From BNPL to Quantum: What’s Really Driving Change in Payments? – Alan Koenigsberg  [Season 2 | Episode #28]

Shaun Ferrari 00:00:34 Hey everybody, thanks for joining us on the next episode of The P.I.T. Exchange, where we talk about the latest in payments, innovation, and technology. I’m your host this week, Shaun Ferrari with Currency Research. And I am thrilled once again to be joined by Alan Koenigsberg, the CEO of Koenigsberg Insights. Alan, great to see you again, sir.

Alan Koenigsberg 00:00:58 Good to see you. Its a habit! It’s all great.

Shaun Ferrari 00:01:02 Yes, it is a habit. I see you in a lot of our events. We appreciate all the support and love chatting with you here as well. I think the last time I saw you, we were in Frankfurt.

Shaun Ferrari 00:01:12 If I’m correct.

Alan Koenigsberg 00:01:14 Yes.

Shaun Ferrari 00:01:15 Yes.

Alan Koenigsberg 00:01:15 I mentioned you had a really busy week, right?

Shaun Ferrari 00:01:18 It was. It was. It’s a busy week for everybody there. But it’s it’s great to see everybody. And, I went with, with Jens, who most of our listeners here know as well as he hosts a lot of these. And, one of the first people we saw walking around was, was you, Alan. So it was it was great to.

Alan Koenigsberg 00:01:33 Great great to see you and meet.

Shaun Ferrari 00:01:34 You there. Yeah, exactly.

Alan Koenigsberg 00:01:36 Yeah. Well, cool. It was a really great conference this year. Probably one of the best I’ve been to, so many sort of topics that are really all about, if you will, to be discussing and trying to figure out, you know, from stablecoin all the way to compliance and regulatory issues. So and I frankly think that a little bit of pent up energy, you know, from the year prior, And so. So it’s great.

Shaun Ferrari 00:02:01 Yeah.

Shaun Ferrari 00:02:01 It was, it was good. It was a lot of good. A lot of good discussions. And I think a lot of the themes that were talked about there, we’re going to we’re going to touch on today too, because you’re, you know, it’s one thing to the next. And I know you’re getting ready to go to money 2020 coming up shortly. And you’re, you’re going to be talking and unveiling a new, a new article, kind of in the, in the run up to that or at that event. and we wanted to chat with you a little bit because when we did a podcast back last February, you released something really talking about kind of those think I think we don’t know if it was titled this, but it was basically the quiet parts, right? The, the, the parts of what’s going on in, in payments that a lot of the banks and others don’t talk about. And you were, you were calling some of those out. And what your new piece does is it takes a look at, kind of what’s happened with some of those things.

Shaun Ferrari 00:02:49 There’s a, you know, there’s a sports guy that I listen to, Colin Cowherd, I’ll give him credit for this, but he does a segment where he, he talks about where Colin was right and where Colin was wrong. and essentially, that’s a similar thing that you did here where, where this is, you know, I’ll call it for our podcast, where Alan was right and Alan was wrong on some, some thoughts for, for 2025 as we went through payments.

Alan Koenigsberg 00:03:12 And I’m delighted to be wrong. You know, certain things it’s it’s you don’t have to be right all the time. but you know what? It’s it is a learning experience. And our clients ultimately set the course right. So we have to listen more and sort of act on that accordingly.

Shaun Ferrari 00:03:28 So yeah. No for sure. so let’s, let’s get into some of these. I mean, when, you know, when we, when we started or when we had the conversation last year around this, you know, one of the things, one of the big things that we were, were talking about was the the buy now, pay later situation and what was what was happening with that.

Shaun Ferrari 00:03:49 and, you know, there were some expectations that this could be this could be a bit of a time bomb that’s out there. What are your current what are you seeing? What’s happening there?

