Martha Miller and Todd Fox on the Future of Payments and Financial Innovation

Martha Miller is the head of Global Policy at Fidelity Investments, and Todd Fox is the president of the Visa Economic Empowerment Institute. They join the program to discuss public-private dialogue, the future of payments, stablecoins, financial innovation, trust, and balancing innovation with risk.

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This episode was recorded on September 11th, 2026

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

Beckworth: Thank you, Peter, for having us here to do a live recording of the Macro Musings podcast. Peter, as I look into the audience, I see a number of former guests. In fact, if you’re a former guest on the podcast, raise your hand. Wow. We’ve got at least half the room here filled with former Macro Musings guests. This is fantastic. In fact, Peter had me here earlier this year, and he grilled me. I took the other side of the microphone.

Public-Private Dialogue

Peter, this is a special treat for me because we’re going to get someone who’s not either an academic or in the public sector. We’re going to get some private sector people who can actually tell us what it’s like in the real world, where the rubber meets the road. We are delighted to have Todd Fox, the president of the Visa Institute, and Martha Miller, head of Global Policy for Fidelity. Thank you for joining the podcast today.

Martha Miller: Absolutely. Delighted to be here.

Beckworth: It’s great to have you on. I want to begin by stepping back and referring to what I just said about my conversations typically involve people in public policy, academics, people who work in government. This is really one of the first shows where I’ve had two people who actually are on the policy side from the private sector. I want to start with you, Todd. What are we missing on the podcast, in Washington, DC? I’m based in DC. What do our conversations miss when we don’t listen to people like you?

Todd Fox: I think when you’re on the cusp of a major platform shift in the way the systems that power global finance, when those systems are changing, it’s hard to keep pace with what is happening in the world of innovation if you’re not talking to people that are inside the companies that are actually building and deploying that technology. It’s not the fault of governments that they’re not building the new tech stack. Their job is to just understand it.

I believe that forums like this are just a way for the private sector to share insights with public authorities and academics so that the policy-making system will just be that much better informed. Things that we talked about a year ago seem very obsolete today. When the pace of change is that rapid, you just need to have open channels of dialogue.

Beckworth: Martha, what about you?

Miller: Oh, goodness. I’ve always thought about my role as one of much more of a translator than a persuader. I think people see people in policy, they see advocacy, and they think, “This is someone whose job is to walk in and to give me one version of the facts that supports the outcome that they are hoping to get.” I’ve always taken the opposite view, which is that my job is to surface from various experts the salient things that we all need to know to have a really informed conversation to make wise decisions.

That was the way that I approached things when I was in the public sector, which gives me a really interesting lens leading public policy and reg strategy at Fidelity Investments. I do find it to be something where, if we can have a conversation around understanding shared facts, every single institution is sitting on a different set of data and has a different lens that I think can contribute really meaningfully to policy discussions.

I think it’s incumbent on all of us to spend time together to really surface those insights so that when we are making decisions, we’ve got the widest aperture and the most information that it makes sense to be using for any decision. You’re never going to have perfect information, but goodness, you need to figure out if you’ve got enough of the good to be really well informed.

Fox: If I could just echo that, the public institutions are meeting us more than halfway in this conversation. A few years ago, the Bank for International Settlements didn’t have an open-door policy. Now they have an innovation hub that is actually welcoming this exchange of views. The Federal Reserve hired a chief innovation officer. There has been a real movement toward greater public-private dialogue, facilitated in large part by international organizations and some of the better, more sophisticated central bankers around the world.

It’s not as though we’re not already pushing on an open door. The question is, when that door opens, do you bring something—

Miller: Absolutely.

Fox: —of mutual value, or are you trying to push an agenda? We certainly are in the view that we learn as much from those conversations that we can then take back to our management teams and share a view from what the regulators are thinking. That’s just as valuable as anything I could deliver. It’s a two-way street.

Miller: Absolutely.

Beckworth: I’m glad we can be a part of that conversation on the podcast here, bringing the private sector to the policy debate. Todd, I know you’ve been a longtime listener of Macro Musings. Is that right?

Fox: I’m embarrassed to say how long, but I think I was probably there for episode one.

Beckworth: Fantastic. I love it. Tell me, how have we done? You’re looking from the outside in. Be honest. How have we done?

Fox: I think it provides a real value to people like me because I cover global policy in a big global company, but I don’t sit there as you do in the capital city. I’m here in San Francisco. Today, we’re in Philadelphia. Normally, I’m 3,000 miles away from the heart of decision-making at the federal level. I have found the podcast format is just an extraordinary way to stay current on issues.

I find the amount of reading I do following podcast interviews is not replacing my diet of reading white papers; it actually helps me discover what to read next. I think when you asked how many people in this room have been on Macro Musings, 60% of their hands went up. I just want you all to know, I bought all your books.

