Web3 Payments: A New Solution for Consumers in Cross-Border Payments

In recent years, consumers' cross-border payment habits have been undergoing significant changes. People are starting to try various payment methods, but are still looking for better options. As a VISA executive said: "The changes in payment methods over the past 5 years have been greater than in the past 50 years."

In today's rapidly evolving landscape of blockchain technology and digital currencies, the deeper reason for the changing payment methods lies in the shift in accounting methods — the blockchain, which serves as a public and transparent global ledger.

Human bookkeeping methods have undergone three major transformations in history, each profoundly shaping economic forms and social structures:

• The single-entry bookkeeping of the Sumerian period facilitated early trade and the formation of states.
• The double-entry bookkeeping of the Renaissance period promoted the emergence of banks and multinational companies.
• The distributed ledger technology driven by Bitcoin in 2009 facilitated the rise of decentralized finance and digital currencies.

This far-reaching transformation is still evolving and has currently facilitated Web3 payments based on blockchain and digital currencies, a new payment method that is penetrating various aspects of real society.

This article will explore solutions for the main scenarios of cross-border payments for current consumers through case studies in the market, and look forward to the future development direction of Web3 payments.

1. The Growing Cross-Border Payment Market

Driven by the surge in cross-border e-commerce, cross-border travel, and cross-border remittances, the cross-border payment market is experiencing explosive growth. Consumers are making cross-border payments more frequently than ever before, and it is expected that by 2027, related payments will reach $250 trillion.

30% of people shop overseas through cross-border e-commerce every week, 45% send and receive remittances every month, and 66% travel abroad every year. However, in the cross-border payment field, consumers' payment habits have not yet been established. On average, they use 4 out of 7 different payment methods, and only 16% of consumers consistently use their default payment method.

Currently, there seems to be no payment method that can fully meet consumers' needs for cross-border payments. Although nearly 80% of consumers are still using traditional banks for cross-border payments, they clearly require a secure and reliable cross-border payment provider.

From June 2023 to June 2024, a total of 771 million people engaged in cross-border transactions, primarily driven by three types of transactions: e-commerce, tourism, and remittances.

1.1 Main Scenarios and Methods

A. Cross-border e-commerce

80% of consumers choose to shop through cross-border e-commerce, with 67% of them making cross-border purchases every month. By 2026, the global B2C e-commerce market size is expected to exceed $8.3 trillion. Consumers are eager for simple, easy-to-use, and secure payment methods to successfully complete each cross-border shopping experience.

B. Cross-border travel

Two out of every three people have cross-border travel experiences, among which 52% travel more than once a year. Travelers need a simple and secure payment method to fully enjoy their trips.

C. Cross-border remittance

Four out of ten people use cross-border remittance services, with 45% of them making remittance transactions every month. It is expected that by 2028, the cross-border remittance market size will exceed $1 trillion. Consumers urgently need a safe and reliable way to conduct cross-border remittances.

Among the following seven cross-border payment methods, the average consumer will use four of them:

1. Electronic payment method
2. Credit Card or Debit Card
3. P2P Transfer
4. Bank Transfer
5. Online Transfer
6. Prepaid Travel Checks/Cards
7. Cash

1.2 Why is now the right time to provide cross-border services to consumers?

• The cross-border trading market is vast and continuously growing. More and more consumers are frequently making cross-border payments, but traditionally these transactions tend to be slow, costly, and lack transparency. Now is the time to change this situation.

• Consumers are trying various payment methods. Each consumer is actively looking for the option that suits them best, but has not yet found an ideal solution. They desire more choices and hope to receive guidance to help make informed decisions. As consumers begin to form habits that may last a lifetime, now is a critical moment to influence their choices.

• Consumers need stable payment habits and reliable partners. This is not only an opportunity to attract new customers through new services, but also an opportunity to retain existing customers for cross-border consumption through one-stop solutions. However, there is also the risk of other competitors getting ahead.

• The foundation of trust cannot be overlooked. In cross-border transactions, trust, security, and reliability are crucial, especially when the transaction amounts are often significant. Winning the trust of customers is key to establishing long-term partnerships.

2. Main Scenarios and Models of Cross-Border Payment for Consumers

2.1 Cross-border E-commerce

In the past year, approximately 589 million people participated in cross-border e-commerce transactions globally. Among them, 72% of transactions involved purchasing physical goods through mainstream online retailers such as Amazon and eBay, while 44% of transactions were for digital products. Although the social media market is on the rise, only 30% of consumers shop through these platforms, which may be related to concerns about data breaches.

In terms of cross-border shopping payment methods, most consumers choose credit cards, debit cards, or digital APP payment services like Paypal and Apple Pay. However, only 51% of consumers use credit or debit cards. 36% of consumers opt for digital APP payment services, while some consumers use wire transfers or P2P services.

