
SEAN VANATTA: What the Club would do every month is mail you back a copy of your receipt. That really makes this valuable for people who are, you know, going out to drinks with clients, having to keep track of their receipts.
The idea caught on. American Express, then known for its travelers’ checks, introduced its own card. And in 1958, Bank of America issued its BankAmericard.
That was the forerunner to Visa.
And the payment networks that enabled credit cards to be used, across the globe, on a daily basis.
SEAN VANATTA: For the card holders, I think it probably felt a bit like magic, right?
The invention of the credit card was a major update to how people and businesses make payments. And as payments went digital in the 21st century, everything seemed like it got even more convenient.
But we also deal with the fees and delays that come with that convenience.
Now, we may be at the beginning of another shift that’s just as big as the one that started when Frank McNamara debuted the Diner’s Club Card — thanks to a new kind of digital currency.
JOSE FERNANDEZ DA PONTE: I've been in crypto since 2015. I was very, very skeptical walking into it…
That’s Jose Fernandez da Ponte, Senior Vice President of Digital Currencies at PayPal.
Jose, like a lot of people back then, was a crypto skeptic. But that changed.
JOSE FERNANDEZ DA PONTE: The first use case that I had on crypto was in payments, and it was about moving money cross-border, between bank accounts using a blockchain ledger.
I was looking at the account where money was leaving, and then the account where money was arriving… and it was five minutes from one place to the other across 9,000 miles of ocean… This is something that you could not do before.
I think that was, was the moment that brought it to life for me.
Jose was looking at stablecoins — a type of cryptocurrency that’s grown its market cap to one hundred sixty-four billion dollars in just the past four years.
He liked that stablecoins could be moved in a way that was fast, cheap, programmable, and interoperable.
He also liked that when they're pegged to a stable fiat currency — and backed by reserves of that currency — stablecoins typically don't fluctuate in value. That’s why stablecoins like USDC can be spent like U.S. dollars.
JOSE FERNANDEZ DA PONTE: The beauty of this instrument is that for most of the mainstream users… you can provide an experience that is fiat on the front, where people are interacting with dollars as they have always done, but it's a stablecoin on the back…
That was exciting to Jose, because he’d been in the payments business for over 20 years. And he could see every little problem in the system — especially when it came to making payments across borders.
JOSE FERNANDEZ DA PONTE: Imagine that you are a U.S. company who needs to pay a supplier in Central America. With the current payment infrastructure it’s gonna cost you something between 30 and 50 dollars to send that, that money.
And for the company that you're paying on the other side, it’s likely going to set them up 1 to 2 percent, when they need to convert their payment into their local currency.
Transactions are costly. And slow.
JOSE FERNANDEZ DA PONTE: If I want to send money, I need to do it Monday to Friday, nine to five.
With stablecoins, fees are much lower, and transactions are way faster.
JOSE FERNANDEZ DA PONTE: If I can send the same amount of money on a stablecoin, on a high throughput blockchain, what is gonna happen is the payment will settle in seconds, not in days.
I will be able to send that money outside of banking hours. And if I'm doing an international transaction, I can time a transaction to the moment in which the exchange rate between the two currencies is the most convenient.
Stablecoins also help with another barrier to paying people in a different country: The need to hold reserves of the local currency on their side of the border.
That can be risky.
JOSE FERNANDEZ DA PONTE: Because if I need to get that money internationally quickly it means that somebody on the other side will need to pre-fund that, they will need to pay on my behalf. And there are many times for a business that means that you need to keep money in pre-funded accounts in the destination country.
And sometimes, that, in some of those markets that are more unstable, that carries counterparty risk with your partner over there.
Jose’s interested in what stablecoins can do right now — and he’s tracking how these benefits play out with real businesses across the world.
JOSE FERNANDEZ DA PONTE: I was talking a few weeks ago to someone who was using a stablecoin to send value from their wallet in the U.S. — this person was using a Venmo wallet to send value to a relative in Malawi, in Southern Africa, to a local wallet.
And they did the experiment of sending the stablecoin on one side, and then sending the money on traditional rails.
The person on the receiving end ended up with 40 percent more on their local currency.
Just because it was not only faster, but it was more liquidity on that side and they could get a better exchange rate.
So you’re increasing the speed, you’re getting more bang for your buck, you're getting a better exchange rate, you’re reducing your counter party risk.
That is happening today.
Last year, the stablecoin market settled more than $2 trillion worth of transactions for real goods, services, or remittances.
That’s 20-25% of the total transactions made by major credit card companies in the same year. And over the past two years, we’ve seen a nearly 20% year-over-year increase in transactions made through stablecoins.
This massive growth in spending among individuals certainly doesn’t surprise Jose.
JOSE FERNANDEZ DA PONTE: There are 30 to 60 million individuals who engage with stablecoins today, and many of them are cross border and many of them want to purchase from US or European-based merchants and many of them lack an international credit card.
He says in many cases, it’s likely you don’t have a card that allows you to make payments and settle transactions across borders.
