The Future Architecture of Finance

Transcript

The Future Architecture of Finance

ROB (00:03):
The UK starts in a strong position. We have deep international capital markets, English law, sophisticated institutions, trusted infrastructure, experienced regulators. Our advantage is trust. The opportunity is to combine that trust with the innovation. And that matters, I think, particularly when we think about gilts, fixed income, repo and collateral, where actually the market debt for legal certainty are just as important as the technology.

YUVAL (00:30):
Now I can programme that when I have certain thresholds of cash, I will automatically compose it and transfer the cash into a money market fund that will earn me yield on the minute. And whenever I want to make a payment and I don't have enough money in my checking account, I will auto liquidate my money market fund that will transfer in real time into a deposit and remit a payment.

NICK (00:54):
The meaning of this word of interoperability, which we in the industry use a lot, but rarely define. So how can we transact successfully across different systems? We do not want to see the emergence or formation of digital islands because that will limit scaling and ultimately entrench inefficiency. And the increased global fragmentation could lead to material GDP losses globally, something from one to 6% of GDP globally by 2030.

TOM (01:28):
When it comes to the powerhouse behind banking economics, global payments is the unchallenged king. It accounts for about 41% of total banking revenues. That's a $2.6 trillion revenue pool. Every year it processes 3.8 trillion transactions representing over $2 quadrillion dollars in value, two quadrillion. Those numbers are worthy of the noble crown. And yet this is all based on a system where transactions wind their way through a complex web of correspondent banks clearing across multiple time zones, taking days to settle and locking up vast sums of capital. But we are stepping into an era of twenty four seven real time borderless payments and market modernization where the map of global money, capital markets and financial infrastructure is being redrawn. From tokenized deposits that could reach $4 trillion by 2030 to advanced digital wallets, programmable assets and the rise of AI. But to get there, we need to overcome some challenges.

(02:46):
Welcome to the Next Five Podcast. I'm Tom Parker and in this episode we explore the future architecture of finance. Joining me to tackle this topic are three experts. First, we have Rob Hale, co-head of global markets at Lloyd's Banking Group.

NICK (03:04):
Thanks Tom. Great to be here.

TOM (03:05):
Next is Nick Kerrigan, managing director and head of innovation at SWIFT.

NICK (03:11):
Delighted to be with you, Tom.

TOM (03:13):
And finally, Yuval Ruz, co-founder and CEO at Digital Asset.

YUVAL (03:18):
Great to be here, Tom. Thank you for having me.

TOM (03:20):
Well, Nick, let's start with you. I mentioned some big numbers at the top of the show. Given the sheer importance of global payments to banking economics, how far have we come in recent years to streamline processes? And let's look at some of the other numbers behind this. In research, SWIFT published in July, 75% of transactions arrive within 10 minutes, but it's the last mile in the chain where payments slow down the most. Can you talk us through how you are reaching that 75% 10 minute payment stat and how to get it over that last mile slowdown?

NICK (03:58):
So thank you, Tom. Our core focus at SWIFT since we were created over 50 years ago now has been to support the secure movement of value around the world. And it's actually pretty important to recognise that cross-border payments have improved significantly over the last decade. So for example, on a global level, payments across 80% of markets are quicker than they were in 2023, and a typical transaction now moves almost 20% faster. So we've already seen great progress on this score and we are indeed now ahead of the targets that the G20 has set for cross-border payments, but undoubtedly there's more to be done and our real focus, our energies are spent on uplifting that payment experience. We recently launched an initiative called the SWIFTR Payment Scheme, and that represents an important step forward in those efforts to make cross-border payments as seamless for retail and small businesses as they already are for wholesale payments.

(04:59):
And that payment scheme was developed with input from over 40 member banks. So some of the transactions that have been already done within the framework of the SWIFT payment scheme have shown at sub 40 second transactions, so Australia to India under 40 seconds. So we certainly know that it can be done and it can be done indeed using the existing payments technology and infrastructure. But as you rightly said, Tom, there is data from our network that shows that actually the in-flight time, that's the time from the bank creating the transaction and going across the SWIFT network is really only about 20% of the overall cross-border journey. And the rest of the 80% is spent in what we call the last mile. That's when the money arrives at the bank of the beneficiary and then the money is actually credited to the beneficiary. And there's a number of contributors to this kind of last mile issue.

