Author: Wang ZeLong Editor: Tong Source: PANews
As an infrastructure, payment is naturally the core––it is the intersectional point of information flow, money flow and user flow. Applying the development path of internet, payment has provided a favorable foundation for financial activities such as money management, loaning and credit investigation, and the current development of mobile payment serves as the best example. In the world of cryptocurrency, the same game is on at the present moment.
LedegerX managed to launch the Bitcoin futures product ahead of Bakkt who was founded ICE, the mother company of NYSE. However, rumor has it that Bakkt is bringing up an even bigger progress––it will soon launch the product of crypto-payment method “Bakkt Pay”, with its potential partners including Starbucks, Whole Foods, AT&T, and Nordstrom.
Cryptocurrency Exchanges that have similar influence as Bakkt, such as Binance and Coinbase, are also eagerly preparing to join the crypto-payment field: the former launched the cryptocurrency credit card in cooperation with Simplex in January this year, while the latter launched the cryptocurrency debit card in the UK in April this year and later announced in June that it will promote this business to other six European countries.
Square, as a payment method provider that was previously not involved in the cryptocurrency world, also wants to take part in this competition: with its application “Cash App” and “Square Market”, it has launched the transaction and payment settlement service of Bitcoin. Not to mention Facebook Libra who attracts widespread attention from the market in recent, as it is like the “spring thunder” in the field of crypto-payment.
A noisy battlefield now in the field of crypto-payment
The important reasons that crypto-payment can attract powerful players from various fields are its ability to lower down cost as well as its wild market space. According to the “2018 Global Payment Report” published by payment service provider WorldPlay, by 2021, the transaction amount in digital payment will reach 876 billion US dollars globally.
Obviously, no one wants to kept out of this “feast”. The racing track is almost full, however racers are still competing with each other.
Crypto-payment service providers
As cryptocurrency is further blending in our daily lives, the competition between “crypto-born” companies and enterprises in other fields is getting fierce. These “crypto-born” companies are trying to partially replace some businesses run by enterprises originally in those fields; for instance, the debit card that was join-launched by Coinbase and Visa can be used in off-line transactions in six European countries, which to a certain extent causes an impact to payment service providers outside of cryptocurrency world such as PayPal.
Square, an on-line payment service provider, has started to provide the service of Bitcoin transaction in its applications in 2017, and has garnered significant revenue ever since––the sales revenue from its Bitcoin business reached 65.5 million US dollars in S1 of 2019. Furthermore, Square is developing the service for all users to transfer Bitcoin from outer wallet to Square, therefore it is not difficult to imagine that in the future Square may become a cryptocurrency exchange, and even services like money management and trusteeship could also be included. This will pose a significant impact in regards of competition to “crypto-born” payment service providers.
In addition, Alipay has created cross-border platforms for money transfer and payment in between Hong Kong and the Philippines as well as between Pakistan and Malaysia, which may also cause a squeezing-out impact to “crypto-born” payment service providers.
Payment token
If we say that service providers have paved the way and built related infrastructure, then we can also say that payment tokens are taking the responsibility to “run”, as they are the most “directed” active players in the market.
Payment token is the tool of crypto-payment’s earliest development, with Bitcoin being the first example; as time went by, functions and characteristics such as privacy feature, assets attribute and real-time payment were gradually being introduced.
According to the current market performance, BTC, XRP, BCH, LTC and XLM secure the top-5 positions of payment token. By 29th June, Bitcoin accounts for 62.9% of the total market value of cryptocurrency, which overrises the absolute leading spot.
XRP and XLM, along with their respective mother blockchain Ripple and Stellar, are a pair that are deeply interrelating, and the latter’s founder previously worked in the former. Both blockchains are more involved in the fields of settlement and cross-border payment, so competition between the two are more obvious.