Beckworth: Just recently, I’ve had numerous stories of people come up to me. Dan Awrey’s book, I had a Fed president—I’ll leave a name—come up to me. He just sang his praises. Yesha’s paper with her two co-authors on “The Moneyness of Stablecoins”—a lot of feedback. I do see some real-time people responding to it.

Let’s move on to the context we’re in. In fact, we’re at a conference on payments. This is a Wharton Conference on the Law and Economics of Payments. It seems to be we’re in the middle of not a new era, but a lot of buzz, a lot of activity. Just a few weeks ago, we had a Jackson Hole conference on payments, innovation, a lot of great papers there, a lot of great discussion this morning. A lot of things going on.

Innovation in Payments

When I’m in DC, I get invited to talk about stablecoins, tokenized deposits, atomic settlement, all these things that are happening. Are we in some new phase of interest, things going on? I know, Martha, you’ve touched on this before. You’ve talked about an accelerator gap. Help us understand. Where are we now in this process?

Miller: From my lens, technology, the curve, and the speed of change is a lovely physics question of the pace of regulation versus the pace of technology change. I think we can all agree that that curve is separating and dividing, and it is intentionally a slower process. The process of making laws, changing the rules, isn’t designed to not happen overnight so that you don’t wind up with this whiplash pendulum swing. It gives a level of predictability and certainty, particularly for institutions that need to build something that endures.

What we’re seeing right now is the speed at which the technology environment—this is about technology change much more than it’s about financial change. It is about the plumbing, is being completely rewired in real time. I think that the policy discussions that you have one year are completely different. Todd, to your point, the conversations that were had about stablecoins two years ago are completely different from the conversations one year ago in the post-GENIUS Act passage, and they’re completely different than they are now.

I think that that’s a testament to the fact that many of the monetary policy topics, those are topics that have endured. There is a longevity to those debates. Many of the debates that we’re having now are rapidly changing. The dynamics that are pushing those changes are, in many cases, I think, exogenous to the industry.

It’s not just the regulators that are trying to keep up. We’re trying to keep up with changing benchmarks for customer expectations because, as much as you might want to think your competitor and the person that’s going to keep you on your toes is someone from within your industry, it’s another firm, and it’s a question of market share; I think it is increasingly a question of—we talk payments—people have come to expect free shipping. They also expect free payments. They expect friction to be completely eliminated.

You think about the instantaneous nature of some commercial entities that are looking to deliver things via drone. You have everything you need in your pocket. You can talk to your voice assistant in your home and do a whole lot of things. They then apply that experience set to regulated domains. Finance is not alone. I think healthcare is also grappling with a lot of this. That expectation shifting isn’t happening from what incumbent financial institutions are doing. It’s happening from the world writ large. I think regulators and institutions are grappling with how to keep up and what is the smart pace of change to implement.

Fox: David, in 1974, the Boston Fed had a conference about electronic funds transfer systems. The idea was all these paper-based processes are going to somehow be improved by computers. A lot of the policymakers and financial institution executives gathered at that event were describing how you can create a better version of a check with a computer. Dee Hock, the founder of what became Visa, gave this famous speech. It’s called the “Electronic Value Exchange” speech. In his remarks, he mentioned that perpetuating existing forms leads to the commercial graveyard where the ghosts of form which do not follow function are buried.

What he actually achieved at that time with 1970s technology really was to build a layer on top of existing financial market infrastructure to abstract away the friction that Martha is describing. The friction was all still there. There was just a new system built to make it invisible to you as a consumer or as a merchant. There’s a lot of different things working behind the scenes to make money move and to make settlement happen.

It’s not always happening, for example, instantly. It sometimes happens on a lag. It’s not always happening in the most efficient way in terms of different cross-border elements of a transaction. It can have quite a lot of steps along the way that need to be resolved. There’s a lot of regulatory compliance built into that system. It did habituate end users, both merchants and consumers, to “You present me with this card. I’m going to give you some merchandise and know that I’ll be paid, even if I don’t know you and even if you have never been in this market before.”

What’s happening now is that vision from 1974 of electronic value exchange is actually now potentially happening not just at the surface level of abstraction that consumers and merchants experience, but all those other intermediaries that are happening that are having to be orchestrated behind the scenes. When we talk about the tokenization of finance, that’s what’s really going on. Now suddenly the money is moving in real time on-chain. That sets up an entirely new set of risks and opportunities.

It comes back to this idea: No one knows exactly where this is going to play out. 1974 was a long time ago, and the technology is really finally just catching up to that vision. We won’t have the luxury of 50 more years to deliberate about this. It’s basically in the marketplace today. I think all we can do is get together and have a good-faith conversation about how to make sure that it stays secure and that it solves real problems for real people.