Alan Koenigsberg 00:03:59 I think that anytime you can offer a borrower, additional sources of liquidity, it’s a good thing. It’s a good thing they should not only have a bank to borrow from. So non banks that are out there that are offering loans or in this form buy now, pay later is a good thing. what I observed was a little bit of a rational enthusiasm around this particular topic that you could, you could have no bad news around buy now, pay later. So I put together a piece that wasn’t the doomsday machine, but it tried to, in a balanced way, talk about education. And do merchants really understand the risks that they’re taking? Do consumers really understand what they’re doing? do we all know that? What is it? 30% of Gen Z’s population is using this at grocery stores. That’s not a great headline, you know, but this is maturing and it’s scaling and it is a payment type and it just needs to be observed.

Alan Koenigsberg 00:05:03 And many in many cases, especially in the US. The payment for is not regulated. You know, it’s a loophole in Reg Z. So I’m not saying anyone’s abusing it, but it has the potential to be inconsistent, depending if you’re Klarna or whomever else it is. So I think that’s part of it. and so I think we all knew that I put the piece out several weeks ago, and funny enough, we reprinted it for signpost, and the New York Times picked it up, picked up a whole story and lifestyle, which is unusual for the New York Times to put a financial, you know, story in the Lifestyle Sunday section. But it was quite biting. in terms of, I think the article is called, you know, you wanted the luxury lifestyle that Did you read the fine print? And I think that’s probably sums it up. you know, not only for consumers where I think low tickets are really where it’s at the small business, small to medium sized enterprises. I think what you’re seeing is a convergence of buy now, pay later and higher ticket levels, but also, in a way, a rebranding of factoring, because factoring plays into this.

Alan Koenigsberg 00:06:23 If factoring has been one of those industries that, you know, it’s been, in need of investment for a long time of being kind, but at the same time rebranding it as buy now, pay later with different kinds of terms and conditions. do to these companies really understand and for a small business, a merchant, if you will, on one side, they’re selling and probably at a velocity they haven’t seen because of the take up of buy now, pay later. At the other side, they have to get raw materials to make that product. And they’re likely in a small business scenario using biofuel. To do that. So they’re acting almost as a consumer of those products. So it does need to be paid attention to. I receive some interesting mail after I’ve published that. some were some were very, very polite. Some were not. but it just goes to show you how hot that issue really is.

Shaun Ferrari 00:07:19 yeah. Well, I think you’re. I think you’re right. I mean, it’s it’s it’s a hot issue, not only because it’s being used more and more and people are kind of familiar with it and, and it’s it, it’s more visible.

Shaun Ferrari 00:07:33 Right. There’s a visibility to it, but also because it has, as you say, I mean, it has expanded into big business. and, and because it is somewhat less regulated and there there is this, I don’t know because because it’s getting so big. I think you call it out in your upcoming paper to that, you know, there at some point there could be systemic risk here. with with how?

Alan Koenigsberg 00:07:59 Lawyers, actually. Absolutely.

Shaun Ferrari 00:08:01 Yeah.

Alan Koenigsberg 00:08:02 It goes without saying that, you know, some some banks I talked to said we we don’t have any exposure here. Well, first you have exposure here, you know, not directly perhaps to the company that’s making the loans but to the broader ecosystem that’s carrying them. So it’s interesting. the second point I could make. moving on from buying up later. Sure. Talked about, you know, payments becoming social. this was right around the time that these an ex announced their partnership. And from my observation, is it really went nowhere.

Alan Koenigsberg 00:08:37 And so. Whilst I think it’s a great idea, you know, and I think that they want to compete with Venmo and Venmo seems to do quite well with PayPal. does it really command significant fees. So the question is, well, can that scale in the market? So I wouldn’t count it out, you know, completely. But it seemed to have quieted down quite a bit between the announcement period and the last eight months. So I think that’s an area we have to keep an eye on.

Shaun Ferrari 00:09:11 Yeah. No, that’s that’s fair. it it does seem that there was a lot of energy a year ago or so around that kind of. Yeah. What is the social specialness of payments and how does that work? But even when you think about, you know, Venmo and PayPal, your examples there, it’s I don’t know, maybe I don’t use them wrong and I’m too old to use them correctly or what have you, but, I don’t use them for the social aspect of it. Right.

Shaun Ferrari 00:09:38 I use them to function a payment. I’m not like, ooh, let me see what Elon bought this week or trading, I don’t know.