(05:53):
One of those would be regulatory reporting requirements or adherence to standards. Another would be the country's capital and FX environment where there may be limited liquidity or fixed windows for actually converting funds that can delay processing. And finally, there's also delays that can occur around manual processes such as compliance processes or indeed sometimes the lack of that real time 24 by seven infrastructure. So when we think about solutions here, there isn't one thing that's going to solve it. It's actually about looking at these issues country by country, corridor by corridor, which will require a combination of global and local efforts. And that's something we're working really hard with the financial community to deliver. And one specific example of recent developments is we announced the Cybus Conference this year that we are going to be incorporating identifiers that customers already use, such as phone numbers, emails, virtual addresses into that scheme system so that customers can use the identifiers they're already familiar with to make a cross-border payment.

(07:02):
So real effort going on and definitely progress being made.

TOM (07:06):
Brilliant. Thank you, Nick. Rob, I want to delve into this a little bit more. Given that commercial banking traditionally use a T plus two settlement window, for those not familiar T+ two means the date something is traded plus two business days. When you look at it today and some of the sort of evolution that Nick has been talking about, I want to look at tokenized deposits where digital wallets are shifting us towards a future where there is a continuous twenty four seven financial system. What is driving that shift and what needs to happen to move tokenization from pilot projects into everyday wholesale market infrastructure?

ROB (07:45):
Thanks Tom. So I see two related opportunities. So on the one hand, payments and then securities and collateral on the other. And on the payment side, businesses operate globally and around the clock. I don't think they care so much about the underlying technology. What they want is speed, certainty, transparency, fewer cutoff times and fewer intermediaries and digital money and tokenized deposits will offer new possibilities. But to discussion we've just had with Nick, existing payment rails are also improving. So I do expect the two to coexist for some time. And then for securities and collateral, securities are a different challenge. So here definitely T+ one and T+ two settlement cycles matter. And the opportunity really is to bring the securities and the payment legs closer together and that then can really start to reduce the frictions in the market, move collateral more efficiently, and then really free up liquidity and funding capacity as well.

(08:48):
And we've shown what that can look like at Lloyd's. Working with RCHAX and the Kantal network, we actually use tokenized commercial bank deposits to purchase a tokenized UK gilt, but a successful transaction is not the same as a functioning market. And I think the next step really is to get to repeatable issuance, investor participation, and then secondary trading as well. And then that needs to be followed by repo financing and collateral use, and it all needs to be supported under a legal certainty, resilience and interoperability as well. So for me, the prize isn't tokenization itself. It is actually making that capital collateral liquidity work much harder.

TOM (09:33):
Yeah. I mean, you mentioned there about legal certainty and interoperability. I want to follow on here about how well positioned is the UK and London to actually lead this financial architecture overhaul globally. We've got things like English law, we've got trusted collateral frameworks and an existing world-class market infrastructure. What needs to happen with regulators and market participants to maximise our potential and usher in as faster real world reform and have UK and London leading it?

ROB (10:05):
The UK starts in a strong position. So as you say, we have deep international capital markets, English law, sophisticated institutions, trusted infrastructure, experienced regulators. Our advantage is trust. The opportunity is to combine that trust with the innovation. And that matters, I think, particularly when we think about gilts, fixed income, repo and collateral, where actually the market debt for legal certainty are just as important as the technology. And here actually I think digit is probably a good example. So the UK government is looking to issue digitally native debt and Lloyd's one of the joint lead managers on that. But issuing that digital bond, that's just the start. Where we need to get to is to get to investors, secondary trading and market making, and then actually the repo financing. So then you have the ability to use those assets as collateral. So I see the digital bond as the starting point and then the functioning digital bond market, that's the real prize.

(11:05):
And that requires, as you say, the regulators, issuers, banks, market infrastructure providers all need to look to work together on those standards, on the legal certainty, on the interoperability and on resilience as well. So I think London has all the foundations to lead, but it definitely won't happen automatically. We have to turn those strengths and put that into how we get to liquid and internationally connected markets. I think that's the key.

