Almost 60% of the world today has access to the internet and smartphones. The increased accessibility resulted in a drop in cash payments from 89% to 77% between 2013 and 2018. And simultaneously mobile payments have grown increasingly common throughout the world.
Alipay, the payments subsidiary of Chinese conglomerate Alibaba (NASDAQ:BABA), alone boasts of more than 1.3 billion users globally as of March 2020. Other mobile payment giants such as WeChat Pay, PayPal (NASDAQ:PYPL), and ApplePay also have hundreds of millions of users and contribute largely to the trillion-dollar global mobile payments market. Mobile payment applications have made payments easier and have introduced better ways to engage potential customers.
Mark Smargon, the Founder and CEO of the blockchain-powered mobile payments platform Fuse, however, says that all the mainstream payment applications we know today are poorly modelled from a business perspective. Or, to be more specific, he adds, they’re meant to serve their creators.
As Smargon puts it, he has been involved in the blockchain industry since the time it wasn’t even conventionally called the “blockchain industry.” He founded a blockchain platform called Colu in 2014 to solve payment problems that affected business owners and consumers every day. From there, he moved to Fuse aiming to make blockchain technology easy and practical to use for the mainstream users.
Problems with Current Mobile Payment Platform
Even though the likes of PayPal and Alipay dominate the mobile payments industry,, the industry is ripe for disruption, stresses the Fuse CEO. The very foundation of the mobile payments ecosystem is similar to that of the centralized financial institutions that lack many key features.
The centralized nature of these payment applications is a major part of the problem. Even with extreme levels of technological advancement and easy connectivity, Smargon questions, why should payment providers charge between 3% and 6% as payment fees?
One of the main reasons, he points out, is that they can, and users around the world do not have alternatives that can challenge their authority. In fact, PayPal even charges a 2.9% fee even when sellers make a full refund. The company rolled out the policy in April 2019 but withdrew it after community backlash, but it introduced the same policy again later in 2019.
Smargon further notes the other shortcomings of existing mobile payment applications saying, “Even if we disregard the monetary expense at which we receive these services, there are other critical drawbacks that affect all. The centralization of these platforms creates data monopolies and prevents competition because of high costs, and it’s the end consumers that suffer due to that. They are also susceptible to cyber attacks that may lead to the theft of users’ data.”
For businesses and communities that rely on these applications, there are almost no customization options that may allow them to better interact with their customers, he adds. And quite certainly, developing an exclusive application from the scratch is not a viable option for all.
The advent of Bitcoin, the blockchain as well as the cryptocurrency, in 2008 marked the Eureka moment for innovators who wanted to challenge the financial system as it stood. It was the beginning of laying the foundation for a new financial system. The use of blockchain and cryptocurrency can immensely improve the current financial system including mobile payments for businesses, communities, and individuals alike.
Blockchain for Mobile Payments and Micro-Economies
Blockchain technology was first used to disrupt the banking and payments system. It marked the beginning of the transition from a centralized system to a peer-to-peer decentralized one.
As one of the early adopters of blockchain and cryptocurrency, Smargon says, blockchain is our way forward in finance. He explains that they are possibly the best solution for major problems in today’s mobile payment applications.
As decentralized ledgers that are not restricted by geographical borders, blockchains can rid mobile payment applications of central entities. Without the need for centralized companies, these applications will have a lower cost of operation and can provide cheaper transactions.
Additionally, being a borderless technology, blockchains treat both local and international payments the same way. Thus, a blockchain-powered mobile payment application can process international transactions with high speed and efficiency similar to how it processes local transactions.
In a blockchain-based mobile wallet such as Fuse, the users are in full control of their funds and data, claims Smargon. Also, he says that Fuse allows businesses and communities of all sizes to easily create micro-economies within the payment platform. These micro-economies are sub payment ecosystems within Fuse’s main ecosystem.
While it is powered by the Fuse chain and anchored to the Ethereum network, he affirms that deploying a micro-economy on the platform does not require any technical expertise. Emphasizing on the benefits of micro-economies, he says that businesses and communities will be able to develop customized wallets that are in sync with their value proposition and also suit their users or members:
“Using the Fuse Studio, which is a smart contract for deploying micro-economies, anyone can create an exclusive token for their custom business wallet. They can set specific rules for its usage, develop unique bounty and customer loyalty programs, minimize transaction fees and so on. It is also possible to add various plugins and fiat payment options such as debit/credit cards and bank transfers.”
All these features combined will give community owners more control over how they want their users to utilize their tokens. It will help innovators bridge the gap between businesses and blockchain technology and let more businesses leverage the benefits it has to offer, says Smargon. The ability to link fiat payments to these blockchain-powered mobile payment applications will bring together the best of both worlds and serve users and businesses better.
As a conclusion, Smargon says, when blockchain-powered mobile payment applications start gaining adoption, many may not even realize that there’s any involvement of blockchain technology. And that’s one of the main goals of Fuse. The platform intends to place blockchain technology so effortlessly in the background that no matter how complex it is on the inside, it does not compromise on the user experience of mobile payments, he stresses, achieved through what Fuse calls their ‘veiled crypto’ design philosophy.
Blockchain-powered Payments are the Future
Many industries still operate with the same methods and follow the same rules that were set decades ago. The financial system especially is far behind the technological curve. The use of blockchain as the foundation layer of mobile payment applications can effectively solve critical challenges businesses and communities face while using traditional apps. While blockchain may not yet be mainstream, the rapid innovation and adoption across the technical landscape may soon bring the benefits of the technology in mobile payments to a majority of the population.