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Financial Giants Race to the Forefront: Unveiling the Emerging Trend of Web3 Payments (PayFi)!

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2024.09.12 MEXC
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In an era where financial technology is continuously evolving, Web3 payments (PayFi) have emerged as a new concept that is gaining significant attention in the industry. Recently, many well-known companies have turned their focus to Web3 payments. For instance, Lily Liu, Chair of the Solana Foundation, has been actively presenting and formally introducing PayFi at major Web3 conferences such as EthCC this year, predicting that its market size could far exceed that of DeFi. Meanwhile, Binance Research has released a detailed report on Web3 payments titled "Blockchain Payments: A Fresh Start," which explores the impact of blockchain on global payments. Coinbase's CEO has also announced involvement in the new field of AI-powered cryptocurrency payments. These developments not only represent a continuation of the Web3 payments vision but also signal a profound transformation of traditional financial systems.

1.Understanding PayFi: The Core Concept of Web3 Payments

Web3 payments (PayFi) refer to payment methods utilizing blockchain technology and cryptocurrencies. It represents a significant innovation and emerging concept in the financial technology field. Unlike traditional payment systems, Web3 payments do not rely on centralized financial institutions such as banks, credit card companies (e.g., Visa and Mastercard), or payment processors (e.g., PayPal) for transaction validation, clearing, and settlement. Instead, they use decentralized networks to facilitate value transfer between users. Key features include:

  • Decentralization: Web3 payments leverage blockchain technology to eliminate intermediaries present in traditional financial systems. This means transactions can occur directly and transparently on a global scale without relying on banks or other financial institutions.
  • Smart Contracts: Web3 payments use smart contracts to automate financial operations. These programmable contracts can execute transactions automatically under predefined conditions, reducing the potential for human error and intervention.
  • Programmable Money: The cryptocurrencies used in Web3 payments are not only for basic transactions but can also execute more complex financial activities through preset rules. This feature supports a variety of innovative financial products and services.
  • Economic Sovereignty and Self-Custody: Web3 payments emphasize users' full control over their funds. Users can manage their assets through self-custody crypto wallets, eliminating the need for third-party institutions to hold and manage their funds.
  • Enhanced Liquidity and Efficiency: Traditional payment systems often experience delays in cross-border settlements, while Web3 payments leverage blockchain's global and real-time capabilities to significantly enhance transaction speed and efficiency, making cross-border payments quicker and more convenient.
  • Innovative Financial Products: Web3 payments extend beyond traditional payment scenarios to include new financial products such as "Buy Now Pay Never" and "Creator Monetization." These innovative products further exploit the time value of money.

Web3 payments offer a more efficient and transparent solution compared to traditional payment systems through decentralization, smart contracts, and programmable money. They not only improve transaction speed and efficiency but also provide users with greater economic sovereignty and self-management capabilities, marking a cutting-edge innovation in financial technology.

2.Current Status and Development of PayFi

Amidst the overall downturn in the Web3 investment market, PayFi has emerged as one of the hottest areas for recent funding. According to data from Web3 asset platform RootData, there have been 15 funding announcements in the Web3 payments sector over the past two months, with a total amount exceeding $200 million, indicating strong growth in the field.

2.1 Funding Dynamics

  • Frequent Large Investments: Recent funding data from ChainCatcher shows that in the past two months, 11 investments have exceeded $30 million each, with nearly 40% of these belonging to the Web3 payments sector.
  • Diverse Investors: Investors include major players from various fields such as payments, stablecoins, and traditional finance, including Visa, Tether, Circle, JPMorgan Chase, and Standard Chartered, as well as top investment firms like Sequoia Capital and Temasek.

2.2 Growth of Stablecoin Payment Platforms

In 2023, transactions handled by stablecoins exceeded $10.8 trillion, with an actual transaction volume of $2.3 trillion. Stablecoin payments are increasingly surpassing traditional payment systems, becoming a vital global payment tool. Over the past two months, several stablecoin payment platforms, including Bridge and blockchain payment technology platform Partior, have secured over $50 million in funding. Recent funding details include:

  • Bridge: Recently raised $58 million. The platform offers enterprise-level stablecoin payment solutions, including cross-border payments, and has been adopted by major clients like SpaceX and Coinbase.
  • WSPN (Worldwide Stablecoin Payment Network): Secured $30 million in seed funding, introduced the WUSD stablecoin pegged 1:1 to the USD, and plans to expand its user base through yield and community governance.
  • Sling: Completed $15 million in Series A funding, focusing on low-cost global remittance services, and launched the self-custody wallet USDP, covering over 50 countries and regions.
  • Other Projects: IDA raised $6 million, Kredete secured $2.25 million, and PEX and Caliza received $4.5 million and $8.5 million, respectively, all supporting instant transfers with stablecoins.

