You can lead the horse to water, but how do you make it drink? Which is like you can show somebody that they can pay with crypto, but how do you actually get people to pay with crypto? And I think that's the more challenging part actually in some ways of how do we actually get the world to want to pay for things on chain. That's maybe the harder side of the nut to crack, I think.
This is Money Code. It's a show where we decode stablecoins and programmable money. I'm Chuck Okabiggo and I'm here with my co-host Raj Pere. Today we're joined by Jess Houlgrave, CEO of WalletConnect. Thanks for joining us today, Jess.
Thank you very much for having me. Very excited to be on the show.
Yes, I'm really excited for today's episode because we're going to use the recent Ingenico partnership to break down what it takes for stablecoin payments to actually scale at the physical checkout. It's huge. So, we're going to look at both the supply side and the demand side. And if this works, it's a real bridge from crypto rails to mainstream commerce. But there are a few non-obvious hurdles that we need to clear. And so that's what we're going to dig into today. But before we dive in, a quick note. Money Code is brought to you by Stablecoin Media and powered by BBNK. The views of the hosts and guests are their own and may not represent their companies. Nothing we discussed today constitutes investment advice. Okay. So just to give people some background, can you share just a quick background on WalletConnect and then just set the stage for the recent announcement with Ingenico. What actually shipped?
So WalletConnect has been around since about 2018. I joined the company about two and a half years ago. And WalletConnect originated at a time when we had mobile crypto wallets. So, I had a crypto wallet on my phone and then often a desktop application that I wanted to interact with. Might be an NFT marketplace, especially back in 2018. Could be a DeFi protocol, a game, or anything else. And it grew into a network of over 700 different wallets. Those wallets now include the mobile wallets that we started with, but also hardware wallets, custodians like BitGo, institutional offerings like Fireblocks, and then on the other side of the network, about 70,000 different applications works cross-chain. And you can really think of this as the kind of secret messaging that takes place between an app and a wallet off-chain to result in an on-chain transaction. So last year those transactions resulted in about $400 billion of money movement or value movement between apps and wallets.
The other thing that happened last year was that we noticed a lot of payments companies starting to implement the WalletConnect network. This was because they wanted to be able to accept payments from all crypto wallets which makes complete sense. I don't want to say, okay, I only want to accept money from Visa but not Mastercard. Or I only want to accept money if you bank with HSBC but not if you bank with Barclays or Lloyds or somebody else. So, everybody wants to be able to accept payments from all wallets. And that's why a lot of payments companies started integrating our network because we give that broad-scale access.
But what was happening we noticed was it still didn't really feel like a payments experience. It felt much more like a crypto experience. So the end user was asked to connect their wallet and then sign a transaction which feels very familiar if you're used to trading DeFi. Feels a lot less familiar if you are used to walking into a store and being asked to pay. You just want to be able to click pay. So in partnership with Ingenico, WalletConnect Pay is basically redesigning that experience for the end user so that over time we can reach what I call like UX parity with a web two payment. And at the same time building out the infrastructure that our partners need on the payment side so that they don't need to learn about crypto. They don't need to think about chain configuration any of this stuff. We basically manage all of that for them. Give their merchants fiat out at the back end. And we launched that as you mentioned with Ingenico a couple of weeks ago. We announced that partnership where hopefully this will roll out over time to the 40 million or so terminals that are out there which means that anybody with a wallet will be able to pay with crypto in store. You can also use this product though online and we have some e-commerce partners lining up. So hopefully bringing this end-to-end crypto or stablecoin payment flow to life maybe.
Super cool. I mean that's, you know, I think you know being at Visa for a long time I've seen, you know, merchant acceptance is obviously a huge nut to crack and so this is obviously a really, this is a massive inroads into that experience but also maybe I think I saw that there was like a cafe in Portugal that you posted recently like maybe we could even just take it a step back and go, you know, step by step on like that core experience and you kind of touched on some of it already as well but maybe just talked about like what you guys unlocked for that Portuguese cafe and what does that transaction experience look like and, you know, what do they hope to see from this as well?
