Unlocking new instant settlements features with stablecoins

What is the current state of affairs regarding the adoption and acceptance of stablecoins?

According to a survey we carried out in the beginning of 2022 on 30,000 consumers and 3000 merchants, approximately 40% of the respondents said they would like to pay with cryptocurrencies. That's up from approximately 30% from when we conducted a smaller but similar survey in 2021. While there’s an increased appetite from consumers to pay with stablecoins or cryptocurrencies, a few aspects hold them back, such as a challenging user experience or a limited number of merchants accepting this payment method. Likewise, not all consumers know how to safely transact with cryptocurrencies. For this reason, it’s key to make a clear distinction between stablecoins and crypto. When we talk about stablecoins, we're referring to fiat collateralized stablecoins, like USDCs, which are pegged to the US dollar and are not subject to the same level of volatility as cryptocurrencies are. Therefore, a stablecoin's main advantage over cryptocurrencies is its reliability when it comes to exchange rates, and this is something that consumers need to be aware of. 

On the merchants’ side, there’s still some uncertainty around regulations, and whether to hold crypto themselves or to partner with a solution provider who can exchange those cryptocurrencies into fiat. Nevertheless, 82% of merchants who are already accepting cryptocurrencies stated that their customer conversion has increased. The luxury goods segment and the gaming creator economy are two sectors very receptive to stablecoins, as they see the benefits gained in the cross-border transactions, as the process is more seamless. 

What can you tell us about your newly launched stablecoin settlement system? 

We launched the product at the beginning of June, and its main function is to settle payments for our merchants in stablecoins. In a normal flow, the consumer goes on the website and pays with any payment method of their choice (card or an APM). We collect those funds from the  schemes, and then transfer the funds into the merchant's bank account. This process is possible only from Monday to Friday (except for bank holidays) from 9 to 5, and there can be other delays with the merchant’s banks. With Stablecoin settlement, we send those funds to the merchant with USDC or another collateralized stablecoin which means the merchant receives them instantly in their wallet.

The revolutionary aspect of being able to do this leg of the transaction in stablecoins is that we can do this 24/7 every day of the year. We actually settled one of our merchants over the weekend as part of our pilot program. The real benefit of this is that it unlocks liquidity that otherwise would not be available to merchants. Apart from that, it brings us closer to condensing the time between a user making a purchase on a website and the merchant receiving the funds in their own account. 

What added value does it bring to merchants?

Particularly for our crypto merchants, we are eliminating one leg of operational transaction overhead, and the process is completely real-time, traceable and faster – as soon as we send those funds via stablecoins over the network, they are instantly received. Because it’s a  blockchain transaction, there are no intermediaries to stop or delay it, so funds move from us directly to the merchant’s wallet. 

What are the barriers that prevent more merchants from accessing this solution?

Non-crypto merchants have several concerns and questions related to the infrastructure needed to hold stablecoins, the impact over their taxes and accounting, or whether their financial department would approve crypto assets or stablecoins storage. In addition, unlike having a bank account where another party is responsible for it, when you own a non-custodial crypto wallet, you are fully in charge of the assets. 

Nevertheless, we are starting to see downstream use cases for other businesses, such as payroll. As part of the same survey, 50% of the merchants reported that their employees had expressed interest in being paid with cryptocurrencies. There is also a growing appetite to use cryptocurrencies and stablecoins for supply chain payments on a B2B basis. So, once we get beyond the initial uncertainty and scepticism, we'll be able to see more application scenarios involving stablecoins.  

How do you see the future of ecommerce in Web3? 

We fundamentally believe in the coexistence of crypto rails and traditional fiat rails for decades to come. Merchants understand how important it is to offer payment options for their consumers, so it is likely for cryptocurrencies could soon become a more common payment method at the online checkout.

Web3 will have a significant impact on ecommerce. The metaverse is already home to fashion brands and gaming companies, which operate stores and trade assets there. As regards NFTs, they are already being used by several brands to reach out to a new consumer base. For example, NFT owners may be able to get first access to upcoming games or certain events. As the Web3 world develops, marketers are also more thoughtful and creative in the use of this technology to shape the engagement between brands and consumers. In a metaverse context, one could attend a concert and purchase digital assets or perhaps even physical items too.

The concept of a 'digital twin' is really intriguing at the moment. For instance, one can have a handbag in the physical world as well as a digital representation of that item that can be used in the metaverse. In the core philosophy of web3, value and ownership are embedded. Consumers can own and transact in a more native way than is possible using the Web2 interface. Certainly, there is a lot to look forward to in this space. 

About Jess Houlgrave

Jess Houlgrave is Head of Crypto Strategy at Checkout.com. Jess is focused on Checkout.com’s go-to-market strategy. She is responsible for scaling the company’s crypto offering, enabling Checkout.com to power the world’s largest exchanges, fan token platforms and wallets. Jess also sits on the Bank of England Engagement Forum for CBDC, the UK Fintech Strategy Group and the DIT / Innovate Finance International Fintech Advisory Group. Prior to joining Checkout, Jess was the founder of Codex Protocol, an Ethereum project to track the provenance of assets using NFTs. Before that she held roles at OPTrust's Private Markets Investment Group and Credit Suisse. She has an MA in Economics and Management from the University of Oxford and an MA in Art Business from Sotheby's Institute of Art.

About Checkout.com

Checkout.com is a global payments solution provider that helps businesses and their communities thrive in the digital economy. It offers innovative solutions that flex to your needs, valuable insights that help you get smart about your payments' performance, and expertise you can count on as you navigate the complexities of an ever-shifting world.