Crypto Payments Infrastructure for Payment Gateway Providers
Cross-border payments charge higher fees than domestic payments, and it is difficult for people to purchase goods overseas unless he/she owns a credit card or prepaid/debit card. Conversely, it is difficult for stores to sell goods to foreigners without a credit card or the like. Cryptocurrency payment services cannot also cash out in the local currency at the affiliated stores around the world.
Users can use Changer Transfer’s overseas P2P remittance network to create a remarkably affordable cross-border payment network for individuals and businesses. When a person without a payment card wishes to purchase goods at an overseas shopping mall, Changer’s remittance partners can carry out the payment task the same way as they would do for remittances.
According to McKinsey’s Global Payments Report in September 2019, the amount of cross-border transactions in 2018 totaled 136 trillion USD. Among them, international payments for the B2B trade and service sectors amounted to 133 trillion USD. Payment companies generated a total of 149 billion USD in revenue with an aver age service fee of 0.1%.
For C2B (consumers buying goods from overseas companies) payments, which include “overseas direct purchases,” transactions totaled 1.5 trillion USD, and payment companies generated 37 billion USD in revenue with an average fee of 2.5%. For the B2C (companies paying foreign workers/individuals) sector, the amount totaled 1.2 trillion USD in transaction and payment companies charged an average fee of 1.5%, generating 18 billion USD in sales.
Lastly, in the case of the C2C (international remittance between individuals, including foreign workers sending money to their family in their home country) sector, the transaction amount totaled 500 billion USD and the related companies raised 26 billion USD in revenue with an average service fee of 5.4%. This means that they collected fees worth 231 billion USD every year just for moving money to another country. In the end, these fees are how much more buyers had to pay to purchase goods, and how much less the seller had to sell them for.
Such service fee income is expected to continuously increase. McKinsey predicts that cross-border C2B payments will grow at an annual average rate of 7% by 2023 with the growth of cross-border e-commerce.
Cross-border payments charge higher fees and take longer than domestic payments. What would be the benefits of using Changer Transfer for cross-border payments by a business or an individual?
Consider this example: Company A in Korea exported its products to Company B in the U.S., and they decided to use Changer Transfer. Company B will enter on Changer Transfer how much it would like to send to company A in Korea. Changer Transfer will then match its remittance partners and request company B to send to the matched partner C in the U.S. the amount in USD. Company B sends the amount to partner C who will convert the amount to BTC and transfer it to the wallet of remittance partner D in Korea. Partner D then sells the received BTC to convert it into KRW. When partner D sends the KRW to Company A, the payment be tween Companies A and B will successfully be completed. Through this method, they can greatly reduce their settlement time and cost on remittance fees. They can also safely send and receive money through official remittance partners with the appropriate licenses.
By applying the settlement method of cross-border transactions through Changer Transfer, online stores can start to sell goods to people overseas who do not have credit cards. The global population still does not have the efficient means to purchase goods overseas without a credit or prepaid/debit card. If people can make payments to any stores around the world as described above, it will not only enhance customer experience but also increase sales for these stores and innovate the cross-border payment market.
In this light, Changer plans to develop Changer Pay, a cryptocurrency payment solution used for cross-border commerce by integrating Changer Transfer’s international P2P remittance infrastructure and Changer’s DFX Gateway.
Cryptocurrency is in its early stage as a payment method since they are volatile and other various options exist like credit cards, PayPal, and so forth. Nevertheless, people in developing countries (there are roughly 1.7 billion people without a bank account in the world) who are not given many payment options are very likely to start buying goods or services overseas using cryptocurrency. This is because blockchain can simply be used instead of requiring the government or companies to make any significant investment in the infrastructure otherwise.
Cryptocurrency payments can be useful in advanced economies with an already diverse range of payment options. For example, stores worldwide can reduce the current 2.5% payment fee to less than 1% through cryptocurrency payments. The settlement period from order placement to payment collection can also be shortened from 1-2 weeks to a day or two.
The huge benefits that cryptocurrency payment brings to both the customers and businesses are that customers can use cryptocurrency to pay for goods and services like cash anywhere, and the payment size will not be limited like credit cards. The easier it becomes for customers to pay for goods, the more opportunities for stores to increase their sales. Too many types of cryptocurrencies currently exist worldwide, however, and not all of them are always abundant in liquidity. It is hence difficult to compute an accurate exchange rate. Nevertheless, one should always be able to know the exact price of the goods he/she is buying. What was 100 USD a minute ago cannot change to 95 USD, and then turn out to be 105 USD once payment is complete. The price for goods worth 100 USD should remain as it is regardless of the cryptocurrency price volatility.
To achieve this, the key to cryptocurrency payment service is that one should be able to know exactly how much he/she has to pay for a product, and that the price should not change precisely before and after the payment. With Changer’s DFX currency and DFX Gateway, it is possible to know in advance the exact exchange rate between cryptocurrency and the fiat currency used in the country where the affiliated store is located. By knowing the exchange rate and the level of liquidity ahead of the payment, affiliated stores will be guaranteed to receive money and the payer not lose money.
Such a system is difficult for payment gateways to develop on their own. From their perspective, cryptocurrency payment is only one of the many payment methods they support. They have also never dealt with hundreds of different cryptocurrencies before. Online payment gateways that have been rapidly flourishing for more than 20 years will most likely partner up with companies that specialize in cryptocurrency to support the new payment method.
In this respect, Changer can become one of the world’s leading cryptocurrency payment solution providers as it has already in place the DFX Gateway that can determine the exchange rate of cryptocurrency before payment and Changer Transfer, which enables fast and affordable payments anywhere in the world. If Changer connects to just one of the major global online/offline payment gateways such as WorldPay and FirstData, it will instantly provide cryptocurrency payment infrastructure to tens of thousands of affiliated stores around the world.
The core competency of the cryptocurrency payment business is not just about establishing more and more storefronts. Chain Partners — developer of Changer — has in fact developed Coinduck in January 2018, the world’s first Ethereum based payment service and found 1,000 offline affiliates in Korea alone. The service was fostered by Samsung Electronics as part of the C-lab Outside program and became the first crypto-payment service connected to Samsung’s blockchain wallet.
From this experience, Chain Partners discovered that it would be much more efficient and faster to rather integrate an API to online payment gateways that had already been installed in stores. This is on the basis that the core competency of a cryptocurrency payment business is in actuality the exchange rate. If people can enjoy lower costs for payments made anywhere around the world, consumers can buy goods and services at a lower price, and sellers can earn more. If people start to recognize and experience this, cryptocurrency payments will naturally become reality.
In short, cryptocurrency payments can enhance consumer convenience by removing several financial companies that have been collecting “toll fees,” as in the case of Changer Transfer. The amount that companies and individuals can save on the fees for their export or cross-border commerce will be incomparable to that of overseas remittances.