Beckworth: This morning we heard some great papers from Yesha Yadav and Dan Awrey. I imagine they took time and deliberation and careful thought into these papers like they always do. They have a long horizon to do a paper. In your job day-to-day, you were telling me last night, every day something different hits your plate. You’ve got to be nimble, quick on your feet. You have to become a master of many different financial payment issues. Is that right?

Miller: It’s not just financial payment issues. My team sits across what many people think of for Fidelity. Depending on your relationship, a large subset of Americans, you either know us for the services that we provide in the retirement setting or the brokerage context or the investment advice context. Increasingly, the issue set continues to broaden.

We’ve also got crypto and digital assets as a part of the policy issues we look at. Increasingly, I think financial institutions are having to build up policy expertise where they’ve had subject-matter technical expertise within business and technology teams. Increasingly, the issue set is not a “we look at financial services policy.” You now need to know AI policy. You need to know data privacy. You need to know data aggregation and data mobility. You need to also understand all of these other adjacencies that are, as we get to Yesha’s paper that we were talking about, that there’s the general-purpose technology, but it is being used, or it is engaging with very financial-specific, what I would call, modalities of use.

It is increasingly complicated. I think it’s one of the most fun things you can do is have a job and a career in which your job is to always be curious and figure out what is it that you don’t know about the problem that has just come to you. Who knows more than you? How do you bring the best insights you can out of them and solve with what is inevitably imperfect information?

It is a ton of fun. The issues every day are something different. I’m really lucky that if I don’t have the deep, deep expertise of somebody who knows the ins and outs of that issue internally, which I almost always do, there’s always someone externally, including people in this room, that you can say, “Okay, this is a novel application of this,” or “Do you know what? We haven’t seen this permutation of the issue or someone try to creatively apply this law or this regulation to solve this different problem. What do we do here? What are the unintended consequences? Are we thinking about it correctly?”

I think that’s, to me, the most fun part of this. It’s not about the abstract thinking, which I think some people will say, “Oh, policy,” and then the word they want to use immediately after is “wonk.” I want to say, “No, no, no. My entire job is to translate this into what happens to real people and customers. Let’s trace it through.” I don’t want to stop at the outcomes of, “Oh, that costs this,” or “There’s a compliance built here.” It’s, “No, no, no. Let’s talk a couple steps further.” 

If we can’t tease that out, we need to spend a lot more time with that issue to understand the customer impact because you never need to stop at the intermediary layer. It’s interesting. It’s important, but it is never the purpose. It’s never the underlying why. It gets into Simon Sinek’s, that means you’re stopping at the wrong layer of the onion before you have peeled it back enough layers.

Fox: I love hearing this because when I think about Fidelity and Visa, I think of them as almost on a parallel journey to bring to the middle class and the people that had not previously been able to participate in financial services—that had previously been the domain of either large institutions or of the very affluent—and making these into mass market products so that even a person who doesn’t have a huge credit file can nevertheless have access to a payment system. A person that doesn’t necessarily qualify to be investing in certain kinds of assets can nevertheless open an account with Fidelity and build wealth and retire with some equity in their 401(k).

I think that history is actually a big part of the trust that, hopefully, the brands that we represent give us a little bit more, hopefully, credibility, but also accountability for what we represent. We’re not just here to be pushing for a big, bold, new innovation that one act of Congress makes my market cap go up or down. It’s really about being on a 100-year journey to bring the middle class into the money class.

We’re not at the end of that journey yet. It’s really now just a matter of making sure that as technology, policy, and globalization all interact, we’re doing right by our current customers and hopefully expanding access to the people that we haven’t reached yet.

Stablecoins

Beckworth: Let’s jump into the actual payment technologies and innovations. I’m dying to hear the industry’s perspective on stablecoins. What do you see it doing? What is its ultimate end use? How big will it get? Maybe give a general answer from both of you, but then I also specifically want to get your hot take on OpenUSD as much as you can share with us.

Fox: Oh, sure. I’m happy to go first with the caveat that Martha knows a lot more about this space than I do. Visa was quite early on in the stablecoin wave relative to other large global payment systems. I think we were probably the first to enable settlement in stablecoins on the Visa network, which is to say we essentially added a stablecoin as yet another currency, along with all the fiat currencies that the network supports.

We’ve been very successful in enabling stablecoin or crypto-linked cards. A lot of the companies that grow up to provide basically some kind of a wallet or a service that allows you to transact in cryptocurrency, there’s a companion debit card or credit card that goes along with that. We’ve also identified a number of really interesting use cases, for example, in parts of money movement that you don’t necessarily associate with Visa. A lot of us experience Visa as a consumer payment service, but Visa has this whole huge business-run commercial and money movement. We’re talking about moving large value in large amounts cross-border, working with corporate treasurers and enterprise-scale clients.

