The Pago Transaction Gateway allows payment processors to offer crypto payments to their merchants. We will discuss how consumers can on-ramp funds, securely make payments, and how merchants can off-ramp the collected funds to traditional bank accounts.
The presentation will include a demonstration of real-world implementation.
Learning Objectives:
- Payment processors and merchants will learn the logistics of enabling blockchain-based payments.
- The benefits of crypto payments will be described, including speed, security, borderless, inclusive, and efficiency.
- How blockchain-based payments are ready for prime time.
Eric Gieseke (00:10):
Hi, my name's Eric Gieseke. I'm founder and CEO of PAGO, Capital and before starting PAGO, I was a Software Engineer at Al Grand, a blockchain startup. And before that I was Senior Architect for a next generation fraud detection system at ACI Worldwide. And this is my partner, Nitya Timalsina.
Nitya Timalsina (00:38):
Hi everyone. I am Nitya Timalsina. I am a software developer and the creative director at PAGO Capital. I currently work at IBM and lead nonprofit as well. I recently completed my masters at Harvard and Software Engineering and we're here to talk to you today about blockchain.
Eric Gieseke (00:57):
Okay, so first off, let's start with what is blockchain? So we all know that it's a globally accessible public ledger, which allows anyone anywhere to send and receive payments. It's secure, it's transparent, and it has the capability of eliminating existing payment silos that we face today. However, there are some challenges with blockchain, namely there's, we're still learning about blockchain, there's still lots of opportunities to help explain the possibilities of blockchain and how it works. There's issues with on off ramps, being able to move money in and out of the blockchain to and from traditional financial systems. And then it's also still somewhat complex to use. And also because of current issues like FTX for example, there's a lack of trust in blockchain and that's something that we need to get over.
(02:16)
So at PAGO we are working to address these issues and by providing a simple integration between payment processors and the blockchain to enable eco or retail transactions or payment transactions. So the system is secure using cryptography to provide secure transactions and to help reduce fraud. It's easy to use. We provide simple to use mobile application for consumers to use to approve transactions. And also we have an API that makes it easy for payment processors to integrate with the blockchain. It's fast, we support a less than ten second settlement time, which so, and that's full settlement and which reduces the chance for chargebacks during the transaction.
(03:25)
We support loyalty tokens to help with adoption so we can give cash back loyalty tokens and rewards to consumers to help with adoption. And we've in included a widget in our wallet to help consumers top off their wallet through card transactions, wires or Apple Pay. And then also we support stable coin. So rather than consumers and merchants having to worry about the volatility of Ethereum or Bitcoin, we support stablecoin like USDC and USDT, which avoids the need to do conversions and also avoids volatility. So where the stablecoin are like USDC and USDT are pegged to the value of the US dollar. So it removes that volatility.
(04:26)
So just to review some of the benefits of blockchain and PAGO, basically the settlement time is very fast under 4.5 seconds fully settled. The average transaction cost is 1% transaction fee. So it's very inexpensive for merchants. The availability is 24 by seven. It's always on. The blockchain is always on and available as long as you have an internet connection and it's borderless. There's no geopolitical borders related to blockchain based transactions. So if you're in US and you want to make a payment to merchant in Africa, that works just fine. And also the last point is it's inclusive. You don't need a bank account to participate in the blockchain. All you need is a smartphone that's connected to the internet and you can process transactions. And this is important, it's hard to believe today, but over half the world's adult population don't, are considered unbanked and don't have bank accounts. So this can help expand the number of consumers that can make payments as well as help democratize access to financial services. For example, savings and lending as well as making payments.
(06:02)
So now we'll describe how it works. So we've worked hard to make it very simple and easy and abstract away the complexity of the blockchain from the merchant as well as the consumer. So the way that we connect is we connect to payment processors and we have a transaction gateway that orchestrates the transaction flow. And also we have a PAGO wallet that is basically a mobile application that provides access for consumers to see their balances, be able to send and receive payments as well as sign or approve transaction requests for merchants. And then once we've integrated with the payment processor, it's very easy for merchants to enable pay with PAGO so that they can start request or accepting blockchain based payments. And it's truly borderless and results in low transaction fees.
