[Parker] Payment providers eyeing blockchain
In recent years, traditional payment service providers have been worried about the intensifying competition as IT platform companies enter to the financial and payment service market. While the size of the market remains unchanged, competitors equipped with new weapons are threatening the traditional players. With an increase in demand for non-contract industries due to the coronavirus and the passage of the three data laws, the traditional players' search for new business model still remains. #Cryptocurrency as a survival strategy? Service providers are planning to co-opt the strengths that were previously exclusive to IT platform companies. Such a strategy is reflected in these companies actively adopting mobile payments and data. They are visibly adopting a strategy of building up a new business based on their existing payment service. So are they creating a platforms and digitalizating payment services that are based on blockchain and cryptocurrency? One example that comes to mind is the global cryptocurrency project Libra, led by Facebook. Locally there is Terra, a Korean fintech company. But the project that is drawing the most interest from local investors is the blockchain-based payment service PayProtocol, which is operated by Danal Fintech, a subsidiary of payment service provider Danal. #Biggest strength of PayProtocol: Directness There would be no point in mentioning a project if it fails to show visible results after launching. In the case of PayProtocol, immediately after it was launched it received positive news. One of the points that is mentioned the most is the platform’s directness. It has expanded the number of stores using PayProtocol using its payment service network. The stores include Starbucks, CU, KFC, BBQ, Domino’s Pizza, Seven Eleven and Dal.komm coffee. The number of stores that uses PayProtocol exceeds 60,000. #PayProtocol special marketing events have also raised interest of users. One was a 50 percent discount when purchasing BBQ chicken and Domino’s using Paycoin in February. The simplicity of the app also contributed to its popularity. Many blockchain projects struggle in real life applications due to a lack of convenience. However, in the case of PayProtocol the payment service has been simplified, as all the user needs to do is bring up the bar code on their app for payment. Because of these direct services, as of April it has now 400,000 users while payments made via PayProtocal exceeds $1 million. During the same period, the value of Paycoin has roughly doubled. #Remaining obstacles But there are those who question whether PayProtocol could sustain its token economy with the current profit model. Compared to the profit it makes from commission charges, PayProtocol is spending excessively on its marketing, which could eat into its own profits. Additionally, the payment project is not a stablecoin, which could be its weakness amid high volatility. This is the reason why Libra is aiming towards a currency-pegged stablecoin. It is questionable if PayProtocol, which is not a stablecoin, could maintain its system during a downward cycle. Lastly, there are those that criticize that the management of PayProtocol as no different from existing payment service providers . #PayProtocol aims at centralization PayProtocol claim that through centralization it could more effective at managing individual information. But at the same time it also means that it has tight control of information, which is no different from the existing services. While it could have strong points for efficient management, this is clearly different from the purpose of blockchain, which is decentralization.