Why Tap into Crypto Payments and Web 3.0
An Essential Guide on Accepting Crypto and the Cash Management around It
Did you know that computer memory chips — such as solid-state multimedia storage devices for electronic games, cameras, and MP3 players — are built on transistors? And while the working principles of a transistor were first proposed in 1925, the first working transistor entered production in early 1950, therefore 25 years later. This comes to strengthen Andreessen Horowitz’s quotes on the potential of blockchain technologies. Andreessen Horowitz is a venture capital firm in Silicon Valley, California, that backs bold entrepreneurs building the future through technology.
‘The decentralised ledger underlying Bitcoin was a fundamentally new kind of network — like the Internet — with possibilities that still hadn’t been dreamed up, Andreessen said. He went on: Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era, and a catalyst to reshape that system in ways that are more powerful for individuals and businesses alike.’ Nathaniel Popper, Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
We have reached a point in technology development that opens so many possibilities for humanity, in terms of financial services (faster, cheaper, more transparent, fairer, inclusive payment systems) that can no longer be denied or ignored. Furthermore, these developments need to be understood, explained, and tested.
The Paypers’ How to tap into Crypto Payments and Web 3.0 for Banks, Merchants, and PSPs Report aims just that: to provide a go-to payment resource of crypto terms and concepts for those interested to understand the basics of crypto payments and their long term impact; to share practical examples of cryptocurrency-enabled ecommerce and banking services; to present the latest developments in the regulatory landscape; and to reveal what are the most innovative companies in this space, that are building the next payment rails — the crypto rails.
We have interviewed our readership to find out more about their appetite towards crypto payments, and notwithstanding we found that 88% of respondents expect crypto to have an impact on the current payment infrastructure, which is why some are already ‘testing the water’.
Why tap into crypto payments and Web 3.0
Most users are using crypto as an investment vehicle, but opportunities to use cryptocurrency, stablecoins like USDC and USDT as a means of settlement and exchange are rapidly expanding. At the same time, the emergence of central bank digital currencies explores ‘innovative ways’ for homes and businesses to make payments and transfer funds. In the ecommerce space, PayPal, Venmo, and Square now enable Bitcoin in their digital wallets, Flexa, a pure-digital payments network, is allowing for crypto to be spent at the point of sale, and Visa and Mastercard are actively working on stablecoin-based payment solutions. Furthermore, innovation in this space has accelerated with the rise of non-fungible tokens (NFTs) and decentralised finance (DeFi).
Decentralised Finance (DeFi) is a permissionless infrastructure, fully secured by encryption, that enables people and businesses to perform transactions directly with each other, without needing institutions to act as intermediaries. DeFi offers the interesting potential to reduce costs and increase speed in payments by eliminating friction in terms of technology, contracting, and coordination between multiple parties. This is expected to impact many functions of today’s payment and securities market infrastructures, such as clearing houses, RTGS, secure messaging, custody, exchanges, and FX services. Digital assets enable companies to make their idle cash work for them. It is also possible to obtain yield by depositing into decentralised lending pools such as Aave and Compound.
The journey has been bumpy so far, and not everyone is enthusiastic about the use of cryptocurrency in the system of payments and financial transaction, but for good reason — the currency is volatile, implies monetary risks, is associated with money laundering, and the list can continue. At the beginning of May 2022, Bitcoin, the world’s most valuable cryptocurrency plunged. The crypto slump has been brutal.
Crypto and Web 3.0 payment industry survey
The longer-term potential for blockchain and digital currency-based payments remains. Despite all the turmoil, no one can deny crypto’s potential to solve payment needs such as reconciliation, chargeback guarantees, risk management, fraud prevention, the cost of cross-border payments, and government regulation. There is a huge amount of ongoing payments technology innovation happening away from areas where crypto is seen as primarily a speculative digital asset.
To test this hypothesis, during the summer we surveyed banks, payment institutions, vendors, merchants, and AP / AR departments to gauge their interest in crypto infrastructure, tokens, and services for businesses and institutions. Not surprisingly, the first edition of our INNOPAY/The Paypers Payment Industry Crypto Monitor has some revealing findings. For example, 88% of the respondents expect crypto to have an impact on the current payment infrastructure, which is why some are already ‘testing the water’. But strikingly, many respondents are not yet offering crypto products or services due to unclear regulations and AML/KYC challenges.
Although some organisations are now offering services based on crypto technology, they are still in the minority (24%). Most of the respondents see various crypto-related opportunities and are keen to pursue them but are still very much at the exploratory stage: reading and researching the crypto opportunities (53%), talking with customers (43%), or preparing decision-making for usage or going to market (26%).
What’s the effect on your business (the gains or threats)
Despite market-challenging conditions, there are still investments made in crypto companies, according to KPMG. Blockchain visionaries like Peter Smith, CEO of Blockchain.com agree that ‘there is not a better time than to be building. You have to zoom out and think about the progress of technology and innovation and where we will all be in 3–5 years.’ We need to adopt the builder’s mindset to seize the technological innovation opportunities behind blockchains and DLTs to improve and democratise the payments industry.
According to an NDYG survey, in the last two years, consumers have become more interested than ever in Bitcoin products from their banks. As such, if financial institutions were to offer crypto products, they would gain new clients, increase engagement, avoid disintermediation, and more. All in all, there is a lot of potential for market participants to explore.
The promise
After reading this report, we promise you will know what the main terms are used in crypto payments, what are the trends and developments in this space, and what is here to stay or is just hype. The content together with a mapping of the crypto payment companies will help you understand what the main players in this space are and find the appropriate technology partner in the crypto space to enable you to develop the crypto payment rails, secure them, and protect your customer, offer the best UX.
The Paypers’ How to tap into Crypto Payments and Web 3.0 for Banks, Merchants, and PSPs Report combines our proprietary research and expertise with insight from different stakeholders within the crypto space such as payments consultants and providers, lawyers, technologists, and many others. Hopefully, the info that is about to unravel, will assist you to decide if adopting crypto as a payment method, as a means of investment, to develop products based on the crypto ecosystem is for you.
We are grateful for you taking the time to download and read our report, and please don’t forget to share your thoughts with us!
Enjoy your reading!
About the author — Mirela Ciobanu
Mirela Ciobanu is Lead Editor at The Paypers, specialising in the Banking and Fintech domain. With a keen eye for industry trends, she is constantly on the lookout for the latest developments in digital assets, regtech, payment innovation, and fraud prevention. Mirela is particularly passionate about crypto, blockchain, DeFi, and fincrime investigations, and is a strong advocate for online data privacy and protection. As a skilled writer, Mirela strives to deliver accurate and informative insights to her readers, always in pursuit of the most compelling version of the truth. Connect with Mirela on LinkedIn or reach out via email at mirelac@thepaypers.com.