(07:14)
And even though an interesting point is even though the transaction fees are less because there's fewer parties involved in the transaction, the margins for payment processors can actually be higher because there's fewer parties involved in the transaction processing. So this diagram illustrates the flow of a retail transaction and this can either be online or a physical point of sale. So the first step is consumer checks out and the POS affords a transaction request to the payment processing system that forwards it onto our transaction gateway, which converts it into a blockchain transaction and forwards the transaction onto to the consumer's wallet and to the correct consumer's wallet, at which point the consumer can review and approve the transaction. Once the transaction is approved, then it's sent back to the transaction gateway. At that point, the transaction gateway commits it to the blockchain and then four seconds later the transaction is complete and settled. The value has moved from the consumer's account to the merchant account and the transaction is final. And at that point the transaction gateway notifies both the payment processor as well as the consumer that the transaction is complete. And all of that can happen within 10 seconds depending on how long it takes the consumer to sign the transaction.
(09:02)
At this point, I'll hand it off to Ntia.
Nitya Timalsina (09:06):
So Eric has gone over the whole system and how it works. I'm going to talk about the specific applications and give you some examples of use cases using existing customers that we're currently working with. So our application, the transaction gateway and the wallet, it can be applied to a wide number of scenarios from retail payments to document signing, billing subscriptions, global agreements, payments and crowdfunding for retail payments. As Eric mentioned, we can support rewards, loyalty tokens, cashbacks for billing. I think the scenarios are pretty broad. It's whatever we want to apply it to, but utility payments is an example. We can support different types of subscriptions like Micros subscriptions, recurring subscriptions, and as Eric mentioned, much of the world is unfortunately still unbanked and we want to expand support to that. Democratizing access to payments is our mission and something that we're personally passionate about.
(10:05)
So it's certainly something we're hoping to expand at PAGO. So the first use case is a company called Chief Gold, and I believe Eric brought a prop to show you what Chief Gold does they mine and sell gold bars that look like this internationally. We mentioned that we're coming to this conference and they thought we should bring a prop. So here it is. So their challenge is accepting international payments. They are working with minors in highly stressful, highly intense environments, and there's some valid concern about fraud and security and there is some concern over the transaction processing speed as well. So if the miners don't receive their payments within a certain frame of time, they might just have issues with continuing to mine and it's a very sensitive operations. They need to have transactions that flow quickly, efficiently, very transparently. And ideally they want to be able to maintain a transaction log as well.
(11:03)
That's very easy to monitor for legal and just financial reasons. And they need 24 access or 24/7 access to payments. So they have integrated with the PAGO transaction gateway for faster and lower cost transactions primarily, and also to facilitate borderless payments. So they're working out of Africa and they need to be able to transfer payments to Mins as well as partners around the world potentially. So they're really relying on that borderless aspect without losing large margins. So any number of transactions, any amount of transaction, they're just going to be saving more overall and being able to rely on that speed and availability. And then as I mentioned, they are able to maintain that transaction log. So it's very easy in terms of auditability. The other example is I pause, this is our first customer. They do physical and online retail payment processing in the US and Europe.
(12:04)
And their challenge, actually, at least the first use case we're working on them with is cannabis related payments. So as you may be aware, there are some issues associated with processing payments for cannabis dispensaries, but there's a growing demand for that. So their solution has been to integrate with the PAGO transaction gateway, but they are also using a white labeled PAGO wallet to be able to really just attached their branding and customizations for their customers. And they also requested to have custom reward tokens. So they have this customized token called Deja Bit, and they're basically able to give that out to their customers and anyone who performs a transaction is able to have those reward tokens. So really this for us has been a really good example of providing payment solutions to an industry that currently lacks access to a payment solution that's reliable. And the payment processor is, as Eric mentioned earlier, able to have a higher margin because there are fewer parties involved.
(13:08)
You're just not dividing the pie as many times, so you have more and we're able to support online and offline payment processing. So IPOs actually has physical devices that they work with at these dispensaries and I mean many other locations and they want to be able to support online as well. And our job was to just try to seamlessly tie all of that together. So we we've been working to do that with them. Another example is One Step projects. So this is a non-profit that is trying to make disaster relief crowdfunding more transparent and measurable, which is challenging because I think there's l very little insight into what's happening inside of nonprofits and especially in the disaster relief scenario. Things need to happen very quickly, transactions need to move quickly, and ideally there should be lot of transparency for auditability again. So it's currently very difficult to monitor transactions beyond the point of donations.