TOM (11:33):
Thank you, Rob. Yuval, let's bring you in here. Your company Digital Asset created DAML and the Canton network. Rob mentioned that earlier, which if I can be so bold as to try and define, but correct me if I'm wrong, DAML is an open source smart contract programming language. And the Kanton network is a privacy enabled institutional grade blockchain with composability, control, and governance. On Kanton, there is a sub-transaction privacy, meaning that parties can only see the part of a transaction that specifically applies to them and organisations and participants use DAML to build apps on the network. Is that fair?

YUVAL (12:15):
That is a very correct and technical definition of what we do.

TOM (12:19):
Perfect. Well, when we talk about programmable assets, we aren't just talking about digital tokens. We're talking about coding sets of rules and actions directly into the asset itself. How are programmable contracts changing the nature of liquidity and trade velocity?

YUVAL (12:38):
Sure. And maybe we circle back to where you started and what you asked Nick, which was the speed of payments. And the speed of payments I think is just one aspect of what the technology is trying to solve, as you mentioned, asset velocity. I think the other components that the technology, just generally speaking, trying to solve is saying, well, today when you use message-based systems, there's also concern of reconciliation that you're not actually sending... What will get to the other side is not necessarily correct. So actually having much more correctness around transactions being deterministically correct is another aspect. But then to your question about composability or programmability, I think is probably the most important thing about this technology, which is today most assets exist on their own networks. So when Rob's bank processes a payment, it's another part of the bank that processes securities transactions.

(13:40):
And that requires a lot of individuals, a lot of software, a lot of coordination. And as we know, that's when we hear about settlement risk. It's this risk that two legs of a transaction don't happen when they're supposed to happen, either because there wasn't sufficient funds or because there's just an operational mistake that happens and as a result, one leg of the transaction fails. And I think that that is one of the most exciting components of this technology is not just that we'll be able to make payments in more real time, but it's we'll be able to programme them to happen only when they're supposed to happen against other assets. So I'll give an example. Just tonight, hopefully this will become public very soon, we started doing on-chain treasury management for a Fortune 100 company. So they are using tokenized deposits. Today, what a lot of customers do is when they go into the after hours, when the bank is closed, they hydrate their cash accounts so they can continue to make payments when the bank is closed and over the weekend.

(14:47):
What this company is doing is saying, "Well, now I can programme that when I have certain thresholds of cash, I will automatically compose it and transfer the cash into a money market fund that will earn me yield on the minute. And whenever I want to make a payment and I don't have enough money in my checking account, I will auto liquidate my money market fund that will transfer in real time into a deposit and remit a payment." All of that stuff that I'm talking about today is being done. That happens. It just happens with a lot of people in the back office, middle office that hopefully do that in the most optimal way. I think that where we're heading towards is that both corporates and individuals will be able to, for example, maximise much more yield or value out of their balance sheet or money as a result of this composability.

(15:40):
So this programmability is not just how do we write rules, but it's also how do we create transactions that are efficient, which today requires an enormous amount of headcount, both at corporates, banks, and then at the individual level, it's almost just not worth the investment.

TOM (16:00):
Thank you very much, Yuval. Nick, right now we see a surge of bespoke blockchain networks, private ledgers and tokenized deposit initiatives. Without unified global standards, we risk replacing clunky correspondent banking with a hyperfragmented digital island ecosystem, if you want to call it Nan. How do we build truly borderless movement of money when underlying distributed ledgers cannot seamlessly talk to one another? And how do we solve this interoperability puzzle?

NICK (16:32):
Well, as we heard from Yuval, I mean, programmability is one of the key reasons that this trend of tokenization is really gaining momentum. And for all of us on this podcast here, it's exciting to see this now moving forward because we've been at this for a number of years, but we're now really starting to see that institutional adoption happening, and the next step from institutional adoption will be actually scaling up. Now, in order to scale up, we're going to have to ensure that we don't replicate fragmentation and we don't actually create new fragmentation as a result of the new technologies. And that means therefore we have to be able to ensure that these new digital systems can efficiently and effectively talk and transact with each other. And indeed those new systems can talk and transact with the existing systems. And this is, to my mind, the meaning of this word of interoperability, which we in the industry use a lot, but rarely define.

