While the future of payments is digital, Gnosis Pay co-founder and CEO Marcos Nunes said that leaves plenty of room for consumer choice. The critical element is flexible back-end infrastructure that makes it convenient for consumers to give and receive via the most comfortable methods.
The United Kingdom’s Financial Conduct Authority recently proposed new rules to ensure individuals and businesses have reasonable access to cash. Under the proposals, financial institutions must address gaps in cash access.
“We know that, while there is an increasing shift to digital payments, over three million consumers still rely on cash – particularly people who may be vulnerable – as well as many small businesses,” FCA executive director of consumers and competition Sheldon Mills said. “It’s important that we support consumers impacted by recent innovations.”
While 95.1% of the UK population lives within one mile of a free cash withdrawal machine, and 99.7% live within three miles, the regulator wants to ensure local needs, which it acknowledges change over time, remain met. Institutions must address requests from local groups and individuals about access gaps and provide reasonable additional services when gaps are identified. Facilities cannot be closed until alternative sources are available.
Are old payment methods dying?
While the FCA’s move is in one sense understandable, given the preference of some (mostly older) for cash, in another, it seems like a late attempt to hold onto a leaky boat. Will it matter in a few years?
Nunes said it could, given our still-strong reliance on inefficient checks. Plenty of energy and billions of dollars have been spent making checks redundant, but they are still significantly used.
Nunes has enjoyed a long career in payments infrastructure. His experiences showed him the many inefficiencies in a patchwork network, where a 2024 iPhone communicates with payment rails designed in the late 1960s.
Part of the problem is that every player in the system, from banks and issuers to acquirers, prioritized their relevance but not system-wide functionality. That leaves us with the patchwork system we have today. Nunes was convinced he could do better.
“My main motivation was, can I do something exactly what they’re used to, but in the back-end, is something completely new and scalable?” Nunes asked. “Can we disintermediate and reduce drastically cost?”
His answer is yes. Gnosis Pay is a decentralized payments network that removes the barriers between TradFi and DeFi. Its first offering is the Gnosis Card, a self-custodial Visa debit card allowing people to spend digital assets in the traditional economy via the Gnosis Pay Network. It is available to adults in most of Europe, with plans to soon bring it to the United States, Brazil and India. One partner is Monerium, the issuer of the EURe and EU-regulated stablecoin.
How to blend old and new payment options
Nunes applauds any effort to allow consumers to save and transact how they feel most comfortable. Forcing undesirable options doesn’t work.
But clouds are still forming. The logistics of printing and distributing cash and coins are becoming less feasible.
How, then, to meet the needs of the millions of unbanked in the United States alone, and the millions more in developing countries where the closest branch is kilometres away?
“It’s probably easier to give people a cell phone and access to faster payment railways,” Nunes said.
He added that the industry is doing a good job of serving the underbanked. In Brazil, a country with 214 million people, Nunes estimates there are 300 million active Pix keys. Many are using it for personal and business purposes. India has similar rates.
“We can very securely say that it’s no longer about the access problem of being unbanked,” Nunes said. “So it’s a story about choice.”
Providing payment optionality through a singular infrastructure
Think of the system as an hourglass, with acceptance and distribution methods on the top and bottom and the clearing mechanisms in the middle. No matter how you get and give it, one decentralized system meets your needs. Do consumers need a financial institution, or can they manage their funds themselves?
Nunes said that smart cryptocurrency firms and financial institutions should focus on optionality and access through a decentralized account.
“You don’t need a financial institution to help you with anything,” he stressed. “It can be non-custodial. You can transfer balances to that account; it allows you to pay with a debit card at any point of sale online and access any mechanism for unbanked people. You can be anonymous about your wealth.”
Nunes believes Gnosis Pay’s decentralized network will allow cash to be more securely stored. While it’s a novel blockchain-based technology, consumers only see a familiar debit card. Financial players will see a sizeable back-end cost reduction.
The changes are coming
When asked if the cryptocurrency industry can do a better job of fostering and promoting security, Nunes cautioned it is still a relatively young industry that’s made great strides in a decade while successfully touting the benefits of blockchain.
Where it fails is in delivering companies with productive business plans that earn revenue. Too many talk differently about a singular issue.
“Hopefully, 2024 becomes that year where people start connecting those pieces,” Nunes said. “Then, in 2025 and 2026, we see more Web3 guys becoming suppliers of Web2 or taking the lead in certain problems. Because our product can make MetaMask users become like a bank. So by definition, MetaMask then becomes a bank.”
Nunes likens the change to Skype’s early years. Telcos fought it, saying it would never happen. Our interview was conducted over VoIP technology, as so many are. Participants don’t need to know how it works, they just see it makes life easier.
“Who cares about Skype right?” Nunes asked. “And hopefully, who cares about Gnosis Pay? We just trigger something that we think is better for anyone out there.”
Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.