Bank Payment Strategy in the World of Agentic and Stablecoin

Stripe’s recent moves are massive and will solve stablecoin acceptance (globally). When (and if) a consumer champion goes all in on stablecoin we will see change in payment innovation akin to the “age of enlightenment”.  What are banks to do?

Cards are the most profitable banking product in the history of retail banking, and the power of banking is unlocked within the networks that link them (blog). While the power of banking is unlocked in networks, network innovation is like herding cats as each stakeholder works to protect their existing investments and competitive advantage (see Network Innovation).

Stablecoins provide a new technical DLT scaffolding for “innovation” which centralizes the rules (ie smart contracts) with the Issuer, and circumvents bank networks for value exchange. Although banks hold the on/off ramps, and may even issue Stablecoins themselves,  the Genius Act’s assignment of AML/KYC responsibility and Fed/OCC regulatory oversight will prevent banks from blocking.  Last week,  U.S. Treasury Secretary Scott Bessent stated that dollar-pegged stablecoins could grow to a $2 trillion market by 2028, potentially reinforcing U.S. dollar dominance globally. Of course Meta and David Marcus’ Libra saw this 10 yrs ago (see Trust Networks).

Fortunately for banks, consumers prefer cards, and merchants are reluctant to invest in anything that customers don’t use (with an unknown conversion rate). From a merchant perspective, the lack of governance and dispute mechanisms, combined with these other 14 system dependencies, creates a great deal of card stickiness (see Acceptance Hurdles). From a consumer perspective I trust cards, and the benefits of stablecoin (Speed and finality) are not consumer value propositions. V/MA’s rules and governance have refined over 50 yrs, with millions of businesses investing to make it work.. All for 5-10 bps of network fee.  They are highly efficient networks, with STRONG consumer preference. 

While cards will continue to dominate eCom in OECD20 markets in the near term, Stablecoin is set to dominate Africa, LATAM and edge UCs like recurring transactions and agentic (see blog), and take over the mantle of banking the unbanked with DeFi innovations moving from the open blockchain to the closed ledgers of Stablecoin (blog). 

Stripe acquisition of Privy (see blog), is brilliant and will make stablecoin management easy for consumers. It is important to note that both Apple and Google have strongly resisted enabling their wallets/secure storage to manage crypto keys (ie cold wallets). They didn’t want to own the financial risk of loss. Stablecoin Issuance (and Genius Act requirements) change this crypto resistance substantially, as the owners of stablecoins are known and held centrally (with minimal offline storage likely). 

Bank Strategy (My Recommendations)

US Banks have consistently failed to execute in consortium with rare exceptions (Zelle, RTP). In both these cases they were delivering innovation and NEW UCs that did not exist. Banks have NEVER successfully created a product that displaced an incumbent (ApplePay, PayPal). The card economic model created incentives for millions of businesses to invest (in your network).  ApplePay is not a competitor; they are a key enabler of cards (and earn their 15bps). 

Top US Banks are well-positioned to succeed as the top USD stablecoin issuer (blog), expanding their roles as payment hubs, thereby retaining consumer liabilities and enabling Real Time conversion to any payment method, wallet or rail (blog). As discussed in Network Innovation, US Banks have been successful in throttling changes to V/MA (to their detriment). The structure of stablecoin (DLT, regulatory, and centralized Issuer) will completely change the pace of innovation. Banks should rethink the friction they create in cards as this heat becomes the central leverage point for Stablecoin value creation.  

For example, the 20 yrs spent creating RTP will see it constrained to commercial bank-bank UCs only as Stableconins give consumers and businesses instant settlement globally across borders. Stripe/Privy, combined with Link will provide intuitive Stablecoin/Crypto USE by customer while Stripe/bridge will enable merchant acceptance with common fraud controls (ex radar will cover both card and crypto).   

In my view, Stripe’s innovations are brilliant and focused on the acceptance side. A key point to remember is that merchants pay for ALL OF PAYMENTS. Thus, Stripe is BEST positioned to extract stablecoin acceptance fees from merchants, if they’re smart, they will also create wallet economics (for Apple/Google) to encourage consumer adoption. (BTW Stripe is smart). 

While Stripe/Shopify has merchants covered, we have yet to see a major consumer champion (ie PayPal, Apple, Google, ) move to stablecoin. Apple is unlikely because of card economics. In my view, Meta and Google WILL MOVE to support any payment type that 1) is preferred by customers, or 2) solves a near term business priority. Examples on the latter include: micro payments (WhatsApp), Agentic, Africa/LATAM, and Recurring transactions. 

