In a week that saw yet more big money moves into the buy now, pay later (BNPL) space and Europe laying out its plans — yet again — to create a continent-wide payments super app, the push to adopt cryptocurrency kept popping up as a constant theme.
Europe’s super app plans are all about enabling a more streamlined way for its citizens to make payments across its 27 member nations. It’s a welcome initiative, according to Citcon CEO Chuck Huang — because while Europe is extremely unified in some way, especially in a political sense, the same can’t be said of its fragmented finance infrastructure, where there remains a confusing myriad of ways for people to send and receive money.
“There are so many different fundamentals, different banks and different ways to pay, so things don’t always run completely smooth, so it’s good to see this kind of initiative taking place to enable digital payments,” Huang said. “It’s always good to see the government helping to build that kind of infrastructure.”
While the exact nature of the EU’s super app remains unknown — if it even comes to fruition, for this is not the first time such plans have been drawn up — it is reasonable to assume it will at least be crypto-friendly. This week, it emerged that the EU is planning to make a multibillion-euro investment into areas such as blockchain, data infrastructure and high-performance computing. So it’s clear the technology that underlies most cryptocurrencies is on the minds of European policymakers.
Further reading: EU to Invest Billions in Blockchain, Data Infrastructure, Computing
Huang said it’s not a surprise to see Europe taking the initiative in blockchain, because it’s a part of the world that has always been very innovative, especially in terms of FinTech. “We’ve seen many new payment startups coming out of European markets in the last few years, such as Adyen and Klarna,” he said.
One of the interesting things with Europe, Huang pointed out, is that even though it has been the cradle of so much payment innovation, there are still a shockingly large amount of transactions done in cash. “In the United States in the last 10 or 20 years, we have seen credit card payments emerge to become a large part of daily life, like 80% to 90% of payments,” he said. “But outside the U.S., even in Europe, a very large proportion of transactions are completed using cash.”
Of course, that presents a huge opportunity for digital payments, and not just in the credit card industry. “At Citcon, we’re working to enable alternative payments and digital payments like mobile wallets and potentially crypto wallets, where we can convert those cash payments into digital,” said Huang.
However, Huang came across as being a little more skeptical over the prospects of buy now, pay later (BNPL), a fast-growing area that big financial services players believe has a lot of promise. This week, Capital One announced plans to launch a test BNPL product at select merchants. BNPL’s momentum continued with the news that Goldman Sachs is buying the specialty lender GreenSky Inc. in a $2.2 billion all-stock deal.
Huang said BNPL has huge appeal with digital age consumers because it’s a purely mobile form of payment with no fees — a straightforward loan with no real strings attached. But he agreed with Capital One CEO Richard Fairbank, who noted with caution that BNPL is only sustainable because venture capitalists and merchants are willing to subsidize the interest costs.
“This is one of the hidden things with BNPL. It’s that the merchant is subsidizing this. They’re doing it because, from the merchant’s point of view, they want to be attractive to those digital age consumers,” Huang explained. “So they view it not only as a payment format, but also as a way to attract new consumers to come to their stores. That’s why they subsidize it, but there is a question over how long they will be willing to do that.
The world of cryptocurrency began creeping into BNPL this week with the news that Zip, an Australian startup, is planning to let its merchants accept bitcoin as a form of payment. It also aims to integrate cryptocurrency trading functionality with its app, reports said.
Huang feels this kind of merging of worlds between crypto and BNPL is probably a natural evolution, simply because cryptocurrencies were first and foremost invented as a means of transferring value.
“The most frequent transfer of value is payments, and in recent quarters we have seen strong demand on the merchant side and also on the crypto wallet side, with both wanting to enable these kinds of merchant-crypto transactions,” he said.
As for crypto more generally, Huang said the world of virtual currencies is split into two camps right now. On the one hand, there is bitcoin and others like it that don’t have specific vertical applications other than the kinds of payments or value transfers its designer first envisaged. Then on the other side, there are tokens such as Ethereum, he said, which have different applications besides just transferring value.
“One way to think about it is that you have a general wallet, like PayPal or Venmo, and then you have a kind of specific store wallet, like a Starbucks wallet that you only ever use to buy coffee,” Huang said. “It’s interesting, and I think both camps can gain some ground. But eventually, we will have some consolidation.”
Crypto appreciation is clearly growing, and with that comes the increased threat of regulation in the space. This week, there were yet more rumblings of discontent from the U.K.’s Financial Conduct Authority (FCA) as it raised the alarm over a “significantly high” number of cryptocurrency firms in the country that have failed to meet regulations aimed at curbing money laundering.
For Huang, regulation in crypto really is no problem. Indeed, many businesses are playing a kind of “wait-and-see” game in expectation of rules and policies being drawn up, and will probably welcome them when they arrive.
“The business world wants to see some certainty,” Huang said. “Crypto payments are a very new thing, so I think a lot of businesses are just waiting to see what kinds of policies the regulators will come up with.”