There are significant differences in consumption habits between different countries:

• Germany: Consumers are least willing to use credit or debit cards ( only 32% ), more inclined towards digital APP payment services ( 49% ) and bank transfers or wire transfers ( 35% ).

• Philippines: Consumers' preferred digital APP payment method (49%), which may be related to the fact that 48.2% of local consumers cannot access traditional banking systems.

In cross-border e-commerce, the payment scenario often involves consumers making purchases in their own country through the payment gateways of overseas e-commerce platforms. These payment gateways are bound to connect multiple payment methods, such as credit or debit cards ( through card organization networks ), Paypal, Apple Pay ( through digital app payments ), and bank transfers ( through the bank SWIFT network ), etc.

( 2.2 Cross-Border Travel

Among the consumers surveyed, two-thirds traveled abroad in the past year, with 62% indicating they used credit or debit cards to book their trips, making it the most popular payment method. Most respondents used the same payment method during their travels as they did when booking their trips.

Despite the increasing prominence of factors such as geopolitical issues, cross-border travel has become the norm, especially in Singapore )86%### and the UAE (84%), where consumers from these two countries have the highest proportion of international travel. Among the 13 markets surveyed, nearly 50% of respondents from each country had traveled abroad in the past year.

In terms of travel payment methods, most consumers choose credit cards or debit cards to book trips or pay for travel expenses. However, a minority of consumers also use other payment methods such as bank transfers, wire transfers, or digital app payment services.

• Canadian travelers especially prefer credit or debit cards, with less than 10% using other payment methods.

• In contrast, Brazilian travelers are the least likely to use credit cards, with a probability of less than 50%, which may be related to Brazil's historically high credit card interest rates and also influenced by the widespread adoption of PIX, an instant payment platform created by the Central Bank of Brazil.

Payment scenarios will more likely be: consumers use their domestic debit or credit cards to swipe for purchases at foreign merchants offline, or pay by scanning codes through digital APP payment platforms.

( 2.3 Cross-Border Remittance

In the past 12 months, 40% of respondents have sent or received remittances, with bank transfers or wire transfers being the most common payment methods. Countries with a large immigrant workforce, such as the UAE and the Philippines, have the highest remittance sending and receiving rates, at 87% and 74%, respectively.

In 2023, the total amount of remittances flowing to low and middle-income countries grew by 3.8%, reaching $669 billion. In the Asia-Pacific region, China, India, and Singapore are the markets with more frequent remittance activities. Digital payment apps are increasingly favored by remitters due to their security and ease of use, gradually becoming the main method for sending and receiving remittances.

Compared to digital app payment methods, there are significant differences in cross-border remittance payment methods. Although bank transfers or wire transfers often have longer processing times and higher costs, they remain the most commonly used remittance methods.

• The proportion of users in the United States using cross-border remittances is the highest at 35%. This may be due to the convenience and ease of use of debit card payment methods.

• In the UAE, consumers use banks or wire transfers for cross-border remittances at a rate of 53%.

Cross-border remittances are typically conducted through bank networks. If there are settlement accounts between major banks in developed countries, the transaction process becomes relatively simple. However, not every bank has a direct relationship with each other, so sometimes transactions need to be conducted through an "intermediary bank."

For small cryptocurrencies/remittance-challenged countries, the model of intermediary banks ) will greatly erode their profits and impose a huge burden on consumers. According to statistics from international banks, the average cost of remittances globally accounts for 6.62% of the remittance amount.

3. Characteristics and Pain Points of Cross-Border Payments

( Cross-border payments are becoming increasingly common and frequent.

According to research, cross-border payments are quite common among many consumers in various regions. A considerable portion of consumers makes cross-border payments monthly, weekly, or even more frequently.

Most digital natives — Generation Z )84%### and Millennials (83%) have engaged in cross-border transactions in the past month. Among Baby Boomers and older groups, 68% reported having conducted cross-border transactions in the past month.

( 3.2 Payment methods are not fixed, and habits have not yet been formed.

Consumers have not yet formed a clear preference for payment methods in cross-border consumption and services. They are using a variety of different applications and payment methods.

In cross-border e-commerce and cross-border travel, over 50% of consumers use credit or debit cards for payment through traditional banks, making it the most commonly used payment method, but not the only option. Digital app payment services are also quite popular.

When it comes to cross-border remittances, the types of payment that consumers choose are becoming more diversified. Bank transfers or wire transfer payment services are among the most commonly used methods, but many consumers also use digital online transfer services, credit cards or debit cards, as well as P2P services.

) 3.3 Consumers desire more choices.

Research shows,