The moment a consumer champion enables Stablecoin, will start the “age of enlightenment” event for payments, with change coming at a pace never imagined. 

Three Focus Areas for Bank CEOs

If I had an another audience with Jamie, Brian, Charlie, Bill, …  I’d focus on 3 things 

Focus Area 1: Lead Stablecoins

Instead of viewing stablecoins as a threat, banks should seize the opportunity to become the dominant issuers of regulated, dollar-backed stablecoins. As I outlined, the success of consortiums like Zelle and The Clearing House’s RTP network came from creating new utility. A bank-led stablecoin initiative would be a similar greenfield venture.

• Action Plan:
  • Form a Stablecoin Consortium: The nation’s largest banks should accelerate efforts to create a shared, regulated stablecoin. This would leverage their collective trust, distribution, and regulatory expertise. Such a stablecoin could become the primary digital dollar for on-chain finance, programmable payments, and wholesale settlement.
  • Embrace Cannibalization: This new rail will inevitably compete with Zelle and RTP.  The strategic priority is to keep consumer and business transaction volume within the bank-regulated ecosystem, regardless of the specific rail as the alternative is loss to non-bank stablecoin issuers.
  • Expand the Payments Hub: Banks must position themselves as multi-rail payment hubs, capable of real-time conversion and settlement between stablecoins, RTP, ACH, and card networks, offering customers ultimate flexibility. JPMorgan’s Onyx division and its Kinexsys platform, which has already processed trillions in transactions, is the blueprint for this model.
  • Define the behavior and what to use when. Banks are well placed to educate consumers and define the category of stablecoin. How do consumers want to store funds, earn interest, or program money. 

Focus Area 2: Protect Cards

The card network is a highly efficient and valuable asset that should not be abandoned but enhanced. The friction that currently exists in the card experience is the primary driver pushing merchants and consumers toward alternatives. 

• Action Plan:
  • End the Antagonism with Enablers: Public disputes with key partners like Apple are counterproductive. ApplePay has been a major driver of card usage and security. Instead of fighting over basis points, banks should collaborate to improve the customer experience (CX) and explore new value propositions. Pushing partners away will only incentivize them to more aggressively explore non-bank alternatives.
  • Invest to make cards the best CX. Support network-level innovations that benefit both consumers and merchants. This includes streamlining the online checkout experience (a goal of solutions like Secure Remote Commerce), improving authorization rates, and using data to offer merchants better liability management and dispute resolution. Make the card network faster, smarter, and safer. This includes adopting 3DS, to actively work with merchants in authorization and dispute. Today COF does this.. with no one else at the party.
  • Abandon Failing Strategies: The lackluster uptake of bank-led wallet initiatives like Paze is a signal that competing directly with the deeply integrated and user-friendly wallets from Apple and Google is a losing battle. Resources should be reallocated from building duplicative front-end experiences to strengthening the underlying bank-owned rails and services that can power all wallets.

Focus Area 3: Bank Innovation and Partnership 

Recognize the need to support your customers where they choose to be. Don’t focus on killing an existing consumer champion like Apple. Focus on solving green field opportunities. How will programmable money change things, how does a consumer “program it” via your bank. Don’t put a bunch of non-bankers in your innovation team, create a cross-functional mix with rotation. Banks must cultivate a genuine culture of innovation, recognizing that failure is a part of the process and that partnerships are essential for speed and relevance.

• Action Plan:
  • Solve New Problems: Focus on “greenfield” opportunities where stablecoins and programmable money can create entirely new value. For example, JPM and ONYX/Kinexsys. Greenfield? For example, Plaid and Trustly moved recurring payments from debit to A2A.  Why not a new form of bill pay using Stablecoin (or RfP)?. Set the price just below debit and change the auth token for these aggregators that use your online banking as an auth system (for free).
  • Embrace Programmable Payments: Proactively explore how consumers and businesses will “program” their money. Banks should be the ones providing the secure, intuitive interfaces for customers to set up rules for agentic payments, recurring subscriptions, and other automated financial tasks.
  • Fix the Partnership Model: The sentiment that banks are notoriously difficult partners is a significant liability. Banks must streamline their partnership processes and create clear economics. As my friends at Google would say “we have 37 bank projects globally and I haven’t made a time on any of them”.  What economics are you creating for partners? The ONLY bank that is universally viewed as a competent tech partner is COF.