The best feature of any product should be speed, cost, and security. Generally every product needs to make concessions on at least one of those categories.
When it comes to stablecoins though, as they relate to payments, there are few categories where they pale in comparison to the incumbent system.
Traditional card payments take three days to settle, incur ~3% fees to the merchant on every transaction, and are regularly frauded by customers.
Enter Stablecoin Payments
Stablecoin payments are lauded as the future of the industry because they significantly reduce the aforementioned friction of speed, fees, and fraud. While the consumer does not incur much of these headaches, for merchants the choice to embrace stablecoin payments on high speed low cost blockchains is a potentially huge driver of increased efficiency.
For a merchant that does $1m a year in transactions, this is the difference of ~$30,000 by slashing the fees that credit card companies charge for processing transactions. $30,000 extra to a small business can allow operators to make key investments into growth strategies, or increase the salaries of their existing cherished employees.
Why Does Instant Settlement Matter for Merchants?
At first glance, it does not seem crucial for merchants to access funds quicker than three days. However, in the ever evolving cryptofication of the world, we know that idle funds can be put to work and made productive — for example, deployed into safe yield bearing instruments.
Every day that a bank or payment processor withholds funds from a merchant account there is a significant opportunity cost. We believe that a merchant deserves the proceeds of their sale the second that a transaction is made. A.K.A instant and final settlement.
There is going to be a new age wherein small businesses can use their idle balances to earn passive income through safe and highly liquid crypto instruments. This modest increase to a business’s bottom line can sometimes be the difference between keeping the lights on.
Potential drawbacks
While stablecoin payments solve fraud on the customer side, it opens up the potential for business fraud. The largest issue with instant and final settlement is the fact that transactions cannot be reversed. If a customer accidentally purchases the wrong item, or even worse if a customer is frauded by a merchant — there is no way to ensure that they will be refunded.
We believe that solutions to this issue will come in due time, and that the public nature of blockchain transactions will increase the likelihood that merchants will honor refunds. Merchants who do not respect their customers will eventually lose the trust of all consumers and fail to attract new business.
Stablecoins > Bitcoin Payments
Incumbent parties commonly look to push or promote “Bitcoin payments” as a medium of exchange. While Bitcoin remains the most sought-after asset in the crypto space, it’s not really the best way to make payments. This goes for any volatile crypto asset like Ethereum, Doge, etc. Tax implications and volatility play a huge role in priming stablecoins as the ideal web3 payment method.
The future is bright for stablecoin payment adoption. We believe this space will continue to grow and Kado will focus on building solutions that enable a fair and equal web3 payments ecosystem, for consumers and businesses.