The evolution from Web2 to Web3 is underway, and with it, the rise of cryptocurrencies as a payment solution. But navigating this dynamic new world can be a challenge for merchants and customers alike, which is why it pays to take expert advice.
As head of Crypto Strategy at Checkout.com, Jess Houlgrave helps new entrants and established businesses avoid pitfalls and leverage new opportunities. Here, she explains the promise and challenges with crypto — and how to win at Web3, rather than lose out.
What’s the difference between Web2and Web3, and where are we in that evolution of the internet?
The word “evolution” is absolutely the right one here. A lot of people think Web3 is incredibly distinctive from Web2 and maybe that will be the case in the distant future, but right now, I think Web3 is a vision. And it’s a vision we’re going to reach on a very incremental basis.
Web3 is Web2 with layers of value, layers of ownership, layers of data ownership and layers of privacy embedded within it. It’s a world in which creators can own more value and disrupt the value chain. Value will also move differently, including the ability for transactions to take place on a peer-to-peer basis. It builds in this new context of decentralization — whether that’s how organizations are formed, through DAOs — or just how networks and communities are built.
Where we are right now is a very incremental step beyond Web2. That’s for multiple reasons: One, the fully-formed vision and understanding of what Web3 is is not all the way there yet. We’re still in an experimental stage of what should work, what can work and what will work. Most consumers don’t fully understand it, and regulators are still building frameworks to regulate the industry. It’s a really exciting period where experiments are taking place around the world, all of which are pushing the boundaries of what’s possible and shaping the future of the space.
What role does crypto play in that evolution?
The concept of value is really, really important. I use the word “value” instead of “money” very deliberately. Crypto and the decentralization of Web3 is really redefining what value is. We now have all these ways of moving value in a digital context that we’ve never really had before.
Fundamentally, crypto is going to have a huge impact on the way Web3 evolves, partly because of its peer-to-peer nature. It’s really going to change the way businesses and merchants interact with their communities. We’ve just conducted a significant piece of research that found a lot of consumers are interested in using cryptocurrencies because of the lower cost of cross-border transactions and their ability to access a range of goods and services in the metaverse.
Demystifying Crypto, Checkout.com, 2022
How will payments be brokered in Web3?
Today, there are a wide variety of ways in which crypto payments are taking place. One is what we call hands-off. That’s where businesses — whether Web2 or Web3-oriented businesses that don’t want to hold crypto but do want to be able to interact with crypto holders — want to be able to offer that as a payment mechanism to their communities. The other is hands-on, where merchants are comfortable accepting crypto, holding it on their balance sheet and where it is much more deeply embedded within their business.
I think we’ll end up seeing a variety of models that will depend on the merchant, their business model and their comfort and appetite for crypto, but also on what their end consumers and communities want too.
And how has Checkout.com ensured that it remains on top of developments there?
It’s just very much part of our DNA. Right from the beginning, Checkout.com was really focused on how we can do things differently. How do we abstract as much complexity from payments as a whole from our merchants, so that they can focus on what they do best? Crypto is not different from that. It’s very much core to us to stay on top of this. And we’ve been observing and contributing to the space for a long time.
Crypto and the decentralization of Web3 is really redefining what value is.
We work with 12 of the top 15 crypto exchanges — providing fiat to crypto on- and off-ramps — and a lot of other platforms. I sit on the Bank of England engagement forum for central bank digital currencies (CBDCs). And we stay very close to what’s going on in Singapore and all the other areas of the world where CBDCs are materializing in a faster fashion. We also have an experimental DNA in our heart. We constantly conduct tests, run proofs of concept and partner with our merchants to develop our offering in sync with their needs both now and in the future.
What promise does payments in crypto provide to everyday users?
Companies like Checkout.com abstract a lot of problems on the cross-border basis, enabling consumers to purchase from organizations all over the world. But even over and above that, we recognize crypto has the potential to speed up those transactions to better enable global commerce and more access for consumers.
More recently, the emergence of DeFi is shaking up the way consumers think about how they store value. For reference, Visa saw $2.5 billion of crypto-backed transactions in the first quarter of 2022. We’re seeing consumers really starting to use this in a way that even a year ago was kind of hypothetical. People are thinking that this is an exciting way to store value and then to pay for goods and services.
And to businesses?
Right across our customer base, one of the most important things for merchants is liquidity: How quickly can we get cash into the business? One of the most exciting things about both crypto and stable coins collectively for merchants is that speed of settlement. Going through a traditional financial system can be very time-consuming, particularly on a cross-border basis. One of the advantages is immediate, or close to immediate, settlement.
In our survey, 70% of CFOs and finance leaders said they thought cross-border payments on the blockchain are cheaper and faster than ordinary payments. Meanwhile, 36% of CFOs surveyed told us they would like to be able to settle some payments in stablecoins and to hold them on their balance sheets.
Demystifying Crypto, Checkout.com, 2022
How important is it to have a renowned, reliable guide through this new Web3 world?
It’s a very exciting stage for crypto. But experiments also bring this element of risk and lack of understanding, especially in a domain that is evolving so quickly. For some consumers, there’s a feeling that the system is quite risky. For merchants, it’s something that is going to be very new to many of them, and introducing new concepts into established businesses is hard.
The role Checkout.com has to play here is to guide the merchants we work with, or our potential merchants, through what this might mean for them. We’ve got dedicated people working day-in, day-out with the smartest minds in the space, so we’re able to provide a very educated view and help our merchants take advantage of the opportunities this transition presents.
And where are we going?
Right now, a lot of the focus is on regulation. What we’ll see emerging over the next little while is much more rigorous and comprehensive frameworks that give people the comfort to jump in. Once we get that comfort, then those stories about why this is great will really start to emerge. And once we start to hear those stories, that’s going to just foster even more innovation, and allow businesses and their communities to thrive.