(14:09)
So you might know how much someone donated and where, but that's sort of where that ends typically, unless the organization chooses to disclose everything, which they often don't. So the other part of it is accepting and distributing funds internationally. So if you're dealing with an earthquake in Nepal, you want to be able to get the transactions there right away. You want it to settle right away and you want to be able to make sure that it gets to the right hands without having to carry around bags full of cash, which believe it or not, happens in the disaster relief scenario because sometime that's the only way to really guarantee that the money gets to where you expect it to get to. So the solution here has been to integrate with the PAGO transaction gateway to be able to track user activities on this platform that one Step has created and also be able to reward those activities.
(14:59)
So there are one step tokens, but nonprofits are able to also have their own unique tokens so that they can reward their volunteers and donors and basically however they want to customize the situation. And they're also able to use PAGOs payment solution for collecting funds a as well as distributing funds to the exact parties that they expect to distribute it to. And you have that customer transaction signing, which adds a layer of security as well. So the result is a tighter end-to-end fund collection distribution acceptance solution that also includes better monitoring. The last example I have is pex. They're sort of similar to IPOs. They work with physical and online retail payments as well, but they're focused in Africa, which has its own unique challenges. And their goal is to make it possible for merchants in developing countries to accept international payments, not just local payments.
(15:58)
They want to be able to be global and we want to help them with that. And another use case for them is processing payments and distributing winnings in gaming related applications. So the solution again has been to integrate with the PAGO transaction gateway with their own customizations. They're also using the PAGO white-labeled wallet. They have customized reward tokens, and then the result of all of this is higher transaction margins. So they're able to benefit more. It's better for the merchant and the payment processor. And overall it's just more inclusive because I think for us it helps target our mission of democratizing payments. And this has been a really fun use case for us because for consumers without bank accounts or credit and debit cards, how do you support them as a merchant? We're really just hoping to close that gap. So to summarize, all of these customers, they, they've integrated with PAGO primarily.
(16:57)
I think the base model would be to connect with the ProGo transaction gateway and that supports existing as well as new payment systems. And it, it's really easy because we've abstracted away a lot of the complexities and we have simple APIs that make it very easy to integrate. There is a lot of support and something that we decided early on was that there's a lot of language happening in the blockchain industry about replacing existing systems or just turning the whole payment system upside down or whatever it may be. But where we see the solution is rather than looking at replacing existing systems, we want to be able to augment them and strengthen them. So if they're existing gaps, we want to be able to fill that. Our goal is not to replace, but to help and just analyze the strengths and weaknesses that exist in the system and hopefully be able to provide some solutions for any gaps that may exist.
(17:54)
For example, with the unbanked populations, I think that's definitely a big gap. The other thing is white labeling the pago wallet. So I mentioned that in some of the use cases earlier. The goal here is to make it very easy for consumers to sign transactions. They can access this application through Apple or their Android devices. And the app's pretty lightweight and there's a lot of development support, very customizable. And there's a flexible SDK so that if there's an existing wallet, it can just integrate with the PAGO transaction gateway and use the facilities, but they can still have their native environment. So we had a banking related customer that we were speaking with, and the conversation there was around just how to embed our application within their system so that we can just use that and they can leverage PAGO, but not necessarily have to turn everything upside down.
(18:53)
They can just augment their system. So we do have extensive support for merchants and payment processors, and it's possible for us to integrate directly with banks and ATM machines to just have a more connected payment process. So next we have two quick demos for you that we wanted to show you, and then we're going to wrap up. This is the PAGO Online store. It, it's just a mock-up that we created just to show what an e-commerce transaction may look like using PAGO and I, I'm not sure if it's going to play when I like this. I hope so. There we go.