(17:31):
So how can we transact successfully across different systems? That to me is the thing that we need to solve for. And indeed, we do not want to see the emergence or formation of digital islands because that will limit scaling and ultimately entrench inefficiency. And that fragmentation could potentially have a real cost. So we commissioned research last year that looked at this and said that actually increased global fragmentation could lead to material GDP losses globally, something from one to 6% of GDP globally by 2030. So there's a lot at stake here. On the other hand, the positive side of it, I think, is that we are thinking and doing and acting on the question of interoperability now at a much earlier stage than maybe we were with other payments systems and innovations. And so some of the best minds around in the industry are indeed working on this,
And then recently, SWIFT, we brought forward our own blockchain-based ledger that looks to solve those interoperability challenges because as you, Val and as Rob mentioned, many banks are now innovating in terms of introducing tokenized deposits. Today, tokenized deposits work really well within the bank's own environments. They're very effective and useful mechanisms for the banks and their clients. And we are trying to support those banks in actually ensuring that those tokenized deposits can be used in transactions that go outside of those four walls. And so the ledger initiative that we announced 12 months ago, which is now live, and pleased to say Lloyd's is an important part of that, that initiative is enabling cross-border transactions using tokenized deposits and leveraging the ledger that we've created as an orchestration or coordination layer between them. In that scheme, the banks retain full authority over their keys, over their assets, over funding and settlement, and we operate as the validation layer.

(19:38):
And we're already seeing real transactions being made and some interesting use cases, it quickly went from interbank payments through to the first corporate payments that we saw. So corporate clients being served up in this way. And then also we've now seen out of hours transactions, as Yuval mentioned, limitations of the current system stay include operating hours. If we can overcome those operating hours restrictions, for example, enabling 24 by seven access to US dollars for payments, that's powerful. And so we've started to see those transactions really happening. So I guess in this interoperability space, we're establishing here the foundation, a platform for innovation, if you like, that we can provide to the community and then enabling the members of SWIFT banks and corporates to be able to innovate, use that as they find value. That's our contribution towards solving this interoperability challenge.

TOM (20:33):
Thank you, Nick. Rob, I want to turn to the operational and the liquidity pressures facing commercial banks. And I think Yuval mentioned part of the solution earlier too, because in traditional T plus one or T+ two environments, banks rely on daytime netting and processing delays to manage cash buffers. But research from the American Economic Association notes that when banks lose the ability to delay in net payment flows, their exposure to payment shocks spike dramatically. Instant settlement means liquidity must be perfectly positioned at 2:00 AM on a Sunday just as easily as 2:00 PM on a Tuesday. How do you address the potential strain on corporate treasuries with this?

ROB (21:16):
Faster settlement can definitely improve certainty and reduce friction, but I don't think speed alone is the goal. And I do think we all need to rethink liquidity controls and oversight. And you are right, Tom. Today, settlement windows do give banks time to organise funding and netting can reduce how much cash actually needs to move. Once we're into continuous settlement, there may be less time and actually more liquidity needed at any given moment in time as well. So I think as we move to real time markets, managing liquidity becomes a continuous discipline that we all just have to be much better at. It's a big opportunity as well. So for treasurers, and if I'm a corporate treasurer, I'd start with data. I'd look to get a live view of my cash, so what you have, what you owe, what you expect to receive, rather than lots of fragmented snapshots.

(22:14):
And then that starts to help you with knowing where the shortfalls are much earlier, to plan funding, to think about managing foreign exchange, investments, and then you know when you need to start to mobilise the collateral. And as we've talked to on the podcast, you then can take it further with programmable contracts. So you can then start to encode your agreed treasury policies, so your liquidity thresholds, permitted investments, the approval limits that you have, and then you can start to get those routine actions happening within those limits. And then if there are exceptions, then they don't get escalated. So I think AI can improve those cash flow forecastings, collateral optimization, while the programmable infrastructure that allows you then to execute those actions within agreed limits. So you get to where digital infrastructure helps money and the assets move in real time, and then AI as an overlay helps us manage the decisions around those movements.

(23:13):
As I think you allude to, the safeguards are absolutely essential. So all of this has to sit within a very strong risk and control framework. And if that confidence deteriorates, then money can move out a lot faster. But that's why liquidity buffers, continuously funding, stress testing, all of that operational resilience remains absolutely essential, and you still need human accountability for all of the material risk decisions. So for me, real-time settlement moves us to real-time risk management.

