Need for speed: The shift to direct payments

When it comes to payments, speed is (theoretically) everything. But while traditional payment rails — from credit cards to ACH and RTP — have modernized in recent years, offering consumers and merchants speedier options, they continue to have drawbacks. Credit cards, for example, might have immediate authorization, but they still take a few days to settle. And while RTP and FedNow, both introduced in the last decade, have been heralded as the future of instant payments, they come with burdensome setup and even more costly fees. It’s no surprise, then, that more and more merchants are turning to direct blockchain payments. This emerging solution is redefining what it means to be fast, efficient, and secure in the world of transactions.[1]

Outdated systems in a rapidly evolving economy

The global economy is expanding at a rapid clip, meaning our “world” is getting smaller, while demands for near-instant speeds increase. Everything from supply chain accessibility to inventory turnover to service delivery is expected to be fast and easy - and things are no different in the realm of payments. This new set of business management expectations puts pressure on merchants to adapt, as outdated payment systems can directly impact the ability to receive payments efficiently and manage cash flow. As digital payments become more central to how people interact with businesses, the urgency for more efficient systems is clear. By investing in advanced payment solutions, merchants can improve overall business performance and meet the growing demands of a fast-paced market.

Moreover, the rapid growth of remittances, cross-border transactions, and digital commerce is exposing the fragmented and inefficient infrastructure they rely on. As these economic forces continue to expand, the limitations of current payment systems are becoming increasingly apparent, making the need for innovative solutions, including a broader acceptance of diverse payment methods, not just desirable but essential.[2]

The shift to blockchain-powered payments

Here’s where direct blockchain payments come into play. They are leading the charge by enabling faster, more cost-effective transactions that match the pace of our global economy. In regions like Africa, and Central and South America, the adoption of crypto payments has surged, reflecting how both global and local market forces are driving the shift towards more efficient payment solutions. Blockchain is not just a technological novelty but a practical response to the evolving expectations of today’s interconnected world.[3]

Advantages for merchants

Speed and efficiency: With blockchain technology, transactions can be processed in minutes, not days, allowing merchants to keep their operations running smoothly. Faster payments mean better cash flow management, which directly translates to more opportunities for growth and makes it a viable payment option at the POS, comparable to traditional methods like credit and debit. Cost savings: No one likes paying high fees, especially when they can be avoided. Flexa offers merchants significant cost savings with lower processing fees and zero fees for customers, unlike typical blockchain technology transactions where customers might end up paying more. By eliminating unnecessary intermediaries, Flexa’s blockchain payments drastically reduce transaction costs. For merchants, this means more money stays in their pockets, and there’s even the potential to pass those savings on to customers, giving them a competitive edge and potentially increasing customer loyalty. Enhanced security: As fraud surges, security stays top of mind, driving every decision merchants and customers make. Traditional systems often send data through multiple third-party layers, which increases the risk of fraud, tampering, and data theft. In contrast, blockchain technology offers a level of protection that these systems simply can’t match. Transactions are recorded on a tamper-proof ledger, significantly reducing the risk of fraud and chargebacks. This added layer of security not only protects merchants and builds trust with customers, but with Flexa, merchants are also guaranteed to never lose a single cent to fraud or incur fees from chargebacks–no matter how much those risks rise with other payment methods.

Customer experience: Consumers today expect quick, seamless transactions, and meeting these expectations can make a huge difference in customer satisfaction. By integrating digital payments backed by blockchain technology merchants can offer a faster, more reliable payment experience that keeps customers coming back. As we’ve seen with Gen Z and Gen Alpha, with the growing interest in the ability to be pay with whatever assets they have at their disposal, early adopters stand to benefit the most.

Future developments supporting this shift

Technological advancements: Innovation has been aimed at making transactions even faster and more efficient. As technology continues to evolve, we expect to see (and drive) improvements in scalability and interoperability, making blockchain an even more attractive option. Platforms like Lightspark are leading by enabling fast, low-cost, and reliable payments via the Lightning Network, a layer 2 protocol built on Bitcoin. Faster consensus algorithms on Solana and Avalanche, along with layer 2 solutions like Base and the Lightning Network, are expanding blockchain's efficiency and appeal.

Regulatory support: As governments and industry bodies recognize the potential of this technology, we’re likely to see new standards emerge that further encourage its use. In fact, as the ecosystem has matured, we’re already seeing positive changes on the regulatory horizon in support of the adoption of blockchain payments.[4]

The future of payments is here

Interested in integrating faster, more secure payments into your business? Learn more about our recently launched Flexa Components and how it can seamlessly integrate into your existing workflow.

Notes

[1]: Visa Consulting & Analytics. (2022). Picking up the Pace in Real-Time Payments: Helping Financial Institutions Achieve Success. Visa.
The Economist. (2024, March 7). Why Africa is crypto’s next frontier: Cheap power is fuelling a new sort of mining boom. The Economist. https://www.economist.com/middle-east-and-africa/2024/03/07/why-africa-is-cryptos-next-frontier
[2]: Ingenico. (2024, June 14). Revolutionizing Retail: Meeting Consumer Payment Demands in 2024. Payment services. https://ingenico.com/en/newsroom/blogs/revolutionizing-retail-meeting-consumer-payment-demands-2024
[3]: Cointelegraph. "An Overview of Cryptocurrency Regulations in Latin America." Edited by Guneet Kaur, February 1, 2024. Accessed August 2024.
[4]: Atlantic Council GeoEconomics Center. "Cryptocurrency Regulation Tracker." Accessed August 2024.