Interview with Payments & Cards Newtwork: The Future of Digital Currencies - Card Settlement Networks
Recently, the Dutch online publication PCM (Payments & Cards Newtwork eMagazine), dedicated to payments and technologies that underlie modern payment solutions, has published its next, fourth since the beginning of the year, issue of its magazine. The main theme of the issue was the blockchain technology - its current position and application features. In this regard, the magazine communicated with Pavel Matveev , one of the founders of our company, discussing what modern banking consumers need, and what difficulties Fintech companies operating like the blockchain base may face in the near future.Digital currency - on the road to success
In modern society, almost everyone has heard about Bitcoin, and this name itself has already become synonymous with the concept of “digital currency of the Internet”. Many people know that this cryptocurrency has value and can be used as a means of calculation for transactions with goods and services in the real world. To be convinced of this, it is enough to look at the statistics, which show that at the present moment there are several dozens of payment operators in the world that help merchants handle transactions with electronic currency. The infrastructure of retail payment terminals supporting cryptocurrency is also growing. There are more than 600 such ATMs worldwide. And the most important thing: if we take as an indicator the number of references to digital currency in popular culture, then we can say that very soon it can become an integral part of this very culture.
Despite all this, it is still rather difficult to find sellers who accept cryptocurrency as a means of payment. Why does digital currency face difficulties in accepting entrepreneurs? The low rate of currency introduction in their environment is one of the biggest obstacles to its spread among buyers. The result is a vicious circle: if sellers do not accept cryptocurrency, buyers will have less motivation to own it, which, in turn, further reduces the chances of its ubiquitous distribution.
The problem that no one wants to talk about: the spread of cryptocurrency among sellers
According to some estimates, the number of owners of the most popular cryptocurrencies around the world today is from 3 to 12 million, and the equivalent value of these coins is 6.4 billion dollars. In 2015, the number of retailers who accepted digital currency for payment was 100,000. This number includes large companies such as Microsoft, Expedia and Zynga and others. The reality, however, is that the average seller receives payment in the form of cryptomonet very rarely. It is so rare that this method of payment does not pay off either the efforts made by the owner of the institution to train personnel to work with cryptocurrency, nor the cost of services of the payment operator processing transactions with it.
The figures show that the spread of digital currency among sellers has slowed significantly from more than 16 thousand new businesses that began to accept it in early 2014 to less than 2 thousand new businesses in early 2015. Without much admiration, those entrepreneurs who have already stopped taking it or are seriously thinking about it are talking about their experience in using cryptocurrency. In this sense, the “digital currency of the Internet” can be compared to checks: it is used by so few people that it is impractical and inefficient to maintain systems that accept and maintain currency.
Problem Solving - Card Settlement Networks
One of the most serious reasons why cryptocurrency does not attract sellers as a method of payment, not counting, of course, additional costs, is that it is still perceived as some kind of incomprehensible technology. The concept of a global Internet currency, which just turned 7 years old, by itself can scare many businessmen. Simply put, the novelty of cryptocurrency makes it a “stranger” for sellers.
In the light of this situation, the idea of combining a new network with other payment methods on the basis of already established systems, such as, for example, card settlement systems that make the cryptocurrency more “tangible”, seems reasonable. The card infrastructure is well known to the general public and enjoys its trust, and therefore it can help electronic currency to become more widespread. Linking digital wallets to the card network eliminates the need for sellers to use the services of individual payment operators, giving them the opportunity to accept cryptocurrency within the existing network of credit cards.
Of course, this solution cannot be called ideal, since here too the traditional currencies “obscure” the cryptocurrency, making it less noticeable. However, from a practical point of view, skillful use of the existing infrastructure is the best and least expensive way to make electronic currency accessible to a wider range of people.
4 major benefits of dual currency debit cards
Paying using dual currency debit cards has many advantages over using fiat currencies and even traditional bank cards. First, such cards, combining traditional and digital currencies, work in Visa or MasterCard systems, which allows them to be used in almost all online and traditional stores and ATMs. Fiat currencies, by contrast, do not allow the use of the currency of one country in another, despite the fact that the currencies of both countries are recognized as money.Secondly, dual currency cards offer more freedom, since they are not tied to banks that can block a card at any time. For this reason, such cards can also be called "best friends of tourists." It should also be added here that the lack of communication with the bank also means that card providers must ensure that there are better ways to digitally protect cards. Additional security measures, such as the simultaneous use of multiple digital signatures, two-factor authentication, confirmation via email, PIN codes and other security settings make stealing funds into an almost impossible task.
Third, digital currency has potential that cannot be underestimated. In 2015, the most popular cryptocurrency was the most effective currency in the world, showing a 35% increase in value. Nevertheless, the same dynamics can serve a currency a bad service, since it allows us to speak about its volatility. Using a debit card with bilateral conversion, which allows you to perform currency exchange on demand, is the best way to maintain the value of cryptocurrency, minimizing any risks. Thus, users can get maximum benefits at any time using the most powerful of the two currencies.
