Swiss Army knife of digital payments

Estimated reading time: 8 minutes

Wadzpay’s SVP of Blockchain marketing, Stas Madorski has stated, “We believe in an interoperable world where technology does not really matter.”

“People just want to make payments and they want it to be simple and cost-effective, and very fast.”

Taking into account long-established payment technologies like SWIFT, ACH, credit cards and many more, consumers and businesses now also have to contend with emerging technology, for example blockchain, which come with their own set of different protocols and accompanying technologies.

“We are a payments platform, a payments company, and payments is in our DNA. And what we do is connect both these (old and new) worlds so they can talk to each other,” Stas pointed out.

One way it works is by licensing their APIs to allow third-party players to integrate with their platform.

People just want simple payments at the end of the day, whether they are an enterprise or a consumer.

“We also interact with third-party APIs to integrate onto other platforms, but essentially, let’s say we have developed the technology to bridge all of those protocols and payment systems, and gateways together,” Stas said, adding that Wadzpay is moving towards covering all existing protocols, as well as future ones. For example, CBDCs or central bank digital currencies.

The goal Wadzpay has is for users to not have to think about the technology or how payments are working for them.”We want technology to be an afterthought because we want transactions to be the main thought.

“People just want simple payments at the end of the day, whether they are an enterprise or a consumer.”

Advantages of an open approach – plug and play?

Everyone wants instantaneous payments, Stas observed.”Consumers and enterprises are after the same thing at the end of day. They want their transactions to occur very quickly and for our money to go to the person or company it was intended to go to.”

Due to this, Wadzpay is not “hedging their bets” and are looking to work with all the payment technologies that are out there. “Because things are changing on a day-to-day basis and evolving very, very quickly in this space,” Stas observed.

This open approach to collaborate instead of compete, means projects like Project Ubin, a collaboration between the Monetary Authority of Singapore (MAS), JP Morgan, and Temasek, may significantly benefit from working with Wadzpay’s platform.

Project Ubin is a collaborative project with the industry to explore the use of Blockchain and Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities.

“We are quite flexible in terms of how the platform works. And that’s why we have been working with banks and large companies and merchants, on processes. It’s very easy to plug into our network and we are basically the transaction layer they can use.”

When it comes to central banks, Stas acknowledges the fiscal policy that each authority wants to be able to manage. “But, we go at all levels; the central bank level, the local, the national levels, merchants and consumers levels as well.”

Trends to note – CBDCs and stablecoins

When it comes to transactions, there would be many parties interested in say, using stablecoins like USD-T (USD tethered), or using CBDCs, or digital currencies, according to Stas.

They are not interoperable by nature. They can work locally, but it’s a big challenge to use one country’s CBDC in another country.

“We essentially allow all of those payment modalities to function at the same time and become interchangeable with one another,” he said.

Stas finds that CBDCs that are issued by a country’s central bank, do not necessarily need to be based upon blockchain technology.

“CBDCs are the perfect in-between medium of stablecoins and digital assets.There is a misleading bias that digital assets fluctuate a lot,” he said adding that because CBDCs are issued by central banks, there is some sort of government-stamp-of-approval on CBDCs.

That said, Stas pointed out the silos that CBDCs have created.

“They are not interoperable by nature. They can work locally, but it’s a big challenge to use one country’s CBDC in another country.

“The difficulty is in actually using that digital currency outside its country’s borders.”

Stas also noted just a few years ago, stablecoins were used as a safety instrument for people trading cryptocurrencies.

“They would convert, for example bitcoin, into USD-T (a stable form of value based on fiat currency) to park their assets when they predicted the market going down. They didn’t want to convert their cryptocurrencies to fiat currencies and back again, because it was so complicated back then.

“So, a big trend I see now is stablecoins being used more as a safety instrument in countries where the currency may be inflationary or deflationary in nature. So, for example in Nigeria, the currency can be converted to USD-T, and definitely there is potential to use stablecoins in everyday transactions, at retail shops.”

Digital payments for the business landscape

Being based in China currently, gives Stas an interesting view of how the overall digital payments landscape will pan out in the country.

“There is less hesitancy to adopt digital payments. Definitely, China is a very interesting market, especially because of the recent rapid change in regulations.”

Stas observed a lot of Chinese companies that have businesses and legal entities abroad.

“Or they haven’t had their headquarters or decision centres within China. And so, for these companies that operate abroad and have their own legal entities and jurisdictions which don’t go back into China… they are interested to explore digital assets.”

When you are abroad, do you want to pay with local currency or do you want to pay in your own country’s currency? A lot of countries don’t even support the latter, it’s actually illegal, said Stas.

Stas foresees regulation around this aspect being especially active in the near to long-term. It is also an aspect where he thinks there is a lot of potential for stablecoins.

“It can be that interesting bridge, so that merchant receives the settlement via base currencies, but the consumer pays in a stable coin a digital based asset.”

Interesting developments

A Wadzpay research paper states that “Mastercard, Visa, PayPal and many others have openly announced plans to allow settlements in digital currencies in the later part of 2021.”

What is the significance of these announcements?

“It may seem fast especially when we pay with our cards, or digitally. But the reality is, there is still a delay.”

Stas responded, “For example Visa says they are using Circle USD-C which is a stablecoin, as a settlement currency on the network.

“You could say there are batches of transactions going onto the blockchain and they are indicating that they would like to use stablecoins as a set mode of settlement. That’s an endorsement that they are legitimate, that there is big belief in them and that it makes fiscal sense for them to do that.”

Perhaps more importantly, the use of stablecoins solve the problem of delay in payments.

“It may seem fast especially when we pay with our cards, or digitally. But the reality is, there is still a delay.”

What Stas meant was the prolonged period it takes for the vendor/merchant to actually receive their funds.

“And that’s not great because people want access to their rewards for services that they rendered, instantaneously,” he said.

With stablecoins, there is opportunity to increase the processing speed, or the number of transactions per second.

The Interoperable network

If you look at ten years from now, transaction speeds will be even faster, transaction fees will be even lower, and it’s just going to simplify and make everything much better for everyone, Stas observed.

“So, it’s a no brainer to have a conversation with someone like us as well, to see how you can actually get digital – by looking at CBDCs in the future, looking at other digital asset-based classes such as stablecoins,” he said.

There is a term I call blockchain fanboy-ism whereby people rally and get behind a specific technology, and they put blinkers and not want to look at anything else.

Movement of funds between borders have to occur relatively faster. Now it’s at a snail’s pace compared to what business needs can be.

Payments is an industry where digital-based assets are still at infancy and at same time payments technologies are very archaic. How to bridge the two worlds?

Essentially, there is just so many potential technologies with their own unique systems, own security features, own limitations, own protocols, and more. Wadzpay wants to adapt to and account for all of that, which is going to be the the biggest challenge.

Stas shared, “There is a term I call blockchain fanboy-ism whereby people rally and get behind a specific technology. They put on blinkers and not want to look at anything else.

“But, how do you predict what’s going to win? So, that’s a really big challenge of having to account for all these future protocols that will continue popping up.

“An enterprise that wants the best and most cost-effective and most future-proof solutions (for payments), should have a conversation with us,” Stas concluded.

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