As for market value, the three major privacy cryptocurrencies Monero, Dash and Zcash are closely following the previous two; with privacy as their major feature, cryptocurrencies, represented by these three, are very popular in non-mainstream markets. For instance, Pornhub accepts Monero as one of its payment methods, and Wall Street Market, the black market that was shut down by transnational law enforcement not long ago, was also found with a huge amount of Monero. Beam and Grin who gained popularity earlier this year are the rising stars of privacy cryptocurrencies.
Commercial banks
Although banks are viewed with the stereotype of “defenders of vested interest”, however when it comes to using blockchain to defend their businesses, they have made a clear and definite commitment.
According to the statistics provided by Odaily, within the 84 blockchain business items in the top-8 banks including Morgan Stanley, Bank of America, Wells Fargo & Co. and HSBC, 33 of them are involved with trade & finance as well as payment, accounting for 38% of the total.
In addition, the four major national banks in China as well as the China Merchants Bank are conducting proactive trials of probing blockchain on transforming payment as well as trade & finance.
The most impactful player among banks that probes blockchain on transforming payment service is definitely Morgan Stanley; when it announced the plan to launch its own cryptocurrency, it undoubtedly provided a powerful shot in the arm to the market that was undesirable at that time. With its position as the biggest bank in the US with billions of assets in the world, JPM Coin has a role to play without question.
Central banks
For commercial banks, probing blockchain on transforming payment business focuses only on the profit of their own; nevertheless, for central banks, their eyes are on the future of national of even global financial environment in regards of their application of blockchain payment exploration.
Currently dozens of central banks around the world are conducting research on digital currency, and some third-world countries have already launched digital currency in their central banks. Their appeals are different: Ecuador and the Marshall Islands aim to conduct de-dollarization with their digital currencies, so as to change the leading role of US dollar in their countries; for Venezuela, Tunisia and Serbia, on the other hand, their targets are to alter domestic economic difficulties and complete financial reforms.
As for central banks in major powers such as France, UK, Canada and China, their explorations are more on the study of the possibility of merging this front-end field with existing economic and financial systems. For instance, the Bank of France launched the item of MADRE in 2016, aiming at improving the overlong time-lapse experience in multi-bank money transferring.
PANews previously reported on the first ever case of cross-border money transfer between central banks, which is the Jasper-Ubin item brought together by the Bank of Canada and the Monetary Authority of Singapore, with the support by two impactful players Morgan Stanley and R3. Related technology development went on for two years, with hundreds of member institutions in the league behind this project.
Clients
Supply and demand are two sides of a coin in the market. Central banks, commercial banks and service providers have completed the supply side of blockchain payment products, and some clients that make use of these payment methods are responsible in completing the demand side.
As a virtual asset, clients that first accepted cryptocurrency as payment method are generally the ones provide virtual products and services––for instance, Microsoft accepted Bitcoin as payment method as early as in 2014 in its Xbox store (due to the frequent fluctuation of Bitcoin, this service ceased operation in 2018).
Another well-known client that accepts Bitcoin as payment method is Twitter, as users can “give prize” to others with Bitcoin on Twitter; however, this service is not operated directly on Twitter, but on the “Tippin” explorer launched also by Twitter. Furthermore, Tippin uses the technology of Lightning Network to support real-time transactions in small amount of Bitcoin, therefore the giver and receiver of the “prize” both need to have a wallet that supports Lightning Network.
Within the cryptocurrency-accepting clients that provide physical products, Overstock is the “pathfinder”. Not only has it accepted Bitcoin as one of the its payment methods as early as in 2014, but also there was news last year that it would sell all the wholesale business and focus solely on blockchain. Currently, in addition to Bitcoin, Overstock also accepts other currencies such as Ethereum, Dash, Litecoin and NEM.
In addition to these above-mentioned clients, some other well-known clients also had previously accepted cryptocurrency as payment method, however due to regulation uncertainty, price fluctuation and cost, they withdrew from this field. These include KFC (Canada), Expedia and Twitch.