There’s a lot of liquidity that just gets stuck in these cross-border flows. Moving value on-chain can really simplify that process. Again, I always think about it in terms of is it helping an end user at the end of the day? Does someone have a pain point for which this technology is actually making a material difference? It turns out, yes, there are companies, maybe middle-market companies, just below enterprise-scale. They’re part of a supply chain. They’re selling into some other company’s procurement process.

They may find that the liquidity unlock of stablecoin, the ability to see all of their balances on a single pane of glass, that can be very valuable to companies that maybe are just not extremely well served by the current kind of correspondent banking system. Those are a few specific use cases.

Within the Visa Economic Empowerment Institute—everything I’ve said up until now is really about Visa, the company—what we’re doing at the Visa Institute is really trying to look at the different policy and regulatory systems that govern stablecoin in different jurisdictions and ask interesting questions. Now we actually have a natural experiment playing out where we can compare what’s happening in Hong Kong with what’s happening in the US with the GENIUS Act.

We can look at what’s been happening in Europe with the Markets in Crypto-Assets Regulation, the MiCA regulation. We can compare that to what’s happening in, say, the UAE and answer interesting questions. Maybe sometimes before people even ask them, but it turns out that a lot of the work we’re doing in the Institute on this topic is just generating really interesting conversations, not only with policymakers actually, but increasingly with our financial institution partners around the world.

Miller: I’d say from my lens, just the fun predicate of the context of why in the world is Fidelity, who most people associate with their 401(k) account or things, in the world of crypto and digital assets? We started—I say we, that’s the royal we. I was not even at Fidelity at the time. Back in 2013, we began experimenting and learning from the R&D perspective about crypto mining, Bitcoin, and trying to understand what is this innovative technology. What are the potential ways that we see that we could use it?

It was interesting to see the individual focus on decentralized finance. I think from our lens, we were looking at it from, “Okay, there has to be an institutional application here. If we’re not doing it with our hands on, then we’re not going to know what’s coming next.” We’ve always had that curiosity mindset toward anything in technology. The claim to fame that we used to hype for a long time is we were the first mutual fund company with a website. That’s no longer something that we say, like, “That is exciting,” that we had a website. Everybody takes that for granted now.

I think that most financial services firms take it for granted that, “Oh, you have a footprint in this space.” We did it at a time when people called it internet funny money. You may still call it internet funny money, but from our lens, we have been looking at every different permutation of digital assets from the perspective of there’s always going to be multiple different theses and hypotheses about where this is going to go.

My personal explanation of it is like, “If you’re going to have a diversified portfolio for your investments, you also, as a large institution, need a diversified portfolio of bets on where the future is headed.” I think that this is one of those investments. We’ve really approached it from a very Fidelity lens, which is, we’re not aiming to be the thing that moves the very fastest. We’re not aiming to be the wallet where you can hold any asset that’s created by any different person. It’s going to be the place for a certain type of customer that wants a certain type of experience.

One of the things that we found early on is there were a lot of institutions that also wanted to do some experimenting. They wanted to hold Bitcoin on their balance sheet. They didn’t want to do it with a wallet that they programmed and with keys that they managed. They wanted a custodian who was regulated. There was appetite for that. As much as that wasn’t the story that you heard about crypto, there was appetite for an institutional player that had institutional controls, rigor, audits, and that was not aiming at moving fast and seeing what broke, but aimed at moving really intentionally.

That’s the story of us entering crypto. We’ve been able to do a lot of really interesting things in the digital asset space, including launching a stablecoin. The hypothesis for us stepping into that was not, “This is going to be where everyone parks their money.” The hypothesis was, “We think that there’s some interesting underlying plumbing that this might change, in the trading infrastructure, in settlement infrastructure, and in a lot of institutional use cases, so we’re going to build our own,” because, if you’re a tinker, what better way to understand something than by rolling up your sleeves and doing it?

We’ve launched a stablecoin. It’s been a really interesting process to go through it and a really interesting process to educate policymakers on why we’re in the space because I think that many saw stablecoin, and you either saw these offshore entities and you thought, “Well, who knows what their reserve management is,” or if they’re an algorithmic stablecoin and everything’s just going to collapse in a poof. We said, “No, we actually think that there is a place here for us to learn from where others have experimented, but to do it within the regulatory perimeter and with the controls and safeguards that we think people in the US deserve.”

That’s how we stepped into it. It’s been a really interesting process. It’s been a fascinating thing for me to experience educating the policymakers and the legislators on what we’re trying to build and why we want to do it in the US, why we don’t want to go overseas for that, which is a business choice. We believe that it should happen here. There’s a right way to do it, and we’re really pleased with where things have landed so far.

Fox: Martha, you’ve raised such a great point that sometimes the best way to understand something is to actually do it in the real world.

Miller: Totally.

