Web3 Payment and PayFi Sector Research

Introduction

Web3Port Foundation is a cryptocurrency fund specializing in blockchain and Web3 ecosystems. Through strategic investments and incubation of innovative startups, it drives the widespread adoption of Web3 technologies.

This research explores the Web3 payment and PayFi sectors, analyzing concepts, payment types, and case studies to understand market dynamics and support investment decisions.

Web3 Payment

The expansion of stablecoins and their applications has positioned Web3 payment as a key sector in the crypto market. It encompasses diverse scenarios, including:

• Stablecoins
• Wallets
• Asset custody
• Transactions (fiat-to-crypto conversions, peer-to-peer transfers)
• Payment processing (merchant settlements, retail transactions)

Traditional Payment vs. Web3 Payment

| Aspect | Traditional Payment | Web3 Payment |
|-----------------------|--------------------------------------------------|-----------------------------------------------|
| Infrastructure | Banks, credit card networks (Visa, Mastercard) | Blockchain, smart contracts |
| Transaction Speed | Slower (bank settlements take days) | Near-instant (on-chain confirmation) |
| Cost | High fees (intermediaries, FX margins) | Low (direct peer-to-peer transfers) |
| Accessibility | Limited (geographic/banking restrictions) | Borderless |

Advantages of Web3 Payment:

• Eliminates intermediaries, reducing costs.
• Enables seamless cross-border transactions.
• Enhances transparency via blockchain records.

Types of Web3 Payment

1. On/Off-Ramp Payments

   • On-Ramp: Convert fiat to crypto (e.g., MoonPay, Transak).
   • Off-Ramp: Convert crypto to fiat (e.g., BitPay, Coinify).

2. Cryptocurrency Payments

   • On-Chain Native: Crypto for DeFi/NFT purchases (e.g., Uniswap swaps).
   • Off-Chain Real-World: Crypto for retail/merchant payments (e.g., Shopify via Solana Pay).

Business Models

Web3 payment projects generate revenue through:

• Transaction fees (0.5%–1.5% per on/off-ramp).
• API integration fees for merchants.
• Gas fees from blockchain settlements.
• FX spreads in cross-border payments.

Key Success Factor: Network effects—more users/merchants increase transaction volume and profitability.

Key Players in Web3 Payment

1. Exchanges Expanding to Payments

• Coinbase: Crypto-backed Visa cards.
• Binance: Binance Pay for merchant settlements.

2. Payment Gateways

• MoonPay: Supports 160+ countries, 80+ cryptos.
• Alchemy Pay: Hybrid fiat/crypto gateway.

3. Web3 Banks & Aggregators

• Fiat24: Swiss-licensed Web3 bank with IBAN accounts.
• Helio: Processes crypto payments for 6,000+ Shopify merchants.

4. Retail Crypto Terminals

• Bitcoin Depot: Crypto ATMs in 30,000+ locations.
• Pallapay: POS systems for convenience stores.

👉 Explore crypto payment solutions

PayFi: The Fusion of Payments and DeFi

PayFi leverages stablecoins and DeFi yield mechanisms to optimize money’s time value.

Market Potential

• Stablecoin market cap: **$171B** (USDT dominates at $117.9B).

• PayFi applications:

  • Cross-border remittances.
  • RWA tokenization (e.g., treasury bills).
  • Streamed payroll/royalties.

PayFi Use Cases

1. DeFi-Integrated Payments

• Example: Use DeFi yield to offset coffee purchases ("Buy Now, Pay Later").

2. Web3 Banking

• Fiat24: Combines Swiss bank accounts with crypto payments.

3. RWA Tokenization

• Ondo Finance: Tokenized US Treasuries (USDY) earn yield while enabling payments.

4. Streaming Payments

• Sablier: Continuous real-time salary streams.
• Zebec: Instant payrolls and retail crypto payments.

👉 Discover PayFi innovations

FAQs

Q: How secure are Web3 payments?
A: Transactions are immutable and verified on-chain, reducing fraud risks vs. traditional systems.

Q: Can businesses accept crypto without volatility risk?
A: Yes—stablecoins (USDT, USDC) or instant fiat conversion (via BitPay) mitigate volatility.

Q: What’s the biggest barrier to PayFi adoption?
A: Regulatory clarity. Projects need licenses (e.g., FINMA in Switzerland) to operate globally.

Conclusion

Web3 payment and PayFi are reshaping finance by merging blockchain efficiency with DeFi yields. Key trends:

• Stablecoin dominance in cross-border flows.
• Hybrid solutions (fiat/crypto gateways) bridging Web2 and Web3.
• Regulation: Compliance (e.g., VASP licenses) will determine market winners.

For businesses, integrating crypto payments unlocks lower fees and global reach. For users, PayFi offers self-custody and yield-earning liquidity.

Sources: Galaxy Ventures, IOSG Ventures, THUBA Research.