Presentation Narrator (19:30):
Hello. In this demonstration will show how to purchase goods from an online store using the PAGO wallet. On the left, we have a demonstration store for purchasing hardware items, and on the right we have the PAGO wallet, which we'll use to pay for the items we purchase from the online store. So first we'll select some products to purchase, select a hammer and a saw. We'll go to the cart and we'll check out, in this case, we're going to pay with our PAGO account, select the appropriate currency, say confirm. We get a notification on the wallet that we have, transaction request. So we check it out and we see that Sora a hammer and a saw. You can see the full amount that we say accept and sign. At this point, the transaction's being committed to the blockchain once completes, then money will have transferred from the consumer's account to the merchant's account, and it'll be fully settled and it is complete, and we can see that the amount that we paid and the transaction fee and that completes the purchase. Thank you.
Nitya Timalsina (21:27):
Yeah, so that's just a brief mockup of what purchasing hardware might look like using the PAGO app. And the next example is non-profit prep funding. So very similar here.
Presentation Narrator (21:40):
Hello. And this demonstration will show how we can contribute to an online crowdfund using the PAGO wallet. On the left, we have the one step platform, which has different crowd funds that we can contribute to using the blockchain. And on the right, we see our PAGO wallet ready to sign a transaction. So first we'll look at this crowdfund and see if it's what we want to contribute to. Looks good, say, contribute our name, agree to the terms and conditions and receiving updates. And then here we have two choices for how we want to contribute Using the blockchain. We can contribute directly to the blockchain address or we can contribute using the pot wallet, which we'll do for this demo. First we select our pay string for our wallet address, and then the amounts of the transaction, we'll just use a very small amount for the purpose of the demo.
(22:48)
And then we click submit. And at this point we receive a notification on our wallet that we have a transaction waiting to sign, and we do, and we look at the details. Everything looks good, it's for the fund that we expected to say, accept, and then sign and approve the transaction. At this point, the transaction's being committed to the blockchain. When it's done, we can see that yes, indeed, the amount was transferred, and at this point the transaction is fully settled, the money is moved from the consumer's account to the crowdfund account and the transaction is complete. And that's it for the demo. Thank you.
Nitya Timalsina (23:36):
So it really just makes it very simple. And as you might have seen, you can have your own customized wallet address, so it's not some series of numbers and letters that you have to remember. That's usually not a highlight for folks. So it kind of just makes it a little bit easier. And then the other benefit is when you've completed a transaction, it is going to be visible on the blockchain ledger for anyone really that has the transaction id or if you want to be able to monitor what's been donated, for example, in this scenario, you'll be able to really just see all of the transactions that this particular fund is receiving, and that really just adds that extra level of visibility. So that's where we wrap up and we're open to any questions that you may have. Thank you. Please kind of not as well as I'd like to.
Eric Gieseke (24:34):
There a microphone.
Audience 1 (24:37):
Is this better? Perfect. Okay, great. I have a few actually, because I've been building and investing in blockchain for almost a decade, and I'm always curious about wallets and what's being spun up. You guys are spinning up wallets for your clients on Algorand, is that correct?
Nitya Timalsina (24:57):
The blockchain that we're using right now is Algorand, but the Public transaction gateway is blockchain agnostic. So we're able to kind of just abstract that away.
Audience 1 (25:07):
No, no, no. Where is the transaction being recorded on an Algorand chain?
Nitya Timalsina (25:13):
In these examples? It is Algorand. Okay. But we can support other blockchains.
Audience 1 (25:17):
So your EVM compatible right now?
Nitya Timalsina (25:20):
We're what? Sorry?
Audience 1 (25:21):
Are you EVM compatible?
Eric Gieseke (25:25):
I'm sorry, I can't understand.
Audience 1 (25:27):
Ethereum virtual machine, which is the predominant use of blockchain transactions. Are you compatible with the Ethereum virtual machine?
Eric Gieseke (25:37):
Oh, well, as Nitya mentioned, where the architecture is designed to be blockchain agnostic, right now we're supporting Algorand, but we plan to support other blockchains including Polygon in the future.
Audience 1 (25:50):
Okay. So the wallet is on Algorand, who holds the private keys? Does PAGO hold the private keys or do your clients, is it a centralized deposit of private keys that's held on PAGO?
Eric Gieseke (26:03):
We're a non-custodial service, so!
Audience 1 (26:06):
No, no, not the payments, the keys, the private keys to the wallet that you create for your customers. Who holds that? Because that's a security risk.