Fox: I mentioned that Visa was early on the crypto-linked card. Products that are allowing you to have the functionality of a Visa card, but the asset backing that transaction is crypto, stablecoin. Guess what? It was actually the partnership with Fidelity that helped us figure out how to do that, because you could have money in a mutual fund, and that’s an asset-backed card that you can spend against.

Functionally, it’s not all that different. It’s the idea that you could have money in a checking account, you could have an unsecured line of credit from a financial institution, or maybe you have assets in a brokerage account. You have value that is yours. The consumer should be deciding how they are going to best handle their own money, but they should be able to spend it at every merchant that they want to go and give their business to.

Sometimes, the best way to have a view of the future is to really just understand how we got here in the first place. Then things that seem scary and transformational, they’re, “Oh, wait, actually, we know how to do this.” After all, stocks and bonds go up and down too. It’s not as though people were being completely wiped out because they could use their Fidelity account at the point of sale in lieu of a checking account with a bank.

Beckworth: It was interesting when we did the pre-call; we talked about how many of your colleagues at Visa love Fidelity’s backed cards. It’s effectively equity-based money, which John Cochrane has talked about for years. It is cool to see there’s actually something like it in practice.

I want to go back to OpenUSD. I want to push you on this because, in some ways, it reminds me of Libra. I know it’s very different, but Libra was Facebook’s potentially global stablecoin. It was multiple currencies. OpenUSD, it looks more like a big conglomerate, many participating organizations. Where does it stand, and what could it do that Libra can’t do or that other stablecoins are not doing? What do you see there in terms of its potential?

Fox: Again, another area where the past of how large new technologies achieve scale in a highly regulated space like financial services is an instructive playbook. It doesn’t tell you everything, but it can give you some examples. Before 2008, Visa was an association of its member financial institutions. The SWIFT system has to solve a problem for all of the participating banks when it comes to messaging, so it was good to have an entity that is collectively owned by the participants.

That idea of a consortium seems to make a lot of sense in the new era of stablecoins. There are a lot of financial institutions that have created their own stablecoins. There’s a relatively small number of stablecoins that are not backed by financial institutions. Those tend to be the bigger ones. I think the idea for the open standard is this kind of governance consortium that will help figure out the rules for this new dollar-backed token.

Now, you asked to compare and contrast with Libra. I was around during the Libra era as well. Some things that the OpenUSD consortium has in common with Libra: It was also a group of entities, not just one company, with the idea that they would come together to try to figure out the rules and governance for a new token. 

There’s a lot of differences, but I’ll give you the two that I think are the most salient. One, it’s right there in the name: It’s the US dollar. This is something that will be compliant with the GENIUS Act that is backed by high-quality liquid assets, which is actually very clearly spelled out in regulation. It will be ultimately backed by the dollar. Let’s be honest, Libra was kind of a white paper. Some companies signed some NDAs. We had a plan to have a meeting and figure out what we were going to do. I think there was a moment when the financial stability community just said, “Whoa, whoa, pump the brakes,” so it never really got off the ground.

One of the reasons why I believe—and probably some of the people in this room were prudential regulators at the time, again, tell us if I’m getting this right—but I think part of the issue was it wasn’t clear that Libra would be backed by US dollars, let alone high-quality liquid assets, but rather some kind of undefined basket of currencies. Potentially, there could have been nonfiat money backing it. It was all a little bit too murky for the comfort of central banks. 

Of course, this was six years before regulatory movement in this space. It was a good example of how, a lot of the time in fintech, there’s this notion of permissionless innovation. Let’s try to build something, test, and learn. It’s going to be small. There’s not a huge systemic risk if things go badly. I think because the consortium included some companies that had a large user base, there was a fear that the thing would become systemic while they were still figuring out what’s in that basket of currencies or what kind of assets are backing the token.

That was a hard lesson. It set in motion a lot of really interesting conversation. There’s actually a third point I’ll mention. At the time that Libra was first contemplated, the number of people in the world of central banking that were really following crypto and stablecoin, it wasn’t zero. It was not a popular topic. I think I am consistently learning by talking to central bankers and people from international organizations like the IMF and the Bank for International Settlements.

They follow this space just as closely as I do. We exchange information. It’s just they have thoughts on this that maybe I hadn’t thought of, and I can return the favor, hopefully. It took a few years to really study this carefully enough where we could have these good-faith conversations. All this innovation is probably good. It’s just the timing really matters. There just wasn’t the level of understanding on either side to really make the Libra thing work.

Beckworth: Martha, what is your outlook for OpenUSD?

Miller: Ooh. I don’t really know that I have the idea of what’s the outlook. I would actually answer it differently. I would go back to the question that you just asked Todd, that is: What’s the value proposition of something that is done as a consortium or where a group comes together? I think that we have a number of examples where if the value proposition and much of the value derives from interoperability, which at its core, that’s the question that we’re all asking about stablecoins, is fungibility, interoperability. If the value comes from interoperability, then consortium value skyrockets.

