Bridging the Divide: Navigating the Future of Blockchain/ Crypto-Powered and Traditional Payments

Note: In this article, the terms crypto, digital assets and blockchain are used interchangeably to mean the broader blockchain technology to facilitate exchange of value.

As London welcomes March with hints of spring, the city buzzes with digital assets and payments industry events. ?In the past week alone, I've attended three events at different ends of the payments- to crypto-focused spectrum: Epic/ Ramp Web3 Payments Crypto Payments Day; Digital Assets Summit; and Pay360, the largest payments-dedicated event.

While navigating through the bustling crowds of over 4,000 attendees at The Pay360, I was on the lookout for companies that bridge the worlds of blockchain and payments. Surprisingly, among +100 exhibitors, only two were from the crypto/blockchain sector.

This could be purely due to the crowded event season or reduced marketing budgets in the current market climate. However, it made me reflect on the broader relationship between the crypto/blockchain and traditional payments sectors, and left me pondering: Are these industries evolving separately?

The Present Landscape

My discussions over the years across the payments and digital assets ecosystem reveal a divide: traditional payment leaders often argue that their customers are not demanding crypto solutions today, highlighting the need to focus on more pressing issues. Conversely, crypto/blockchain payment leaders highlight the benefits of blockchain for payments, such as speed, cost savings, transparency, and efficiency, and see market opportunity to disrupt incumbents. Despite the advantages, and the increased use of blockchain for payments, these remain as niche applications. Blockchain-based payments are not yet mainstream, for consumers or businesses.

Observations on Key Barriers to Closer Integration

From my engagement with both traditional finance (TradFi) and crypto-native ecosystem over the years, I've identified three main factors preventing these ecosystems from closer integration.

1.???? Complex User Experience Curtailing Demand: Often cited as ‘the elephant in the room’ within the crypto community, the user experience remains daunting for the everyday user. Navigating cryptocurrencies and blockchain technology involves a steep learning curve. The complexity of setting up wallets, understanding private keys, and interacting with exchanges starkly contrasts with the more intuitive experiences offered by current web 2.0 customer journeys.

2.???? Regulatory Uncertainty Hampering Adoption: Although good progress is being made in some regions, such as Europe's Markets in Crypto Assets (MiCA), the evolving and varied regulatory landscape across different countries adds a layer of uncertainty that hinders crypto/ blockchain founders to build new offerings and test market fit. This uncertainty also makes it risky for traditional payments players to lean it and explore benefits that blockchain may bring to their business.?

3.???? Expecting Blockchain to Solve All Payments Problems: Viewing mainstream crypto payments as an end goal rather than a solution can overshadow the actual benefits and improvements that crypto/blockchain can offer over existing financial systems. It's crucial to focus on the specific problems being solved, as crypto/blockchain isn't a panacea for all payment challenges. For instance, the UK's retail payments system, which is already highly digital and serves a well-banked population, may not see immediate benefits from crypto solutions. However, crypto payments excel in scenarios like micropayments, direct consumer-to-content creator transactions, connecting the unbanked to financial solutions, enabling merchants with faster settlements at lower costs, and facilitating cross-border payments.

?While there are other potential factors – such as scalability of blockchains, volatility of cryptocurrencies, environmental and security concerns – the above factors have stood out as the dominant challenges.

The Road Ahead

Despite these hurdles, the landscape is rich with innovative solutions, constructive regulatory engagements, and industry collaborations. My recent experiences notwithstanding, there are clear indicators of a growing convergence between these sectors, from Central Bank Digital Currency projects to UK’s Regulated Liability Network initiative, and cross-border stablecoin initiatives. I am excited to lead and collaborate in this dynamic ecosystem, eagerly anticipating the moment when the integration of payments and blockchain becomes as seamless and indispensable as the role of APIs in today's payment conversations.

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Disclaimer: The views and opinions expressed in this article are solely my own and do not reflect the positions or opinions of any company I have worked for or am affiliated with. This content is for informational purposes only and should not be considered as professional advice.