Delving into the future of finance, the recent panel discussion at Finance Magnates London Summit 2023's (FMLS:23) Innovate Stage showcased an intriguing dialogue on Web 3 Payments. From unveiling challenges in B2B transactions to contemplating the transformative potential of blockchain technology, experts discussed the challenges in this evolving landscape.

The panel discussion was moderated by Elena Sabelnikova, a business partner at Advanced Payments Solution, and brought together Danat Tunushbayev from BVNK, Nabil Manji, the SVP for Crypto and Web 3 at Worldpay, Nikita Sachdev, the CEO and Founder of Luna PR, and Kebbie Sebastian, the CEO of Merge Money.

B2B Payments and Time Efficiency

The conversation commenced by outlining the intricate challenges within the payment landscape. Sebastian mentioned: "Challenges with respect to payments are time and cost. Regarding time, 53% of B2B payments are credited within an hour, and 42% of cross-border B2B payments are credited within an hour for P2P. Clearly, that's not good enough, and I believe the cost ranges from 1.5% to 2.5% whether it's B2B or P2P payments."

However, Manji reflected on the progress made in the consumer payment space over the past decade. He highlighted the remarkable shift from predominantly card-based transactions to diverse local non-card payment methods globally.

This diversification has significantly reduced costs. Yet, the profitability struggle within fintech businesses raises questions about the sustainability of further cost reduction.

According to Tungushbayev, traditional methods like Swift often entail prolonged settlement duration of up to five or six days, coupled with relatively high fees, particularly in corridors like Southeast Asia to the EU or the UK. Emphasizing the potential of blockchain technology in revolutionizing this space, he underscored the emergence of startups innovating with stablecoins and native tokens.

Blockchain technology facilitates rapid settlements, significantly lowers costs, and enhances security compared to conventional methods. The panelists delved into the prospect of near-instant settlement times and heightened security in this technology, especially the application of central bank digital currencies (CBDCs).

Sachdev said: "We are not completely in Web 3 yet, and CBDCs present a perfect use case for Web 2.5. I feel like CBDCs will provide more transparency with how money moves and the supply of money. I think CBDCs are an alternative, not comparing it to cryptocurrencies, but I think it's a perfect middle ground."

Central Bank Digital Currencies and Regulatory Hurdles

The panel discussion highlighted the potential of CBDCs but cautioned about the protracted timeline for their implementation. Sebastian noted the pivotal role of legal tender concepts and the reluctance of countries to relinquish control over monetary policies.

He said: "I am not as bullish on CBDCs for two reasons: the likelihood that any country would give up a key instrument of monetary policy is very low, and two, in the time it will take off. But I guess without China, India, and the US getting behind crypto and CBDCs in a big way, you do not have a block that represents 40% of the world's population and 53% of the world's GDP. If that does not happen, this will not take off."

Besides that, regulatory landscapes emerged as a critical cornerstone in stablecoin payments. The discussion examined the necessity for robust regulations addressing counterparty identity and recourse in case of technical glitches.

Tungushbayev opined: "I think you can look at crypto payments as an alternative payment method in order to acquire a new customer base without going into a new geographical location. You can also look at a whole new sector of people holding their crypto wealth. By offering crypto payments or web-free payments, you can start looking at expanding into new regions."

Security in Web 3 Payments

In the course of the discussion, the issue of security in payments surfaced as an essential concern. The panelists agreed on the need for stringent regulations and traditional security measures within the crypto space. The need for regulated licensing, asset segregation, stringent controls, and qualified personnel highlighted the critical steps to ensure client asset security amid industry concerns over past security breaches.

Sebastian echoed this sentiment, underscoring the importance of oversight and standards. He cited the banking sector's stringent compliance spending, indicating an imminent convergence in the cost of compliance for crypto companies to ensure heightened security.

The panelists acknowledged the growing participation of traditional financial giants in the Web 3 Payments arena. "We are seeing multiple traditional financial giants come in and try to innovate on the blockchain, whether in payments or tokenizing," Tungushbayev mentioned. He explained that the convergence of traditional and emerging financial players signifies a pivotal shift in the industry's landscape.

The financial world is at the phase of a transformative shift with Web 3 payments. As panelists analyzed the challenges, proposed solutions, and contemplated the role of traditional institutions, the conversation revolved around efficiency, security, and regulatory frameworks.