Within 10 days of President Donald Trump signing the GENIUS Act into law on July 18 and effectively establishing the first federal regulatory framework for stablecoins, two of the country’s three largest core providers had already announced plans to provide stablecoin platforms specifically designed for banks and other financial institutions.
In fact, Fiserv didn’t even wait for the President’s signature, announcing on June 23 plans for its own stablecoin (FIUSD) and digital asset platform for banks.
FIS followed suit on July 28, releasing its own plans to offer financial institutions the ability to transact in USDC, the second-largest stablecoin in use worldwide.
Fiserv points to its client institutions as the driving force behind the decision to launch so early.
“Usually by the end of the day, I’m losing my voice because of how many financial institutions I’m talking to (about this),” says Cooper Thompson, Fiserv’s head of product for embedded finance. “We were getting that demand from our financial institutions and from our merchants and that’s why we decided to get into this space.”
FIS cites its commitment to a larger overall strategy to support digital assets and currencies by introducing technological innovations that can help their client institutions provide more product offerings to their customers.
Jack Henry and Associates, a third major core provider in the U.S., is choosing to continue leveraging its existing infrastructure to enable successful stablecoin implementation for its banks and credit unions.
“Clients can already securely integrate with a number of third-party stablecoin and wallet providers using our open APIs,” says Mark Folk, director of corporate communications for Jack Henry.
He adds that the company does plan to enable stablecoins as a payments rail in the future. “We want to ensure we do things the right way while regulations are being written over the next six to 12 months,” he says. “We expect to enable stablecoins as a payments rail soon after regulations are in place.”
Not Starting From Scratch
The two core providers already jumping into this new digital space are bringing in experts to assist them. For its FIUSD stablecoin, Fiserv expects to use infrastructure provided by Circle, a global fintech firm and stablecoin market leader. On the day of the FIUSD launch, Fiserv also announced a partnership with PayPal to enable interoperability that “will allow both firms to further expand the use of stablecoins and programmable payments around the globe.”
FIS is also working with Circle to give financial institutions the ability to offer their customers the option to make domestic and cross-border stablecoin payments in USDC.
“Fiserv has done maybe the right thing by partnering with and collaborating with PayPal and leveraging their stablecoin infrastructure,” says Tony DeSanctis, senior director with Cornerstone Advisors.
With a plan to build out future interoperability between FIUSD and PayPal’s PYUSD coin, DeSanctis says Fiserv has an on-ramp to scale stablecoin payments in a way they likely wouldn’t be able to do otherwise.
“Where FIS is also probably making a good decision is by partnering with Circle, and integrating the USDC, similar on-ramp and interoperability. Those are, I think, smart moves,” he adds.
Both Fiserv and FIS are also likely to offer some peace of mind to banks looking to explore a new and unfamiliar technology. That includes an ability to comply with know your-customer rules, the Bank Secrecy Act and anti-money laundering rules, according to Pete Chapman, chief technology officer at the $1.3 billion Grasshopper Bank, a New York-based subsidiary of Grasshopper Bancorp and an FIS client.
“I would assume that there is a very tight core/ledger integration,” he says.
Do the Benefits Outweigh the Risks?
While those positives are interesting to Chapman, who told FinXTech that Grasshopper Bank has already met with FIS to discuss its stablecoin offering, he still has several questions about whether core providers are the best option for banks looking to operate in this space.
“My knee jerk reaction to core solutions for quickly emerging technologies is ‘be cautious,’” says Chapman. “The core is really good at providing a one-size-fits-all solution for their thousand banks that are sitting on that core. But is that going to be configurable? Is it going to be at all customizable for your strategic needs?”
Meredith Rousseau, the senior vice president of banking and financial services at the consulting firm SolomonEdwards Group, also is skeptical. “Ask the tough questions of these vendors before you jump in,” she told a crowd at Bank Director’s Bank Board Forum Sept. 10 in Marco Island, Florida. Rousseau also encouraged attendees to ask about timelines and beta testing.
For Fiserv, existing clients will likely have the easiest time adapting to the new technology.
“Our digital assets platform is built in such a way that it will plug into all of our cores natively,” says Thompson. “So, whether you’re on Premier, Signature, Cleartouch, DNA, Finxact, Portico — in our credit union space — it will be able to plug in with that core banking offering. We’re building out the digital assets platform to leave no financial institution behind, no matter the shape or size of the financial institution.”
DeSanctis says he thinks Fiserv is viewing it ubiquitously, because they have the merchant and the issuer side of the equation. “FIS doesn’t offer their products beyond their client base, so their solution is more of an on-ramp to get FIS clients on to the blockchain,” he adds.
Do Stablecoin Uses Justify the Need?
There is widespread agreement that the main benefit for banks to embrace stablecoin is that it will allow them the ability to speed up and streamline international cross-border payments for customers.
“Obviously cross-border payments are the slam dunk,” says Chapman. “Real-time, low-cost, secure, great, all well and good. But I think there’s more around the 24/7, 365 real-time settlement and what that could mean for programmable payments and everything that comes with that.”
But beyond cross-border payment efficiencies, there are questions about whether there are enough other use cases to attract banks to the technology, especially since stablecoin could lead to more than one type of interchange disruption.
Revenues from interchange fees could largely disappear if stablecoin emerges as a better alternative to other types of payments.
“If the niche is cross border, and a lot of your profitability as a business is cross border today, you’re probably in trouble and you probably have some work to do,” says DeSanctis.
Fiserv officials understand that concern but believe banks can find ways to manage the loss of those fees.
“There’s still an opportunity to charge for those services,” says Thompson. “What it’s going to do is simplify operations on the back end and also increase the speed, and also potentially increase margins, right? So, rather than having so many middle players in that correspondent banking chain, you can reduce the operational overhead, reduce the cost and then increase your margin.”
But managing issues like fraud prevention and chargeback rights is an even larger concern on the interchange side. “Transactions on the blockchain are immutable and so, what happens? It’s super easy for us to pull back an ACH in that window, or a credit card transaction within a certain window. You just can’t do that (with stablecoin),” says Chapman.
Even for Fiserv, this is a problem with no current solution in sight. “We’re still working through exactly what that’s going to look like,” says Thompson. “I don’t have a 100% solid answer.”
Thompson can’t say the number of banks who have signed on or expressed interest in FIUSD.
Chapman believes there is a limited pool of banks and credit unions who will consider the core option.
“Who is going to the core providers to get these solutions? Probably the banks who are $20 billion and south. And probably the down market thousand are never going to touch this stuff,” explains Chapman.
Banks and credit unions will have to carefully consider their options. The GENIUS Act will take effect within 18 months of passage or within 120 days of when federal regulators issue regulations to implement it, whichever happens sooner.
*This article has been updated to correct the spelling of Fiserv’s core platforms.
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