There’s lots of examples of this. This morning, we were talking a good bit about Zelle and the fact that the whole point of that was moving things between banks. It did not make sense for each institution to be developing their own technology with their own proprietary API that didn’t speak very clearly or wasn’t updated. It makes sense when there’s a consortium that backs something. Same with Akoya, which provided API backing. It was, again, consortium. People came together. You see that on repeat.

I think whenever you’re looking at a problem, sometimes the person with the best ideas, which might be an individual institution, may not be best positioned to solve for that. I also think that one of the real things that scared people with the Libra case was the fact that it was not largely financial institutions that were making headway. I think the level of fear of the unknown of these companies where they didn’t have a history of prudential oversight or of any financial regulatory oversight. There were no examiners that were coming in and looking at them.

Yes, they might have the technology expertise to technically build it, but had they learned the lessons of finance, monetary, and fiscal policy? The lessons we keep relearning, they’re cyclical lessons. It’s not usually net-new lessons. We learn the same thing on a new set of facts, but it’s this history lesson that we can look back and say, “Oh, we can draw from this prior example.” I think here there was the concern of: Do these individuals understand enough about what they would be building and the ways that it would need to work when things don’t go as planned?

I think that’s the same critique that was made early on of the crypto industry of, have any of these individuals that are mostly technology natives, have they ever grappled with the challenges that financial services firms have been working through and developing expertise in managing and processes and governance protocols and risk measures and compliance systems? 

Those are all things that we come back to with the word trust. Trust was a topic that we talked about a good bit this morning. I do think we have a really interesting system right now with trust. That really underpins a lot of what we’re talking about with payments because payments right now, it’s really about a third party delivering trust, brokering trust between two parties is the way that I think about it. It used to be that you needed to really know that counterparty. We were telling the story of the advent of credit cards and Diners Club. You needed to know that person to know, “Am I willing to say you don’t have to pay your dinner tab tonight? You can come back.”

Well, if you had an intermediated system of trust, it would really change things. I think you’ve continued to see different iterations of where a third party can deliver that. We started with institutions and with brand names that we believed in. Then the advent of giving something a one through five-star rating online completely changed where instead of an institution, you could rely on complete strangers.

The idea, a decade or two decades ago, that you would get into a stranger’s car that pulled up with no markings on it, and you would say, “This is safer than a cab,” which is what most people today say about the taxi industry. I feel safer in this person because they have got 97 five-star rides. I have no clue what the driver is like that has the taxi medallion, nor if they’re the actual driver that is supposed to be in that car.

I do think that we’re looking at these different iterations of, where does trust come from? Is it derived from a personal relationship? Is it derived from an institutional relationship? Is it derived from critical mass? I think that’s going to continue to shift the expectations of consumers. It’s going to continue to shift the ways that we need to think about the system. Trust is one of those things that you usually build it slowly and you break it quickly. That is the piece that we have to be mindful of as stewards of trust. How do you ensure that you continue to incrementally build it and to never, ever take it for granted?

Beckworth: Okay. Well, I have plenty more questions, but I want to turn it over to the audience. If you have a question, as Peter mentioned, please go to the microphone over here. You will be on camera and the audio as well. Please make it a question.

Balancing Innovation and Risk

Conti-Brown: I wonder, Martha and Todd, just listening to your description of the evolution of technological change and thinking about financial services’ experimentation with technology versus technology firms’ experimentation with financial services and thinking about that asymmetry, I understand why technology-forward firms who want to dabble into different industries are going to be pretty wild-eyed and enthusiastic, evangelistic about their approach.

I’m less confident about why financial services firms would take so many big bets. I think your answer about having a diversified portfolio of risk and development makes a lot of sense. How do firms make sure they’re striking the balance between taking appropriate risk-adjusted experiments without just drinking the Kool-Aid, without just exploding in their enthusiasms and following the lead of those firms who are very far technology forward. But to Martha’s point earlier, don’t have that same financial services sophistication that took many decades for other firms to gather?

How do you make sure you’re striking that balance without constantly telling, “Oh, kids these days think that they’ve rediscovered something and they really haven’t,” and then turning into a dinosaur in the process?

Fox: I was at a dinner recently in San Francisco with a group of cryptocurrency entrepreneurs, and I asked them, “What do you think is the definition of an entrepreneur?” One of them said, “Someone that has the guts to say no to their lawyer.” I was like, “I guess you’re right.”

Miller: I feel like if that’s a Venn diagram, that’s largely yes, but it is not if that, then.