Alan Koenigsberg 00:09:47 Generationally when I look at I have a Venmo account and I look at the pizza or this or that this, is right.

Shaun Ferrari 00:09:54 Yeah. I don’t. Yeah, exactly.

Alan Koenigsberg 00:09:56 This is rendered. You know.

Shaun Ferrari 00:09:57 Yeah. With the with the little option of. Should this be a public or private? Private? Why do I want to post that? I’m paying you something. It’s very strange anyway. Absolutely. so maybe.

Alan Koenigsberg 00:10:10 I can also, to cap this one off. Sean. Yeah. It’s when these announcements actually become currency, you know, that people have expectations based on, you know, we come out, Ellen makes an announcement such and such makes an announcement. And their expectation is they’re going to deliver something and they don’t. And so I think we just need to keep an eye on that too, because that’s always been a risk. Execution risk.

Alan Koenigsberg 00:10:33 you know, throughout our time.

Shaun Ferrari 00:10:34 So yeah.

Alan Koenigsberg 00:10:37 The next one we called out was digital currencies. This is a no brainer there. we predicted that central bank digital currency in the US would go the way of, you know, zero. And we have already seen the president make some announcements. He signed an executive order, I think, after the publishing of the article, basically banning them. but at the same time, we saw a huge amount of energy around stablecoin. And I think the democratization of currency, the programming of currency is extremely important. Question is, can it scale and can adapt standards around, the problems that it’s solving. And there are really big problems like cross-border payments and other merchant settlements being faster, etc., where they don’t have pools of currency. that command, you know, a secondary market in some tertiary markets, like in Africa, they’re still settling in dollars, if you will. And that is a problem for those markets, especially with inflation. So I won’t get into the genius act and all that.

Alan Koenigsberg 00:11:48 You know, our listeners know all about this better than better than most. But you know, comprehensive stablecoin regulation is important. And so the genius act gets the ball rolling on that. And this is not an experiment. This is actually happening. You know. So there’s huge amounts of flows I think there’s over 7 billion and others in this market. So I think that we just need to continue to invest and keep our eye on where it’s going. corporates ask me all the time, you know what? What am I going to use this for? And then for companies that are large multinationals, like companies maybe 15, 20 years ago would have an in-house bank, you know, like Volkswagen or others. This is a perfect example of, moving your liquidity around the world and a consistent currency on a natural hedge, etc., etc. and it’s being done in a much more efficient way with a lot less friction. That’s a perfect use of Stable point. And then I can go on from there. You know, cross-border payments, emerging markets, etc..

Alan Koenigsberg 00:12:57 it provides choice. You know, this is why when I joined visa, I developed B2B connect. It was the choice that banks asking us to democratize the way high value payments were made. And now there’s so many banks that are doing that because they want to have an experience control, if you will, over the end to end experience of that high value payment and not have to depend on another financial institution that may maybe at some point de-risk them. So that’s a that’s a good point. around there. So huge topic. If anything we uncovered it. You know, we uncovered its power, in 2025.

Shaun Ferrari 00:13:41 Sure. I mean, I think it it in a way, it filled that. So you called the you called the CBDC, at least in the US. def I would say correctly for sure, and then maybe underestimated the stablecoin. I think it’s a lot of that is filling filling the void to some extent. Like, I mean not not necessarily that people were looking for a CBDC, but a tokenized a, a tokenized asset that can move and help liquidity move quickly, whether that’s a CBDC or a stablecoin or some sort of other blockchain based digital asset.

Shaun Ferrari 00:14:24 tokenized deposit, if you what? Whatever that is, there does still seem to be a lot of work going on in that space. As you say, more and more volume being being used. And what is that ultimate use case? I think you named a few of them. I think on the broader scale, there’s it’s still kind of being searched for. I think you’re right. The for a corporate to use it to move, move liquidity around within. Sure. Even for a bank to use it, for customers to move, between accounts and that sort of stuff, I can see some benefits there. Maybe, to, to get it done fast and quick. What scares me is exposure to stablecoins, which are still not I mean, I know we have the genius act and regulations that are percolating, but it’s still a less regulated. I think that’s safe to say. I don’t know if you’d agree, but I’d say it’s less regulated than the traditional financial instruments are.