2.3 AI-Powered Crypto Payments as an Innovative Trend

In addition to stablecoin payments, AI-based crypto payments are rapidly emerging. On August 31, Coinbase CEO Brian Armstrong announced the implementation of AI-to-AI crypto transactions on the Base network, allowing AI Agents to use USDC for instant, fee-free global transactions. Additionally, AI crypto payment startups like Skyfire and Payman have received backing from leading institutions. While these AI crypto payment projects provide interfaces and services for payments between AI Agents and humans, some projects are developing AI Agents with payment functions for regular users, such as Bitte from the Near ecosystem and Wayfinder from blockchain gaming. Although AI crypto payments are still in their early stages, their potential is increasingly evident.

Overall, the rapid development of PayFi, the successful funding and widespread application of stablecoin payment platforms, and the innovative attempts at AI crypto payments indicate that Web3 payments will continue to play a crucial role in financial technology. However, PayFi also faces challenges:

  • Technical Implementation and Adoption: Despite blockchain technology's strong support for PayFi, practical applications face technical challenges and market acceptance issues. Current PayFi projects are beginning to offer related services, but overall market awareness and acceptance are still in the early stages.
  • Regulation and Compliance: PayFi involves financial transactions and cross-border payments, necessitating ongoing improvements in relevant laws and regulations to ensure system compliance and security. Changes in global regulatory policies directly impact PayFi's development.
  • User Experience: Many PayFi projects still face high entry barriers, such as KYC verification, which limits their ability to expand their user base or develop further.

3.Future Applications of PayFi

Solana Foundation Chair Lily Liu envisions PayFi as extending beyond traditional "peer-to-peer electronic financial systems" to create an ecosystem encompassing "programmable money, open financial systems, digital property rights, self-custody, and economic sovereignty." Unlike DeFi, which focuses on financial transactions, PayFi targets the practical application around goods and services, falling within the realm of real-world assets (RWA). The vision of PayFi primarily revolves around the "time value of money." Lily Liu's three core application scenarios help illustrate this vision:

  • Buy Now Pay Never
This concept contrasts sharply with traditional Buy Now Pay Later schemes. Buy Now Pay Never allows users to deposit funds into DeFi products, earn interest through lending, and use this interest to pay for goods. This approach ensures that payments are realized through the time value of money, not just instantaneously.
  • Creator Monetization
Many creators face cash flow delays between creation and payment. PayFi can help creators receive immediate cash flow by discounting future income, addressing potential funding issues during the creation process.
  • Accounts Receivable
Account receivables financing is a traditional business financing method. PayFi aims to optimize this process using blockchain technology to enhance settlement speed and lower financing barriers, enabling more businesses to manage cash flow efficiently.


Although PayFi is still in its early stages, several notable projects are working to turn its vision into practical applications:

  • Huma
Huma is one of the more developed PayFi projects, offering lending services for both businesses and individuals, as well as accounts receivable purchasing. Despite processing nearly $890 million in payment financing, Huma still faces certain barriers, such as KYC requirements and regional restrictions.
  • Arf
Arf focuses on cross-border payment networks, providing licensed financial institutions with short-term credit lines based on USDC. Arf's services enhance the liquidity and efficiency of cross-border payments, and its merger with Huma could further bolster its influence in this sector.
  • Credix Finance
Credix is a protocol specializing in B2B credit, primarily serving the Latin American market. Its CrediPay service offers features similar to Buy Now Pay Later, providing businesses with more flexible financing options.
  • NX Finance
NX Finance is a yield layer protocol within the Solana ecosystem, optimizing asset utilization through leverage and staking strategies. Although NX Finance mainly serves crypto-native lending protocols, its focus on the time value of money is closely aligned with PayFi's vision.

5.Summary

Overall, PayFi, as an emerging financial concept, is still in the exploratory phase, covering areas such as accounts receivable factoring and cross-border payments. While most projects face strict KYC and regional restrictions, their potential to enhance traditional financial systems and explore the time value of money through blockchain technology is significant. In the relatively quiet Web3 market, the Web3 payments sector remains particularly active. Investors and industry professionals should closely monitor the progress of PayFi, delving into its potential and challenges in real-world applications. MEXC, known for its rapid listing of new coins, extensive range of cryptocurrencies, and high contract liquidity, is also keenly observing PayFi's developments, exploring its innovative growth in global payment systems to deliver a superior trading experience to users.

Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.