The hub-and-spoke model of payments is coming to an end (TWIF 10/24)

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Chuk did a great job yesterday summarizing the skinny master accounts floated by the Federal Reserve at their Payments Innovation Conference. I think it's hard to overstate how interesting that development is.

Something I've been talking about, related to stablecoins, for a while is that their most underrated feature is programmability. People today focus on payments cost and speed, but what we're really building is financial infrastructure where money automatically goes to its most useful and efficient point, where it moves proactively instead of reactively, and where a dollar can look like both a payment medium and an investment (imagine if you could buy your coffee with a share of your money market fund....)

The Fed's proposed skinny accounts are a step in that direction.

Today, payments in the US operate in a hub-and-spoke structure where, no matter which services or providers you're trying to move money (or invesments) between, you have to cash out into a bank account as an intermediate step. But what if you could move funds and investments wallet-to-wallet, directly, without needing to route through a bank?

Well, as you can imagine, banks are not excited by this idea. Just like early electric elevators, which still required operators to pick the destination floor, the issuers of deposit accounts don't want to lose their intermediary status. But efficiency dictates that capital should flow more seamlessly between different points of rest, and the Fed's decision could lead to that future.

Elsewhere, there was a lot of chatter across stablecoin Twitter this week about which L1s and L2s are building private transactions. As payments becomes an increasingly popular use case in crypto, as money moves on-chain, and as KYC standards become more rigorously enforced for wallets, being able to transact privately will becomea table-stakes feature for stablecoins.

Lastly, I wanted to say a big thank-you to Peter Renton and Spring Labs for an invite to talk about investing in fintech and AI at the annual AI-Native Banking & Fintech Conference!

See you at Money2020 this week?

Please enjoy another week of fintech and banking news below.

Have feedback for us? Let us know. Find me at @nikmilanovic, @twifintech, and @ndm

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First Internet Bank deployed an AI-native loan-intelligence system from Parlay Finance to streamline its SBA lending process.

Lloyds Banking Group and Lolly introduced “Pay by Bank” self-service kiosks enabling direct bank-to-bank payments via mobile apps.

MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank launched a yen-pegged stablecoin built by fintech Progmat to enhance cross-border and corporate payment flows.

HSBC and Juspay launched a comprehensive acquiring platform combining HSBC's global network with Juspay's infrastructure to offer merchants an end-to-end payment solution.

JPMorgan Chase and American Express competed fiercely in the premium-card market by increasing fees and enhancing perks to capture affluent consumers.

The Federal Reserve System is exploring introducing “skinny” master accounts to grant fintech firms access to basic Fed payment services.

For the first time, the Bank of Canada registered non-bank fintechs as payment service providers, opening direct access to payment rails and ushering in a new era for Canada’s fintech industry.

The American Fintech Council urged the Consumer Financial Protection Bureau to prohibit fees for open-banking data access and preserve consumers’ rights to share their financial data.

The United States Department of Justice seized around US $15 billion in bitcoin linked to a forced-labour “pig-butchering” crypto scam orchestrated by the Cambodia-based Prince Holding Group.

Coinbase expanded its Coinbase One Card to all U.S. users, offering Bitcoin rewards on everyday purchases, and also rolled out business payment tools to facilitate crypto transactions for enterprises.

Persona, a provider of a digital identity platform, launched Persona Connect, a new solution that enables organizations to securely share and reuse verified identity and business data across their own ecosystems.

Zepz launched the Sendwave Wallet, a stablecoin-powered platform enabling users to send, save, and hold digital dollars in over 100 countries.

MoonPay introduced MoonPay Commerce, a platform offering merchants customizable crypto payment solutions, including widgets, APIs, and Pay Links.

Klarna unveiled its digital wallet and debit card in the UK, aiming to disrupt traditional banking with cashback rewards and Visa backing.

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Are you ready to grow your fintech with scalable, API-enabled payments? Backed by a leading financial institution, Newline TM by Fifth Third empowers enterprise fintechs to effortlessly launch and scale payment, card and deposit products directly with Fifth Third Bank.

Learn more at newline53.com

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Coinbase announced plans to integrate private transactions into its Base network, leveraging its acquisition of Iron Fish's team to enhance privacy features.

Ant Group and JD.com paused their stablecoin initiatives in Hong Kong following directives from Chinese regulators concerned about private sector control over digital currencies.

Flexa integrated Base Pay as a default checkout option across its platform, enabling merchants to accept USDC payments seamlessly both online and in-person.

Worldpay entered into an exclusive agreement with Kroger to provide payment processing services for the retailer's operations.

Astrada introduced real-time expense reporting capabilities into Workday, enhancing financial transparency and efficiency for organizations.