TOM (23:44):
Yeah, Yaval, let's bring you in here.

YUVAL (23:46):
Yeah, I love what Rob said, but I would also like to add that one of the things that a lot of times I don't hear it gets taken into consideration is that when you actually can move assets in real time with certainty, the amount of liquidity that is needed to conduct the same type of activity should be significantly lower. No different that when you see settlement times in a clearing house goes from T plus two to T+ one, the default fund in those clearinghouses goes down. When you can call on margin in a clearing house or a prime broker or an FCM, when that frequency goes up, meaning I can deliver collateral more times a day, the need for collateral at an FCM and a prime broker should actually go down significantly because the risk is actually going down as a result of the time.

(24:40):
So I actually think that what we're going to see from velocity of asset is that banks globally, and as a result of that, their buy-side clients would see that they can conduct the same activity they do today with significantly less balance sheet than they would today. Today, because of the lack of velocity of money, the buffers that have to exist within a bank and as a result of that, their clients is significantly bigger. And therefore, if you actually make money move more efficiently, I think that you would need significantly less balance sheet to conduct the same activity.

TOM (25:21):
Absolutely. Rob, did you want to come back on that?

ROB (25:23):
You'll also end up with more assets being eligible for collateral. So we talked earlier in terms of tokenized money market funds, but it opens up a lot of assets that currently are not used as collateral that will be going forward. And then really it's about getting the right asset in the right place at the right time, the right fall, and that effectively is collateral optimization, which you should be in a better position to do because you've got more data and you can start to look at AI overlays as well.

YUVAL (25:51):
Yeah, that is such an important addition. I agree.

TOM (25:54):
Yeah. Nick, come to you on that.

NICK (25:56):
Yeah, I mean, I think Yuval and Rob made some key points here because you are absolutely right. You're increasing the velocity of money, you're increasing the level of choice in financial instruments that people have, and then you can link that then to that programmability element, which is so important because then you'll be able to achieve atomic transactions. In other words, if this event happens, then I do this thing. And that becomes then I think a much more automated type of financial system and gets quite exciting when you think about then the potential for AI agents because those AI agents can add the intelligence on top of the programmability, but equally the programmability can act as an effective and important constraint on the agents because the agents can only act within what the programmability is allowing them to do. So I think that opens up really exciting opportunities for financial institutions to have a much more valuable and efficient financial system in the future.

TOM (26:53):
Yeah, absolutely. I want to build on the addition of AI agents and come to you, Yuval, because when decisions are starting to be given to AI agents because of the speed that we're talking about when it comes to transactions, how are we going to be able to balance the decisions that AI agents make at those speeds and the human in the loop for oversight? Can you talk us through what the future of that might look like?

YUVAL (27:20):
Sure. And maybe I think that a lot of times you hear people talk about why blockchain is really important for AI. And I think that really the underlying component of that, I'm not sure that blockchain is the only infrastructure that is good for AI, but really this idea is that today, although most transactions do get processed correctly, there are still breaks. And if the idea is that AI is going to grow the number of transactions and financial services exponentially, there's not enough humans to be able to meet with the amount of breaks that will happen as a result of that additional activity. And therefore having these deterministic systems that give you 100% confidence that if you initiate a transaction, it will actually be processed correctly is an important component of having an agent economy successful. Now with respect to your point, listen, I think that the evolution of agents, if you just take a step back, is no different than electronifying financial services.

(28:20):
Before we had the internet, banks dealt with customers during opening hours and they saw customers, and then things become electronic and banks had to come up with tools of how to think about liquidity, bank runs, not that you could actually send money electronically. Already today with open banking, there's a lot of automation. Not every transaction necessarily gets triggered by an individual actually clicking buttons. And I think you're just going to see the same evolution and banks and FinTechs will create tools to monitor the health of the system, to monitor identity, for example, of agents is going to be probably an important component to make sure that whoever is acting on your behalf is a legitimate actor. So I think that all you're going to see is as a result of the scale, banks and therefore service providers will develop tools that will allow us to monitor systems in a much more efficient manner and be able to process significantly more activity.