Fox: That limits the universe of possible partners that a regulated financial institution would want to collaborate with. I think that the test that really works, at least in my own mental model, does something grow the pie? Does it actually create new transactions? Does that create new value, or is it just replacing something old with something new? Easy for me to say. I’m working for a company that’s already in 200 countries and territories, that’s doing business with nearly 16,000 financial institutions around the world, that’s actually delivering on this trust and accountability equation for a few billion cardholders.

You really owe it to your current partners as a steward of an ecosystem to be very selective about who you invite into the network, but openness is the ultimate North Star. You don’t want it to be such a closed club where you’re just doing what Dee Hock said not to do in the 1970s. You can’t just say, “Look, we love the debit card business, we love the credit card business, and we’re against anyone that wants to compete with us.”

The language we use at Visa is to be a network of networks and to really open our product stack and unbundle the services we can provide so that builders and developers can take the element of the Visa product catalog that they need, access it using an API, plug it into their app, and have the ability to plug into this whole global acceptance network and have the security and trust and capabilities that come along with Visa. They may not need the entire portfolio of products that a large regulated financial institution may need.

I think finding that balance is ultimately the role of a network and the role of any steward of an ecosystem. It’s just a little bit different when you’re a founder and you took some money from a venture capital firm and you now need to show 100 times growth in the next two years. That is just a different equation of, look, we have to blitz scale this thing. We don’t have time to go through all these hoops. If we get to a certain scale and people love us enough, maybe at the end of the day we’ll be too big to regulate. That is just a different philosophy. I can see how the incentives would lead some people to think that way. Yes, that’s not my world view.

Miller: Yes, I’ll answer, which is I think innovation for innovation’s sake is a fast drain on an R&D budget. If you can’t figure out pretty quickly how something delivers value to an actual person—because at the end of the day, the institution is still, it could be a business, but behind the business there are people. If you can’t figure out a value hypothesis in that, then it is probably not worth you chasing with a lot of resources.

As you look at the balancing act of what ideas do you chase and which ones do you say, “That’s interesting, we’ll let someone else tackle that,” or, “We don’t think it’s worth it,” I think constraints-based innovation is critical. I think we’ve seen this time and again with companies that have failed where they didn’t have a clear driver of who’s the customer for this. That is a neat idea, but who exactly are you designing this for and have you really identified that target customer and built for them?

I think that that’s the key differentiator. In this space, I think if you’ve got something where you think there is a clear value add here that does something meaningful for an identifiable group of people, those are ideas that are worth pursuing. Conversely, if it’s something that you think, “Okay, we all just find this interesting,” or, “This is novel,” that does not make it worth chasing.

The Future of Innovation

Beckworth: If no one else has a question, I will throw one more out and then we’ll wrap it up shortly here. What really constrains the future of innovation? I mentioned Yesha, again, had this paper on the money, stablecoin. I learned a lot from it because it showed that despite all the technical innovations, the legal architecture is not there to make it truly like money in many dimensions. 

There’s a lot of talk about the future is going to be 24/7 clearing, atomic settlements. Everything’s going to be on a programmable ledger, smart contracts. I mentioned earlier, would the Fed even be on one of those? There might be frictions, legal constraints that prevent us from getting there. Does the future look bright for that world, or are we behind with the legal architecture, the regulations, in getting there?

Fox: It’s kind of a cliche, and I think it’s probably the most overused quote, but William Gibson had this famous line that, “The future is already here, it’s just not evenly distributed.” I think when it comes to payment system innovation, that is actually a very helpful way to think about it. The privilege I have as president of the Visa Economic Empowerment Institute is to be able to look out at 200 countries and territories that are all trying to figure out as best they can how to, to Martha’s point, make their citizens prosper. 

If someone comes to us with an idea that could deliver some value to an end user, be it a merchant or a financial institution or a consumer, of course, we’re interested. The question is always, what’s your ability to manage risk so that you’re adding something new to the ecosystem and not just essentially tapping into something where you’re getting value that you’re not giving back, not just to your shareholders, but to the entire network? It’s not always easy to tell, especially the more far out the idea, the more work you have to do to really think through the risks. I think we’ve been very successful as a network in really bringing in the best of innovation and building it into the existing system.

I sometimes think the entire technology stack that is working behind the scenes when you tap a Visa credential has probably turned over a few times since 1958. It may turn over a few more times between now and 2040. What matters is not whether we’re using one type of database configuration and one type of mainframe computer or whether it’s on a blockchain or not. What really matters is does it have the right rules and governance attached to it?

The simplest thing in payments is to move money from point A to point B. The hardest thing is to figure out what rights, rules, and privileges attach to that money as it’s moving so that you have trust on both sides of that transaction. That has a lot to do with rules and not as much as people may think to do with rails.

What I think Professor Yesha Yadav from Vanderbilt University shared in her amazing paper today was, we’re entering this new agentic paradigm, and it’s going to force us to almost figure out where do we have to build some entirely new rules framework versus where do the existing rules, both the rules set by governments and then the ones that are built by private sector networks, to then extend and transpose those regulations into actual operating requirements for the users of the Visa system.