And fourthly, perhaps the most important advantage is that card networks greatly simplify operations with electronic currency for both the buyer and the seller. Store owners no longer need to take any additional measures to accept currency, and digital wallet users do not need to limit their choice to the small circle of companies that accept cryptocurrency.
One can argue that this relatively new product represents a new step in the evolution of the digital currency, since any currency is only as good as its payment infrastructure. Card networks will be able to do what other payment operators could not do - to help the cryptocurrency to adapt to the current system and become more user friendly. Without this step, the electronic system can become a victim of its own inaccessibility and sink into oblivion, without ever becoming the property of the general public.
Future cryptocurrency - card settlement networks
The globalization of our planet leads to the globalization of relations between its entire population. The demand for digital money today is very high. “Digital Internet Currency” is a secure, web-based, affordable currency that helps all those who do not have a bank account to access money and allows you to make quick and cheap money transfers without any geographical restrictions. The popularity of smartphones in developed countries and the pace of their spread in developing countries allow companies like Wirex to offer services of a full-fledged banking service platform, which can be used only with a smartphone and a debit card.
Given this demand, the future of integrating the popular cryptocurrency into the card infrastructure looks bright. Combined with mobile banking infrastructure, this integration can revolutionize the modern financial sector.
What is Wirex and what is your mission?
The idea of creating Wirex appeared due to the lack of a financial infrastructure that combines the simultaneous use of digital and traditional currencies and is intended for the general public. The founding team - Dmitry Lazarichev, Georgy Sokolov and I - realized the potential that the blockchain technology possesses, which can make financial transactions faster, cheaper, safer and accessible to everyone, including 2.2 billion people around the world who do not have access to banking services. But as is often the case with new technologies, only early users are now able to feel the benefits of blockchain. We strive to make them accessible to everyone.
The main product of Wirex is a multifunctional banking service platform, which is a hybrid system that combines digital and traditional currencies. The use of digital currencies makes transactions faster and cheaper, while traditional currencies guarantee near universal acceptance and legitimacy. Their combination in one account allows customers to enjoy the benefits of two types of currencies simultaneously.
As part of our banking platform, we offer 3 basic, interconnected services. One of them is mobile banking. When we say mobile banking, we mean that the service is one hundred percent mobile. That is, users do not need to install desktop applications or go to the office. They can send and receive funds, link debit cards, and even confirm bills directly from their mobile devices using the Wirex application. Our other service is the issuance of dual-currency debit cards registered in the Visa and MasterCard systems, which provide their holder with ample opportunities for retail purchases and are accepted by ATMs. Well, the third service is an instant money transfer service, requiring only the presence of an internet connection and available including from the mobile application Wirex. Unlike most traditional solutions in this area, our money transfers are cheaper and available 24 hours a day.
In the future, we plan to introduce the ability to buy cryptocurrency using bank transfers and other alternative payment methods such as PaySafeCard, AliPay and others. We also implemented integration with PayPal, Amazon, Skrill, so our users can easily transfer and transfer funds between them. And, of course, we are open to any offers of cooperation with other companies.
What do you think this year will be for your company and the industry as a whole?
The predecessor of Wirex, E-Coin , grew up with a very high speed - about 30% monthly. In one year of its existence, E-Coin, its customer base has reached 100 thousand users. From Wirex, we expect the same, if not big, indicators, since the demand for financial services, including blockchain technology, is now very high. Thanks to the expanded range of Wirex services, we expect to grow much faster. Our company today has already gone beyond a simple debit card provider: we offer something that is not yet on the market - the integration between digital and traditional currencies, available as a mobile banking service.
What are the main obstacles to growing your business in the coming years?
As I already mentioned, quite a few other startups work with the blockchain today. Many of them, including us, use cryptocurrency as a means of calculation. A likely obstacle here is the ability of virtual payment systems to achieve wide distribution in society. Will digital currency be able to attract more users who are not in the group of early users? We believe in this and believe that these changes are occurring right now, and the current stage of development of the currency is crucial. Cryptocurrency volatility remains a challenge that prevents it from gaining trust from the general public.
Of course, the question of legislative regulation of the mass use of digital currency remains open. That year we saw how it changed and developed, and this year we expect even more changes. It is difficult to predict what the new legal requirements will be and even harder to say what will be the ways to ensure their compliance. We are closely following all the innovations.
Previously, Pavel led the development of projects for international IT companies and collaborated with them as a solution architect. He has held senior positions in IT projects for companies such as Barclays Capital, Morgan Stanley, BNP Paribas, Societe Generale, Credit Suisse, and others. As an expert in the field of financial technologies, Pavel has repeatedly attracted investment banks to consult on blockchain technology.