Alan Koenigsberg 00:15:24 Very.

Shaun Ferrari 00:15:24 Well.

Alan Koenigsberg 00:15:25 It is it is under regulated or not regulated yet.

Alan Koenigsberg 00:15:29 Yeah. remember stablecoins is stable because. Why? Because every dollar stablecoin is backed up by a dollar dollar. Right. And some form of asset. we’ve seen some companies tip over that didn’t have adequate reserves, to support their the stablecoin so it can one stablecoin be worth more than another or less than another? It’s entirely possible. And we saw you know, we saw some of that activity during not stablecoins but money markets during the financial crisis.

Shaun Ferrari 00:16:03 For sure.

Alan Koenigsberg 00:16:04 Yeah. We also covered quantum computing. Quantum computing. At least from my perspective wasn’t getting enough airtime. You know and called it the £800 gorilla in the room, you know, sort of sitting out there. But interestingly enough, throughout this year, JP Morgan and HSBC and Deutsche. And some others moved beyond these pilots. And they’re actually operationalizing some quantum deployments. And I think that’s actually fascinating. quantum is a completely different paradigm of computing than our current model. And that’s going to be a theme going forward. So quantum computing on top of digital currency.

Alan Koenigsberg 00:16:48 On top of all these other capabilities, I mean, a lot more power and potentially a lot less fee and a lot less process around it. So I think there’s more to say and more to do next year, but I think that keep our eye on the space as well. this is not something again, that’s just like hypothetical. This is happening and it’s real. And other countries are working on their versions of quantum as well. I don’t think I always view this sort of like, almost like a race in a way. Like we raced with atomic energy. You know, the mutually assured destruction kind of thing. Nobody wants to be without, you know, a quantum computing capability, because they would be left at a deficit of mindshare, etc.. So interesting.

Shaun Ferrari 00:17:40 Yeah. And how much? I mean, those are some of the I think the opportunities with quantum computing are huge. The threats with it are also huge. I mean, there is some of the most scary presentations that I’ve seen over the this past year in terms of the hacks, the, you know, breaking the encryption, all that sort of stuff that quantum can do.

Shaun Ferrari 00:17:58 And will we be ready and and I’ve heard people ask like, well, is this kind of a Y2K thing where everybody was worried about it and then nothing happened? Of course, nothing happened because companies spent.

Alan Koenigsberg 00:18:09 Billions.

Shaun Ferrari 00:18:09 Money prepping for it. so, you know, is this another I don’t know, is it is it something? Are we doing enough to prepare for it? I guess is the.

Alan Koenigsberg 00:18:20 I mean, I think that that’s a valid question is it’s like the boogeyman that never shows this face. Right? I think the often the boogeyman doesn’t come out like Y2K is because he spent so much time and money over preparing for it. I remember getting our lock boxes at Amex ready for it, you know, working all night long and, you know, running the mail. And did the zeros come out right? And all this stuff, nothing happened because we coded it. Right. So it was fine. Yeah. open banking is that other topic that we had in our top five that I didn’t see coming.

Alan Koenigsberg 00:18:53 You know, with this collapse, if you will, in the US now, publicly, I would say, you know, open banking democratizes the way consumers or small businesses can access to financial institutions. I think that’s especially powerful in places like Europe, the U.K. and others, where traditionally these walled gardens existed and they weren’t able to actually access, a capability that showed the multiple financial institutions in pricing, etc.. But in the US, I’ll make the joke and say, we’ve had screen scraping for two and a half plus decades. And whilst it’s not screen scraping, open banking is much more sophisticated than that. It is in a way, you know, we’ve been looking at these capabilities or these, companies that have been serving up multiple lenders, embedded finance capabilities for a long time now. And so it’s not a surprise to me, I guess that sort of it petered out in the United States, and a number of others have sort of like dialed back their coverage and investment, in open banking. Again, I think the term open banking implies something in the US that we already really have.

