Tokenized deposits may be coming, but it's not a slam-dunk

Tokenized deposits are digital versions of traditional bank balances held on a blockchain. For retailers and service providers, this technology could eventually replace traditional credit card processing and ACH transfers. While regulators might set the 'rules of the road' as early as next year, the transition won't happen overnight. The goal is to make payments settle instantly, 24/7, without the high fees associated with current banking rails. For your business, this means the gap between a customer making a payment and the cash hitting your account could shrink to zero. It also opens the door for more programmable financing. Imagine a financing agreement where funds are released automatically to your business the moment a service is verified on a ledger. However, major hurdles remain. Different banks are currently building their own separate systems that don't talk to each other yet. Regulators are also worried about 'digital bank runs' where money moves too fast for banks to manage. You don't need to change your checkout process today. But you should keep an eye on your merchant bank's roadmap for DLT (Distributed Ledger Technology). As these systems mature, they will likely offer you lower transaction costs and better cash flow management than the current 'Buy Now, Pay Later' or credit card infrastructures.

Source: American Banker — Top News

← Return to the library· Submit a correction