TOM (29:24):
Thank you, Yuval. Rob, I want to move the conversation forward and focus on global equitability because all of this digital market infrastructure modernization requires massive technological investment. While AI embedded finance has the potential to lower the $5 trillion financing gap for small and medium enterprises or connect last mile merchants in emerging economies like Kenya or Brazil, there is a parallel risk. If participating in the most liquid low cost Global markets requires advanced digital wallets and native AI integrations. Do smaller institutions and developing economies risk being structurally locked out? And how do we ensure the future architecture of finance remains inclusive rather than exclusive?

ROB (30:18):
I think the opportunity is significant, but I do think, as you say, the risk is real as well. So if you have a digital infrastructure that certainly can lower costs and widen access, but if you end up with closed networks and expensive integrations, then that definitely could favour some of the largest institutions. The starting point for me though is back to what we've been talking through really, is interoperability and common standards. So smaller institutions, including those in emerging economies, they should be able to connect without having to rebuild their entire technology stack. And what we can't do is end up in a world where we're replacing yesterday's financial barriers with tomorrow's digital barriers. And that's something that I think we do need to work on as an industry, but access alone also isn't going to be enough. So what we need is institutions also need the confidence in the legal framework, governance, operational resilience of the systems that they're going to be using as well.

(31:18):
So again, that means that banks, market infrastructure providers, technology firms, regulators, we all need to work together. So we're not building these isolating networks for a handful of participants. And ultimately we want more participants to be able to transact safely and efficiently across borders. And whether they're using the existing architecture or they're moving into the digital networks, they need to be interoperable as well.

TOM (31:44):
Yes. Nick, coming to you.

NICK (31:46):
Thank you. I think Rob made a really important point that when you have a situation where different regions are moving at different speeds, particularly when it comes to investments and innovation, there has to be a really key focus on common standards because these enable the smooth integration of new technologies and new assets into the existing system. And standards is really a core focus for us at SWIFT to ensure that the existing standards such as ISO 2082 are continuously updated to be fit for purpose as we move into this more tokenized world, but also that we look to create standards, and I'm particularly talking about business standards for digital and tokenized assets and money so that the kinds of market practises that we are all familiar with in the existing world can be also created in the digital and tokenized world. And this means how do you define an asset?

(32:44):
This means what roles can people have? It means what is the life cycle of those? So I think standards is a key effort and it's something that I think we're all working on across the industry. In addition to that, I think to effectively integrate new technologies so that benefits are felt by many people around the world, I think there's three other elements required. So trust is clearly one of those. The second is resilience, right? It has to work as much as the time as possible, and that's why we operate the SWIFT network at four nines of resilience, so 99.99% available. And then scale, because you want to be able to actually incorporate as many people as possible into this global financial system because that's what supports global trade, it's what supports global securities transactions. And so I think in this context, it's not just about the technology.

(33:37):
Obviously technology is really important, but we need to ensure inclusion that means that those who are moving at a fast pace can move at that pace, but you have the standards there so that those who are maybe moving not as fast can adopt when they are ready. And that's then important ensuring an open ecosystem rather than a closed one, rather than one which has digital islands. And so we are very much focused on innovating with the community to create this inclusive financial system of the future.

TOM (34:10):
Thank you. Yuval, did you want to add any thoughts on this?

YUVAL (34:13):
I totally agree with what Nick have said. I mean, I think that at the end of the day, we really need to focus on how the infrastructure integrates very easily into the existing system. So I think that Nick really covered all of the points correctly.

TOM (34:29):
Super. Well, as we bring this episode to a close, we're going to have a quick fire round with all three of you. If you could try and answer these questions in under 60 seconds, that would be great. I know that's a big ask. But first up, from where you all sit, what is the single biggest bottleneck, whether that's regulatory alignment, legacy IT systems or interoperability that could delay the full adoption of digital market infrastructure over the next five years? Nick, let's start with you.

NICK (35:01):
Thank you. Well, I'm going to come back to the point I just made. It's about standards, standards, standards here because the lack of standards could enable the emergence of more fragmentation. And so if we're going to have adoption, we need to be able to have adoption by many parties, not just a few who are doing specific transactions, but lots of people need to be able to adopt. And if you need lots of people to adopt, you need to have those standards so that they can rapidly create standard compliant assets based on common tokens and smart contracts and all of this good stuff. So getting standards right is going to be a key thing to avoiding blockers to adoption.

TOM (35:38):
Yuval.