Some of the stuff that we’re already doing probably works well as we move into agentic AI. Some of it will need to expand. Some of it probably becomes irrelevant. The art of this is a little different than the science. The science is really just encoding all this stuff, and smart contracts make that ever easier to do. The art is putting the right legal framework in place so that when things go wrong, you know who has liability.

We’re entering this era now where that’s getting hard not just because of the new technology, but because of geopolitical fragmentation, new types of threat vectors. You think about what malicious actors, cyber criminals, hackers, fraudsters, scammers can do with AI. The world’s getting more and more scary. You can’t just say, “This technology looks good. Let’s deploy it and see what happens.” Sometimes it really takes innovation in AI to stop AI-enabled fraud. You can’t just sit still and expect the good old days to last forever. You’ve got to continuously be thinking with that innovator’s dilemma mindset.

Miller: I think it’s an interesting question looking at the future proofing. I do think that the dilemma there is a fascinating one, and it gets into some of what the policymakers are currently grappling with. You mentioned 24X and some other areas that really get into market structure plumbing. The SEC right now is grappling with a really robust agenda where they’re trying to do a whole lot of different things that would enable innovation without breaking the things that work well.

You think about everything from tokenizing equities and what’s the value proposition if it’s already hyperefficient in terms of trading, unclear. There might be some 24X trading. Do people really want things to move 24X, and do we have systems and institutions in place to monitor and detect things 24/7? Because there are some really nice backstops that happen when things pause and when you have a window to fix something before trading reopens.

Many of those are solvable, but they come with tradeoffs. I think as we look ahead to the future, the thing that I have really worked a lot with, and our team has really highlighted is, we talk about technology neutrality a lot. That sounds like a buzzword that you might put on a lobbyist’s mug, and you might wonder exactly what does technology neutrality mean. To me, it is about when we have the window to write a rule or to pass a law, doing something that can endure when technology inevitably, whether it is in one year or five years or 10 years, moves and renders the prior paradigm obsolete.

I think a really interesting example of that right now is the SEC’s proposal on electronic delivery. Really moving into the modern world of making the default that people receive information electronically, there is still optionality with paper, but that they get it electronically. One of the really interesting pieces, if you totally nerd out and go into the details—which I imagine, if I’m going to do a Venn diagram of people who love the details and people who are listening to this—one of the most interesting aspects of that proposal is the definition of electronic address. The obvious thing, if you’re going to use today’s technology, is to try to define email. 

That is, I think, the wrong thing because we don’t need a world in which we need to change the rule book every single time a new way of communicating comes along. You move from passwords to text message codes to passkeys to I don’t know what’s next. There’s quantum encryption. There’s all kinds of other future states. We don’t ever need to have a world in which the ability to deliver something better and more securely and more safely is hampered by a hard-coded way of doing something in the past.

Whether that is a manual check rollover mandate as opposed to the ability to move something electronically, which we have a whole lot of places where paper checks are the default. Whether it is you have to have a wet ink notary signature as opposed to other ways of documenting trust electronically. We’ve talked about checks and mobile payments. There’s so much that we, with the best of intentions, we say, “Well, the best thing to do is to precisely define this based on what we know today.” That the entire purpose of what we’re trying to build for is a world that can accommodate tomorrow and be evergreen.

That is a wild challenge. It requires a lot of people to come together and to problem-solve it. I do think that this debate over electronic addresses is a fascinating little specific example because the thing that we’ve tried to say is, “Look, it needs to be about a secure protocol for interacting in some sort of an authenticated environment with a customer without saying it has to be text messages or SMS text messages or email addresses.”

I don’t know if the SMTP protocol will even exist in five or 10 years that underpins email, but I do know that there is going to be something new and there’s going to be a shift in expectations of how people receive things. That, to me, is the really interesting part of how do you strike the balance between prescriptive rules that give you super clear rules of the road today that you can build an entire compliance infrastructure around versus principles-based that give you the adaptability for what comes. The ability to not say, “Well, this is a new issue and we have no rules that address it,” but to instead say, “I understand how the existing rules can be applied to this novel application.” We don’t have to go back to the drawing board again and rewrite everything from scratch. 

There’s tremendous opportunity in the different issue sets that we see ahead and the many different proposals before the regulators that they are in a sprint to finalize right now, and the same with Congress and the many things that they’re debating, figuring out how to strike that balance. It is a wild challenge. I profess to have not all of the answers by any means, but an absolute curiosity and determination to roll up sleeves and figure them out collectively.

Beckworth: With that, our time is up. Our guests today have been Todd Fox, Martha Miller. Thank you both for coming on the podcast.

Miller: Thank you. 

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth and follow the show @Macro_Musings.