Written by: Liu Honglin
As a lawyer surfing the Web3 industry, I often have the opportunity to experience some beta products and services in advance, thanks to the care and trust of friends in the industry. Recently, a classmate from BG contacted me, saying he saw some articles I published about the USDT bank card and invited me to experience their premium card, claiming that their product experience is great.
As an internet product enthusiast, there’s no reason to refuse this, so I provided my UID, and after being added to the whitelist, I found myself stuck at the KYC stage at the bank because my passport was about to expire, so I had to replace my passport to smoothly and seamlessly experience the entire process.
After the experience, my feeling is: this is the future of crypto payments.
In discussions with many friends from traditional internet companies, the most frequently asked question is: what is the actual use of blockchain? What are the truly commercially valuable sectors of blockchain?
My answer, apart from traditional mining exchanges and cryptocurrency fund investments, is basically: cryptocurrency payments.
The operational principle of cryptocurrency bank cards
Taking the cryptocurrency bank card I experienced as an example, BG acts as a traffic pool, accurately directing users to a certain crypto-friendly digital bank abroad, helping the bank attract new customers and deposits.
Secondly, I opened an account at an overseas bank with my Chinese passport and completed KYC and AML tasks according to the bank's compliance requirements, meeting the account opening standards of the local bank, and after finishing, I had a virtual bank card.
Again, when I need to make a cryptocurrency purchase, I first need to transfer cryptocurrency assets directly from my CEX account to my bank card (conversely, I can also transfer the balance from the bank card to my CEX account). This process is not completed on-chain, so there are no gas fees or other expenditures.
Finally, when I need to spend, I can directly bind this virtual credit card to Alipay or WeChat. I even specifically made a purchase using Alipay, and there was no difference from a mainland bank card; my consumption record can also be viewed in the app. More importantly, for some internet spending that particularly requires an overseas bank card, having this virtual card is incredibly convenient, so I quickly bound my ChatGPT for automatic payments.
What’s even better is that the bank card deducts my fees and returns them to me in the form of platform tokens. Isn't this pay to earn? At this moment, the concept of PayFi naturally presented itself in my mind.
The positive flywheel of Web3 payments
It is not hard to imagine that if a bank card issuer wants to capture users, or if a Web3 startup focusing on the payment sector wants to quickly increase user numbers and transaction volumes, it can completely achieve the distribution and airdrop of its project tokens through a consumption fee subsidy, which is evidently more cost-effective compared to the current costs of user acquisition through internet advertising.
Of course, this article cannot be purely a user experience post; more importantly, this experience has given me several new insights.
The first point is the issue of frozen accounts that cryptocurrency players are all worried about. As the proportion of virtual currency used in gray and black industries increases, under the crackdown by law enforcement agencies around the world, more and more bank cards are being frozen. Moreover, this is entirely a probability issue; there is basically no completely safe solution. However, through the USDT bank card method, at least at this stage, it can meet the consumption needs of the vast majority of small-amount players in the traditional financial world.
The second point is that the existing method seems relatively compliant. According to my understanding, when U card users make purchases, there should be two steps involved: one step is the conversion from USDT to fiat currency, and the other step is the cross-border settlement of fiat to fiat. The former is completed by licensed institutions or banks abroad and only needs to comply with local regulatory systems, while the latter still follows the existing logic of cross-border consumption with bank cards, which does not require terminal merchants and consumers to make any changes or technical upgrades. It can be said that it leaves the compliance work and difficulties to itself while leaving convenience for the naive users.
The third point is to build a commercial growth flywheel through payment scenarios. The freezing of bank cards can be said to be the most painful pain point for cryptocurrency players currently. Whoever can solve this pain point well can basically acquire customers at a very low cost. By helping banks attract users and funds, there is already income from channel fees; if part of the channel fees is used as 'subsidy' in platform tokens for users, it can further enhance user stickiness to the platform, contributing to an increase in consumption frequency and amount, effectively promoting the project’s tokens to more crypto players. This can be said to achieve three goals with one action.
To say it without exaggeration, the USDT bank card outlines a clear business model for the Web3 payment ecosystem. For ordinary users, this payment method allows cryptocurrency assets to truly enter daily life, no longer just an investment tool but becoming part of consumer payments. For the industry, it accelerates the integration of cryptocurrency and traditional finance through innovative models, effectively addressing pain points such as the difficulty of cashing out virtual currency, poor integration of traditional payment systems, and challenges in promoting project tokens, finding a clever balance between compliance and convenience.
Just as I sighed after the experience: 'This is the future of crypto payments!' The future of payments is not far away, but is happening right now in the midst of innovation.