YUVAL (35:39):
Yeah, I think that people don't talk about integration and ease of use enough. Our view is earlier in this podcast, someone mentioned nobody cares about the technology under. If we really want mass adoption, using the technology needs to be just as easy as using the internet.

TOM (35:57):
And Rob?

ROB (35:58):
We have mentioned it a few times, interoperability. So individual technologies, they can work brilliantly, but without those common standards, sufficient liquidity, enough participants, you still don't have a functioning market. Technology working is not the same as a market working.

TOM (36:15):
Brilliant. Well, if not in five years time, as that might be too quick, but what year would you put on the share of tokenized deposits on shared digital ledgers competing side by side with upgraded messaging rails for global trade? Rob, I'm going to start with you.

ROB (36:34):
Well, I'm an optimist here, so I would say the early 2030s, but I do expect coexistence is not a replacement. So tokenized deposits and improved existing rails I think will develop side by side. Then the adoption really is about the use case and the economics. So for me, this is definitely an evolution, not a flip of a switch.

TOM (36:56):
Yval.

YUVAL (36:57):
When I log into my bank account, I can still use ACH, I can use Zelle, I can use all kinds of options, and therefore I agree with Rob. We're going to see more options to both consumers and corporates and the business model and the characteristics of these new ways will determine what will be used more, but I think we're going to have more options rather than just one dominating.

TOM (37:21):
And Nick?

NICK (37:22):
Yeah, I think here the direction of travel is very clear. And like Rob, I'm an optimist. Equally, I'm also a big fan of the Bill Gates quote, which is paraphrased is that innovation usually takes somewhat longer than you think, but has a greater impact. And I certainly think this is going to apply to tokenization. Our role is really preparing the community for that change so that everybody can benefit from it. We're agnostic to the assets, the business model, the technology, but we will support the community ensuring that there is an effective and efficient transfer of value, whether that's on the existing rails or on the new rails.

TOM (37:58):
Brilliant. And in five years time, what's your one hope of where the world will be when it comes to a modernised financial architecture? Yuval, I'm going to come to you.

YUVAL (38:09):
Maybe related to your earlier question, which was, will this technology create more barriers between those that don't have access? My view is that in five years, and my hope actually, is that every person will have much easier access to many financial products and will also have the intelligence tools to help them manage their financials in a much more efficient manner.

TOM (38:36):
Nick, coming to you.

NICK (38:37):
Yeah. I mean, our hope is that we can actually give financial institutions, businesses, whoever is using payments, a single point of access to multiple forms of value, and that value can be delivered quickly and easily no matter where you were in the world. And so I'd really like to see a future that consists of more choice, not less. And so as we see the emergence of new tokenized forms of value, I want to help the industry that our community to be able to integrate those really seamlessly and so we can transact in whichever way that we want using a secure and trusted infrastructure.

TOM (39:17):
And finally, Rob.

ROB (39:18):
Well, my hope would be that we've moved beyond isolated pilots and we've moved to a more connected, intelligent financial system. So some of the things that we talked about where money collateral and moving more efficiently, you then have better digital infrastructure, and then we do have some AI overlays that make markets just more resilient and more accessible. So for me, it's not simply faster finance, but it's better finance.

TOM (39:45):
Well, brilliant. Thank you. It's been a fascinating discussion, but one that alas must come to an end. Many thanks to my guests, Rob Hale.

NICK (39:54):
Thank you, Tom. Great conversation.

TOM (39:56):
You, Val Ruz.

YUVAL (39:57):
Thank you very much, Tom.

TOM (39:59):
And Nick Kerrigan.

NICK (40:00):
Thank you. Really enjoy being part of this conversation.

TOM (40:07):
Well, the digital blueprint for global finance is being redrawn in real time. The migration towards tokenized deposits, programmable assets, and instant settlement promises unprecedented capital efficiency and twenty four seven liquidity. Yeah, as today's discussion made clear, it's all about interoperability. It's about collaboration. It's about not just getting faster, but getting better, as Rob said earlier. I think really in the next five years, we're going to be looking at a slightly different world and hopefully a more equitable one when it comes to accessing capital and having money flow. Well, let's just see if it gets that little bit quicker and that little bit better. I'm Tom Parker, and this has been the next five podcast.