Cryptocurrency always seems to stumble on its path from speculative asset to mainstream payment method. But fintechs are persistently trying different approaches toward that goal.
"The market opportunity for crypto payments is massive," said Shane Rodgers, chief executive of PDX, a cryptocurrency company that issues its own coin and is developing a system to quickly convert crypto to traditional currency.
PDX's platform is set to commence testing in mid-October. At the same, YellowHeart, a ticketing company, is launching a crypto payment option for digital-native consumers who want to spend crypto coins directly rather than convert them at the point of sale.
"It's something that the younger generation is using every day for payments no matter what anybody says," said Josh Katz, YellowHeart's CEO.
Both approaches are different, but have the same goal of building momentum for mainstream crypto payments, which are still rare despite data suggesting a substantial appetite for crypto at the point of sale among both consumers and merchants.
PDX Global's platform will convert multiple digital assets to government currency in near-real time. To mitigate crypto's volatility, which has been particularly acute during the correction of the past few months, PDX will back cryptocurrencies with tokens that are supported by energy assets such as oil and gas initially, with plans to add more sustainable energy options in the future.
Consumers will pay PDX in crypto, and PDX will pay the merchant in local currency. Merchants will pay PDX a 1.5% fee for settlement, which is lower than card fees, which typically range between 2% and 3%. The speed of the settlement — a day or less — and the backing of energy assets both hedge against changes in crypto's value. PDX will also hold different types of crypto to ensure liquidity.
PDX is not issuing a stablecoin at this point.
The difference between PDX's platform and a stablecoin is that PDX is "backed by" the oil and gas reserves (and other assets), but not "pegged to" the value of another currency. That could cause more fluctuation than a stablecoin, though PDX has applied for a banking license and expects to create a stablecoin after receiving its license, according to Rodgers.
PDX will use same-day ACH to process payments, and plans to use FedNow for instant settlement when the national faster payment system launches in 2023. "The merchant gets settled in cash; they aren't in any way tied to the crypto side of the transaction unless the merchant wants to accept crypto," Rodgers said.
While PDX preps its pilot, YellowHeart, is taking a different approach by avoiding the conversion altogether.
YellowHeart has launched an NFT ticketing app for Android and iOS, replacing physical tickets with a digital asset that provides consumers with access to content and NFTs that double as digital content memorabilia. The artists selling tickets can track ticketing cycles, which is designed to reduce scalping. NFTs, or nonfungible tokens, are a digital representation of a piece of art or other content. The buyer is the owner of the NFT, which allows the digital asset to serve as a form of currency that can be traded or sold.
The YellowHeart app connects to the company's NFT marketplace and features a wallet that integrates with the Ethereum blockchain and cryptocurrency technology company Polygon. Events will have QR codes on site to allow users to download the app to view artists' NFTs and make purchases. Artists at launch include Maroon 5, Romero Britto and DJ White Show, and investors include LiveNation.
YellowHeart has been testing its crypto payments feature internally ahead of launch and is using Coinbase as its processing partner.
YellowHeart, which charges a service fee for crypto or noncrypto payments, does not keep the difference if the value of cryptocurrency goes up between payment and settlement, nor does it "cover" the loss if the value decreases.
"There is a risk, but if you come to us, whatever Bitcoin comes in the door is yours and not ours," Katz said, arguing that its target base is already investing in and trading crypto, and ordering and paying for tickets is an additional use for crypto balances for active cryptocurrency traders.
Research suggests there is demand for crypto payments. Eighty-five percent of retailers want the ability to accept crypto payments, according to a
The PDX option keeps crypto out of the hands of merchants. That's a model similar to most cryptocurrency payments, which exchange the funds for traditional currency before the transaction reaches the merchant; PDX is offering fast processing as a differentiator.
In YellowHeart's case, the buyers and sellers are likely already interested in crypto and other digital assets. Many of the targeted events for YellowHeart involve NFTs, for example. While NFTs are still an early-stage technology, there is an opportunity to
In an
"We're a Web3 company doing Web3-related commerce," Katz said. "Crypto payments are essential to doing business in that world."