Eric Gieseke (26:13):
The private keys are securely stored on the mobile device.
Audience 1 (26:22):
That's not how that works. Okay. So when you talk about cross-border payments, how much do you do on KYC and how much do you work with regulators on foreign exchange licensing? Because when you're saying if somebody, let's say, is making a payment in dollars to Nigeria, there's an exchange component between the dollar and the nira. What are the on and off ramps that you work with and what are the KYC specs that you have to ensure that payment is regulated and to ensure that payment is secure And the customers that are using your payment rails are KYC. How are you doing that?
Eric Gieseke (27:01):
So we partner with payment processors who basically do the KYB process for the merchants and then for the consumers, the KYC process right now is fairly open. We basically, anyone can download and register the wallet today,
Nitya Timalsina (27:27):
But our target audience, I suppose, is merchants and payment processors. So we're not necessarily incurred, I mean, it is possible for anyone to use and download the wallet, and we're working on the KYC process for that aspect of it. But the customers that are actually using this right now, they handle it because the payment processors.
Audience 1 (27:48):
And how do merchant do it? How do you on-ramp, I have nira and I want to transmit that. How do I on-ramp from fiat to crypto? Oh, right. Who are you using? Because that process of KYC is either through a regulated exchange or a money center bank. Who are you using for that?
Eric Gieseke (28:07):
Okay. Yeah, good question. So on the consumer side, we're integrated with widget from a company called WYRE, and they handle the conversion, basically topping off the wallet from either cards or ACH or wire transfers or Apple Pay, and they secure that transaction. And on the merchant side, we're recommending that merchants set up an account on Circle, which is a custodial service that merchants can use to collect their payments and then also, off-ramp those payments to a traditional bank account and Circle we're recommending because!
Audience 1 (28:51):
Circle is Coinbase, which is under your stock.
Nitya Timalsina (28:53):
Circle is not a Coinbase.
Audience 1 (28:55):
Circle, off-Ramps onto Coinbase and Wired. If you look at what Stripe did in their integration with FTX, they were payment processing and they were ACH and credit card to crypto. I'm trying to understand who is your FTX? Who is your on-ramp partner that is taking your Fiat and making a crypto? Because Wired is not doing that. Wired has an exchange that does that. And the licensing and the KYC around that exchange matters for foreign exchange and criminal activity, which is a big concern with Blockchain payments. Who is your off and on ramp into Fiat, right? Yeah. Because when you say you donate nonprofit, right? You donate to Ukraine, you to whoever, when that money gets there, somebody needs to take that and make that into Fiat and actually use that fiat to do something. Who is that off ramp for you?
Eric Gieseke (29:49):
Yeah, for Merchants, we're recommending that they use Circle, but there are other exchanges that they can use to off ramp from the Agra blockchain, USD, SDC from the Aran blockchain to a traditional bank account. But we do recommend using Circle because Circle has zero transaction fees.
Audience 1 (30:07):
Circle, simple point Circle is a stablecoin, still a digital currency circle is not Fiat Circle needs to become fiat through a off ramp.
Nitya Timalsina (30:16):
I can give you an example. So on circle, if you make an account as a merchant or let's say a nonprofit, it's very easy to connect your bank account and have transactions from circle to your bank account and vice versa. It settles pretty quickly. I mean, I've done it a number of times. And then wire, which Eric mentioned actually the widget, you basically just enter, let's say your card information or your wire information and it is able to get that money from your bank account. You can also settle it back.
Audience 1 (30:45):
I guess what I'm saying is given that this.
Nitya Timalsina (30:52):
Yeah, that might be good. Yeah. In case we're happy to explain it to you or give you a walkthrough. Sure.
Eric Gieseke (30:57):
If there's other questions. Yep. Thank you. Yeah, as we mentioned, the on off ramps from blockchain are one of the restricting factors to its adoption, but there are solutions and it's getting better. And part of our work is to help educate people about our merchants that we're working with as well as consumers on how to enable those on off ramps.
Nitya Timalsina (31:28):
Any other questions?
Eric Gieseke (31:35):
And if anyone has any questions or would like to follow up, please reach out to us. Thank you.
Nitya Timalsina (31:40):
Yeah, thank you.