Alan Koenigsberg 00:20:18 you can compare prices for car loans, you know, in a used car site across ten different lenders because that particular car company wants to sell you a car. They’re not in the loan business. So they’re going to they’re going to pull in as many financial institutions as possible to give you choice and make it easier.

Shaun Ferrari 00:20:38 Yeah, I think that is true. I think some of the thoughts I had with open banking kind of this is maybe one of those quiet things that people have never said out loud, right? To your title. Your first piece on this is one of the thoughts I had with Open Banking, as I heard everybody talk about. And it was a huge topic, especially in Europe and over the past years, my own inner voice was always like, what’s the big deal? like from the from the from the US perspective, I was just kind of like like it’s kind of like what we already do. So I think your point here is I kind of.

Alan Koenigsberg 00:21:12 I’ve said that a couple of times in other roles, I’ll tell you, I was looked at like dog eared.

Alan Koenigsberg 00:21:19 What are you what are you missing? What are you missing? I don’t think I’m missing anything, but. Okay, I’ll roll. I’ll roll it.

Shaun Ferrari 00:21:27 Exactly. All right. And I think your other one. Right. maybe there’s been a lot of volatility this year. Yeah, just politically wise, there’s been a lot going on. what does that meant to to the payments world?

Alan Koenigsberg 00:21:42 it means a lot. It means a lot. I mean, starting with, you know, central bank, digital currency. I mean, if you ban it, you ban it. It’s over. At least in the US and other countries march forward. I think we may have underestimated the level of political volatility, which we don’t really talk about that much, but it’s something that we have to plan against. and understand. It’s like a risk management exercise. also for our clients, a corporate clients that are being incentivized to tariffs to produce in the US, etc.. That creates a whole other basket of products and services that are institutions that can serve up to foreign companies and to domestic ones as well.

Alan Koenigsberg 00:22:30 In terms of building plants, etc.. So that’s something out there that bind with crypto combined with everything else going on. It’s very, very important that we pay attention to, obviously, the political nature of these announcements. And will they stick? We could be at the end of a term and go to another party, perhaps, and they may undo everything that was done. You know, so we’ll see. We’ll see. Time will tell. But here putting putting a factory is a 25 year payback. You know, it’s really hard to undo that, you know, true for your, you know, political terms. So I think companies need to really stop for a while. And now they’re moving forward. But they’re moving forward very cautiously.

Shaun Ferrari 00:23:20 Yeah. For sure. so with with all of those things there, you know, there’s I think we touched on some of these, but there’s looking at 20, 26 and what lies ahead of us and how we should we should plan for that. are there any things you really want to want to draw out at this point there? I think we we covered some of that and some of the topics we’ve already talked about, but, anything you want to hit home?

Alan Koenigsberg 00:23:44 The hit home.

Alan Koenigsberg 00:23:46 Buy now, pay later. I think there’s probably some intervention that needs to occur in the US. you see inconsistent intervention in different countries, but at least there’s intervention and rules being formed around the use of, y’know, pay later for both business and consumers. Stablecoin standards, frankly, that match scale. You don’t want this thing to scale out of, you know, heaven here and not have the right kind of framework and guardrails around it. So those are two like right out of the box in the US. RTP interoperability I was a little sarcastic in my first article about it, but the lack of understanding of why? Not only why do we have to? I know there’s a very valid answer, but, why don’t they talk to each other? And so we’re leaving it to banks and their clients to figure that out. And I don’t think that’s equitable either. the next one was sort of like, well, open banking, have a recovery or just have a permanent disadvantage. I’m not sure it’s either one.

Alan Koenigsberg 00:24:53 You know, at least in the US, in other markets. Sure. Open banking takes on different flavors. and so you have 78 countries that are racing ahead, you know, with different forms of it. I think that’s great. And again, back to my comment earlier, any way we can democratize the use of lending and getting liquidity for small business, medium sized enterprises, consumers, etc., it is a good thing. open banking is a tool to get there. Quantum again, you know, sort of like, what’s that safe migration look like at a big scale? I think you’ll see some major announcements coming in 2026 about, which systems could move to a quantum based, Likely some wholesale systems and trading systems at first. Funny enough to probably continue with distributed ledger systems. Didn’t necessarily scale on that fast. and lastly. Adapting our strategy and understanding the political nature of the, we traditionally didn’t pay a lot of attention to it, but we have to we have to.

