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Why has crypto payments not taken off yet?

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POSTED

9 March 2023

Introduction

As crypto natives, you would probably have tried to subscribe to paid services like Messari for that sweet, sweet alpha. You would have clicked through their payment page and to your utmost dismay, they do not accept crypto for their monthly subscriptions!

The cheek of them to be building their businesses off of the crypto revolution but not accept crypto! Do they really believe in crypto? You fumed internally whilst pulling out your credit card reluctantly to subscribe anyway.

In all seriousness, this exact scenario was the reason why we started Suberra. We wanted to subscribe to some of our favorite alpha sources but were incredulous that many have not put their money where their mouth is (or in this case, put their mouth where the money is) and are only accepting fiat as payment.

So why has crypto payments not taken off despite more than a decade since Satoshi’s fateful white paper, detailing an alternative payment system? Is it a case of not having enough true believers? Or is it because of deeper problems?

3 reasons why

Here we propose 3 main reasons why crypto payments have not taken off.

  1. Not user-friendly enough

The contactless payment movement has been a revelation for the credit card industry, boosting adoption rates at POS payments, where cash was previously king. The main reason for its success is down to the simplicity of the UX. A simple tap and payment is made. It’s both intuitive and frictionless, like pure magic!

For crypto payments to succeed, the user experience for payees has to be at least on par or hopefully superior to that of conventional payment methods. And that is no mean feat technically.

From the management of wallets, fragmented chains, to the arcane concept of gas tokens, a payer is faced with multiple friction points when trying to checkout with crypto. It is no wonder that crypto payments have been largely relegated for payments by more motivated payers who are willing to overcome the user friction.

2. Unclear Regulations

From EU’s MiCA to the United State’s travel rule, regulators have been scrambling to catch up with the velocity at which the cryptocurrency industry has evolved over the past few years. There is an inherent mismatch between the laws and reality which has caused many businesses to shy away from crypto payments or outright backtracking on previous adoption.

In the US, one particular taxing concern surrounds the situation with tax reporting (pun intended) for crypto payments. Per regulations, cryptocurrency sales attract capital gains tax. As cryptocurrencies are not deemed as e-money in most states, the act of paying using crypto is equivalent to that of an outright sales. Imagine the complexity in tax reporting if you were to use crypto for your day-to-day spend!

The good news is that crypto as an industry may have grown too big for regulators to ignore any longer. There have been various concerted effort by governments around the world in laying out clearer guidelines surrounding crypto and its use cases. Some examples are Singapore’s MAS recent call for consultation on Proposed Regulatory Approach for Stablecoin and EU’s classification of e-money tokens through MiCA.

3. Not subscription-friendly

Dread it, run from it. Subscriptions are inevitable and have truly taken over commerce as we know it. The SaaS model has sprouted various behemoths like Slack, Spotify and Netflix. Even dynastic businesses like Adobe, having been built on the software ownership model, have scrambled to align with the SaaS movement.

Yet, as you enter the mysterious valleys of Web3.0, you will find that “ownership” is the talk of the town again. There will be various projects that are selling lifetime access NFT passes for the wallet-friendly price of only 1 ETH. You will be able to sell these passes on the secondary markets, they proclaimed triumphantly. Ignoring the very visible elephant in the room — the ideal of being able to re-sell your NFT once you are done with the service only works if the market for the NFT is liquid.

 Some of the projects may package this model as returning the project to its roots, adopting a community ownership model. While that is indeed a lofty goal worth supporting, we feel that many projects simply have not found the right tools to monetize on chain with subscriptions.

FAQ section of a popular Web3.0 Tooling service

True subscription on the blockchain is technically challenging. The blockchain was built with decentralization and security in mind. Every transaction has to be signed and approved by you — a “push” payment.

Hence, the blockchain does not lend itself well to “pull” payments like subscriptions.

There is simply no good mechanism on the blockchain for merchants to pull funds away from their subscriber’s wallet on a monthly basis. The whole beauty of subscription is the convenience it affords to both subscribers and businesses.

For businesses that rely on recurring subscription payments as a business model, they have had to rely on alternative methods if they want to accept crypto, all of which have severe cons.

How Suberra solves these problems

At Suberra, we are focused on elevating the checkout experience and making it user-friendly for the payer. For example, payments are gasless through Suberra. The payer will not need gas tokens when transacting in USDC. This removes a huge impediment to the checkout process where users either do not have the gas token or are unwilling to pay for the gas fees.

With users making transactions with different crypto wallets on multiple blockchains, how can businesses accept payments easily without any hassle of bridging assets?

Our integration with Dynamic allows us to support over 100 wallets right off the bat! Merchants will also enjoy multi-chain payment support on the most popular chains.

As a whole, Suberra’s solutions will:

  • Provide essential tech to make crypto wallets as convenient as credit cards
  • Support multichain payments
  • Automate payments and on-chain subscriptions
  • Make payments gasless for USDC payments
  • Include features to simplify business operations

How Suberra’s subscription payments work

Suberra’s subscription payments work through periodic allowances, which are time-gated smart contracts with an allowance (i.e. pre-defined transaction value).

This allows the end-user to provide a one-time approval for recurring payments, enabling businesses to provide subscription-based services in a hassle-free manner. On top of the EIP-20 allowances, our solution protects users by building another layer of stricter constraints. End-users can predefine the maximum amount of tokens that can be pulled by the dApp in a period of time (e.g. 30 USDC per month). Suberra is also non-custodial, meaning we do not hold the users’ cryptocurrencies.

Once the smart contract uses up the allowance for the given period of time, it cannot pull any tokens from the user’s wallet, until the periodic allowance is reset at the next unit interval.

The future of cryptocurrency payments

At launch, Suberra will support recurring payments with major wallets like Metamask, Ledger, and Argent, with high-utility L1 currencies like Ethereum, Polygon and Avalanche. For users of other blockchains and crypto wallets, fret not, for our goal is to support most major blockchains and L2s by the end of 2023.

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RISK DISCLOSURE:

Suberra is a software and tool developed by Suberra Protocol Foundation (”Suberra”). Suberra Protocol Foundation is not a bank and does offer any banking or depository service to its customers. Digital currency is not legal tender, is not backed by the government, and digital currency accounts and value balances on Suberra Protocol are not subject to Federal Deposit Insurance Corporation or Security Investor Protection Corporation protections. All references to ‘dollars’, USD or ‘$’ are references to the United States Dollars unless otherwise stated. For more information regarding the risks of using Suberra, please refer to our Terms of Conditions.

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