JOSE FERNANDEZ DA PONTE: There are some very good recent reports that are talking about use of stablecoins in places like Turkey and Nigeria and Brazil and other markets. Those are vast, vast populations with increasing expenditure power, that are yearning for a mechanism that they can use for purchases overseas and stable coins are going to be one of those cases.
PayPal, Jose’s company, is already pushing towards mainstream adoption. Earlier this year, they launched a proprietary stablecoin pegged to the US dollar: PayPal USD.
JOSE FERNANDEZ DA PONTE: Because this is not going to be a hack. This is gonna be a tool in the toolbox of the CFO, and it should coexist with the instruments and the platforms that they are using today.
When their stablecoin completed its first business payment in October, it was an exciting, and nerve wracking, moment.
JOSE FERNANDEZ DA PONTE: It reminds a little bit of the NASA launches, when you are at the war room in one of those launches and you have people all over the world… and then there are like 30 seconds of everybody holding their breath…
JOSE FERNANDEZ DA PONTE: … and then you see it come through, and then there is a burst of enthusiasm and congratulations; it’s, it’s fantastic.
But PayPal already has 36 million merchants relying on the company as their primary payments platform.
So you may be wondering: Why would any of those 36 million people make the switch to stablecoins?
JOSE FERNANDEZ DA PONTE: If you're a small business who's operating on those wafer thin margins and trying to figure out how to make ends meet, this is a game changer.
There are more than 400 million accounts in the PayPal universe. There are more than 30 million merchants.
If we can make that easily available, to interact with a stablecoin, and they like the trust of the brand that they have used, we believe that we can provide that initial jumpstart to the system.
Jose told me about one company that illustrates the benefits.
Fig Tree Pots is a small ceramics business in Austin, Texas.
JOSE FERNANDEZ DA PONTE: Selling their wares locally for many, many years. And we were talking to Renee, their CEO. And her frustration was that she had to actually decline international wholesale orders, because they couldn't just figure out the way to be paid by their wholesaler in the Middle East.
Fig Tree Pots is a small shop. All of Renee’s pieces are made in her little home studio. She doesn’t have the time and resources to figure out the complexities of international payments and foreign exchanges.
JOSE FERNANDEZ DA PONTE: When you are offering an alternative, I mean, her eyes lit up. So saying, “Okay, so you're telling me now they can pay me, in this stablecoin instrument, I can receive that in, in the wallet that I do all the time, I can send it quickly to my bank account, and I can get that additional business.”
For Renee, getting rid of these barriers to cross-border payments could unlock entirely new markets.
JOSE FERNANDEZ DA PONTE: There is a cost component, but she's very excited about the prospect of being able to sell more. Of reaching consumers that she cannot reach today — if she's selling from her physical art gallery, from local markets, and from a website, this allows her to turbocharge that website and make it available for overseas consumers.
Over two decades ago, PayPal was at the forefront of the financial system’s shift to a digital, cashless world. PayPal users could make seamless and secure digital payments from anywhere, to anywhere.
With crypto, Jose believes Paypal is taking another huge leap forward — but with an eye toward practical adoption of this game-changing technology.
JOSE FERNANDEZ DA PONTE: We started to be in this space because we are a payments company.
We weren’t talking about the ideological components of blockchain. We are not on that ideology, none of us have laser eyes, we are in this because for many of us, this is the first time in a long career in payments that we have seen technology that can fundamentally upgrade the financial infrastructure.
So we started on this because we were experimenting with some of these protocols five years ago, and we were able to move value for a cost that is the equivalent of 26 times cheaper than moving money from a bank account to a bank account.
And it's 400 times cheaper than moving money through a paper check.
And if you believe in physics, you believe that the universe likes a low energy state, and if there is a technology that will let you move value 26 times cheaper… that technology eventually will see the light of day.
For businesses discovering and adopting this new technology, seeing the opportunities and the changes it can spark — it’s kinda like the first time we used little pieces of plastic to pay for lunch. It can feel like magic.
JOSE FERNANDEZ DA PONTE: And when you think about the waves of innovation in payments, the credit card is a very good example…
You're moving people to change their behavior. They need to understand that that rectangle of plastic that they're going to swipe at a merchant is actually going to go against their bank account and is going to work well. Same thing when you're tapping to pay at a grocery today with your phone.
There are billions of dollars who have gone into habituating consumers to act in a certain way. And when you're trying to change that behavior, you need to provide a ton of additional value in the short term for folks to change.
We will see that with stablecoin payments as well.
Like credit cards 75 years ago, stablecoins come with a new infrastructure that can break down decades-old obstacles to making everyday payments.
And like so many people have embraced a life without paper bills, companies and consumers today are realizing that stablecoins could reshape our basic expectations of how to move money.
Thank you to Sean Vanatta and Jose Fernandez da Ponte.
This is “Evolving Money,” a podcast from Coinbase and Bloomberg Media Studios.
If you like what you hear, subscribe and leave us a review.
I’m Maggie Lake, thanks for listening.