In 2025, it is hard to ignore that the payments industry is living in a digital age that is only growing faster and more expansive.
No longer are companies and customers satisfied with traditional financial services; they are searching for methods and currencies to accelerate their payment preferences to meet them at their digital user face.
What if we could digitise not just money, but currencies, mortgages, loans and bonds? Tokenisation is making this possibility a reality.
At the Pay360 event this week, Nick Kerigan, Managing Director at Swift, broke down why tokenisation is having a profound effect on the next generation of digital money, which is contributing to various innovations when it pertains to central bank digital currencies (CBDCs) and stablecoins.
Kerrigan simplified the blockchain-based tokenisation process as “representing something in a token” that can be securely stored within a digital ledger, which can also be represented on a blockchain network.
While the traditional finance sector has been wary of blockchain and its emergence, more and more players are tapping into its capabilities due to its ability to rapidly send, settle and store data and payments.
This is why major payment firms like Mastercard and Visa are committing to tokenisation as part of their efforts to wipe out numbered debit and credit cards in a bid to reduce fraud, both physically and digitally.
Kerrigan highlighted that all tokenised assets will potentially reach a valuation of $16trn by 2030. The Swift Managing Director also stated that financial institutions are looking to utilise tokenisation as they see value in collateral management, and this is where tokenised money comes into play.
Stablecoins: the leading digital currency?
With 90% of all cross-border transactions being settled in less than an hour, as Kerrigan reiterated, this represents just how far the digitisation of payments has come in the past several years.
However, the emergence of stablecoins has added a new dimension to a digital reality that can settle cross-border payments within seconds.
Shaun O’Keeffe, SVP of Global Growth of blockchain infrastructure firm Zero Hash, told the Pay360 audience that the “real innovation” of digital payments lies with stablecoins, and there are present day use cases that complement this argument.
He revealed that Zero Hash has been working with leading payment service Stripe to integrate its blockchain capabilities to facilitate stablecoin payments across 69 different countries, operating 24/7 and can settle these transactions instantly.
O’Keeffe shared that there is a growing appetite for stablecoins across the world due to their speed of transaction and cheap remittance fees.
These factors are also contributing to consumers who live in underbanked and rural populations, where traditional finance services are limited or scarce. O’Keeffe highlighted this sentiment, acknowledging that “traditional banking isn’t serving the workforce”.
Regulation surrounding stablecoins is also picking up steam, with US President Donald Trump recently calling on Congress to push forward with its legislation, whilst the UK has been in the process of drafting legislation for stablecoins for the past two years.
Despite the stablecoin surge, O’Keeffe mentioned that due to its close relationship with cryptocurrency, it often gets attached with the same negative stigma. However, he stated that “once stablecoins go into the background, that’s when it will ultimately offer a better user experience”.
Why is the UK looking at the Digital Pound?
While cryptocurrencies and stablecoins continue to push into the mainstream, global central banks have been watching and have come to their own answer when it pertains to competing in a competitive digital financial landscape.
CBDCs, a digital form of central bank cash, have quickly gained momentum across multiple global banks, and policymakers have already launched pilot testing programmes for their usage across retail channels.
Maha El Dimachki, Centre Head of BIS Innovation Hub Singapore, clarified the two key distinctions between what is a wholesale CBDC and what is a retail CBDC.
El Dimachki stated that a retail CBDC is a direct claim on central bank cash, used primarily for payments. A wholesale CBDC acts as a reserve for a central bank so that the currency is collateralised.
The conversation then turned to Diana Carrasco, the Head of the Digital Pound Project, which the Bank of England has been working on for the past three years.
Carrasco revealed that the reason the Bank of England has been investigating a potential Digital Pound is due to the ever-evolving digital payment landscape we live in. She stated that nearly all of payments now are digitised, but not cash.
CBDCs are another form of tokenisation, but the tokenisation of cash runs on the underlying blockchain technology to make transactions happen in a matter of seconds, but Carrasco noted that CBDCs do not necessarily need to run on blockchain networks.
CBDCs can be another form of tokenisation, where the tokenisation of cash runs on the underlying blockchain technology to make transactions happen in a matter of seconds. However, with the Digital Pound, the bank would provide the core infrastructure, including a ledger and Carrasco noted that a Digital Pound is unlikely to run on blockchain networks.
But is the landscape in danger of becoming too digitally oversaturated with a litany of digital currencies all converging at once?
Payments are sticky, interoperability is key
Customers have their favourite payment preferences that they will stick to no matter what. It would possibly take the average consumer several years to even entertain the thought of making payments with a CBDC or stablecoin.
El Dimachki emphasised the “sticky” nature of payments, but does believe that a “trigger point” will occur when blockchain-based methods begin to seep through the mainstream consciousness.
This is why interoperability is a key fundamental aspect of the coming together of fiat and digital currencies. Banks must be able to maintain a two-tier financial system, ensuring traditional finance continues to run smoothly while being agile to accommodate the growing appetite for digital currencies.
CBDCs may be the answer for central banks, but consumers may opt for a stablecoin or cryptocurrency to handle their payments. There will also be merchants, retailers and online marketplaces that will not accommodate both fiat and digital, that’s why the infrastructure is vital to enable customers to have the flexibility to use both.
Our digital reality is evolving, yet again, but across the next decade, banks and financial services will have to contend with a new wave of digitally-backed payments and currencies, ensuring that payments can continue to run faster and operate smoothly.