Shaun Ferrari 00:26:05 Know for sure.

Shaun Ferrari 00:26:07 I was at a roundtable, with some regulators from the state of New York, a couple of months ago. And I think, you know, kind of the the opposite of the, the volatility piece was to your, to your earlier point about, you know, if you’re if you’re clear about like, CBDCs are illegal, okay, at least I can plan around that. Right. There was so as you know, it was a it was a very liberal group of regulators in New York City that I was, I was talking with and they were like, you know what a lot of us may have been brought in or have been part of the Obama administration and all that sort of stuff, but there was so much lack of clarity around certain regulations. in the, in the prior administration, at least, there is clarity around certain things. Now, they were talking more about stablecoin and genius act and all that sort of stuff there. Like at least there is clarity and we can do our job.

Shaun Ferrari 00:27:00 so.

Alan Koenigsberg 00:27:01 I couldn’t agree more. You know, if you’re saying go, it’s closed, the window is closed. You know, I think that if it’s half open and you have all these agencies that are spaghetti izing the regulation of it, it’s very confusing and expensive.

Shaun Ferrari 00:27:15 Yeah. anyway, I think, you know, these were these were great points. I like the, the roadmap for 26 and what we might be be looking at coming down the pike there. I know we’re going to we’re going to see you coming up soon at an event we have in Ghana. so I, I encourage anybody that’s listening that wants to talk to Alan some more in person. I know you’ll be at money 2020 before that, but where I’ll see you next is is at our our event in in Ghana. So we’re looking.

Alan Koenigsberg 00:27:44 Forward to that. I’m getting my yellow fever shot today so that’s great.

Shaun Ferrari 00:27:49 No it’s good I mean it it is and one of the interesting things about Africa in particular is there’s just so much vibrancy in the payments market, that it touches on all these things that we talked about today and more, just in terms of their ability to either leapfrog certain things or they look at things differently based on where their markets are, obviously.

Shaun Ferrari 00:28:10 And it gives them more opportunities to to try new things and, you know, find those use cases for stablecoin and that sort of stuff that might not be as apparent in the US as it is in in some African countries. So it’s a fascinating culture.

Alan Koenigsberg 00:28:24 And payments and mobile technology is the face most of Africa’s banking population. You know it also congratulating Ghana on 60 years. Yeah. Other native currency is fantastic. and it’s so deserving of a celebration around that and creating that kind of environment for their population. So it’s all good. I’m always delighted to come.

Shaun Ferrari 00:28:46 Sure. Awesome. Thank you. do you have any other final thoughts for us today or,

Alan Koenigsberg 00:28:51 You know, keep reading. Keep reading the, the pieces that we put out. You know, if you like them, you like them and you don’t like it. And I want to hear from you, too. but, you know, we’ve we’ve actually, pointed it out or poked at a couple of very interesting topics now covered by New York Times and others.

Alan Koenigsberg 00:29:10 I think that’s great when you get a conversation going. we had some conversations at CBS. It’s a very senior bankers around buy now, pay later and some other topics, hot topics. And, sometimes the folks that need to regulate are the least incentivized to. But I think we need to come together often as an industry, and self-regulate and work together Because end to end, we all bear that responsibility for sure.

Shaun Ferrari 00:29:40 Cool. Well, let’s leave it on that sense of collaborative coming together, which we of course like to help with as much as possible here at Currency Research. And thank you again, Alan, for for taking the time and joining us on the exchange this week.

Alan Koenigsberg 00:29:54 Thank you Shaun. Always a pleasure.

Shaun Ferrari 00:29:57 Great. Thank you. And thanks everybody out there for listening. we hope you enjoyed the episode, and we can’t wait to share some more insights in the world of payment information and technology with you on our next episode. So thanks again and remember to like, download, subscribe, come be a guest. Reach out to us. We’re always happy to have you. Talk to everybody soon.