Yeah, the 94 Degrees coffee shop which has probably become the most famous coffee shop in crypto in the last couple of weeks was a kind of partner of ours to test some of these user experiences. And they've been really amazing to work with because, you know, they've given us a lot of feedback as a merchant about what they want to receive. The setup with them is really anyone can go in store and with them we've actually enabled more crypto types. So unlike restricting this to just stablecoins, people can also pay with native assets like ETH or Solana in the coffee shop. And about half of the transactions that we see through the coffee shop are in those native assets. Which is a kind of interesting data point for us to take note of. But basically anybody with any of the wallets that are compatible with WalletConnect can go into that coffee shop. If you tell them you want to pay with crypto and they have a little sticker up saying we accept crypto with WalletConnect Pay. So if you tell them that you want to pay with crypto on the same terminal that they have instead of kind of kickstarting a card transaction they basically just display a QR code. That QR code has all the payment context information. So how much they need to pay. It contains the like array of assets and chains that they're willing to accept. And then when the user scans that QR code today, the experience will vary a little bit depending on the wallet that they use. So, if they use one of the wallets that's upgrading onto this new payments experience SDK that we have, they'll be shown a very simple kind of click-through option. If their wallet is on the old version of the WalletConnect wallet kit they have to go through a slightly different flow. But we hope over the next six months almost all of our wallets are going to upgrade to that more payments native experience to give that like delightful end-user experience. So they click pay, transaction goes through and for an end user you don't really notice any difference. For the merchant though, they're paying much less fees because they're not paying card transaction fees. They're getting basically near instant settlement. And they're able to open up to a broader range of customers who want to pay for things with crypto.
That's awesome. And just to stick with the example, what happens after the on-chain transaction occurs? So the crypto let's say it could be a stablecoin or it could be Ethereum lands in a wallet is the wallet belongs to the merchant a payment provider somebody else. Can you walk us through how it gets from there to cash in the merchant's account?
Yeah. So this setup varies depending on geography and other constraints that we have with WalletConnect. We don't have our own payments licenses for example. So we partner with people who do to make sure that this is fully compliant. But you can think of broadly at a high level these funds going to a what we call a transit account. This provides some protection in case the funds are accidentally transferred from a sanctioned address. We try and make sure that that doesn't happen by pre-screening but it's impossible to say that the funds can't, you know, we cannot accept funds from a specific address. So people wanted to be malicious, they could. So they go into a transit account. We carry out several more checks. And then those get off-ramped via one of our regulated partners into fiat kind of bundled so that we're not sending 20 fiat transactions a day. Although we could if somebody really wanted instant settlement, we could do that. But basically they get bundled and then at the end of the day settled to the merchant's bank account. So important thing is there that settlement time is really reduced again depending on the geography. Card settlements can be one or two days. They can actually be up to like 30 days in some places. I think in Brazil it's T plus 30 settlement. So making a big difference in some geographies. Basically the merchant will have that money in their bank account by the end of the day.
That's awesome. And I think it's a good example of the various different parties at play here. You mentioned the complexity and the nuance of having to manage the fact that on chain you can't control who sends you an asset and so you need to have this transit account to kind of screen first and say okay it's not from a sanctioned address and then you continue the rest and that's just some of the nuances that you need to manage on chain. Okay, great. I think this is a good point to kind of dig into what else needs to happen to make this kind of go more mainstream. I think this has been the biggest topic of the day with regards to this partnership and everyone's really excited about the scale the distribution the fact that I mean Ingenico is everywhere essentially it's global it's in almost every country and the idea that the, you know, 700 million wallets the distribution on the consumer side and the merchant side is in place but there lots of other things that need to happen and so maybe we could start on the supplier side and so for the terminal to accept this flow what needs to happen from the acquirer and the merchant and both and what incentives are at play.
Yeah. So you're right this is a first step of many to getting worldwide distribution. For Ingenico they have a few different go-to-market routes. So sometimes they partner directly with a merchant and at other times they're providing services and hardware of course to an acquiring bank. So the exact kind of who's involved will vary depending on some of those approaches. But ostensibly certainly in today's flow the merchant, the acquirer and of course Ingenico all need to say yes, we want crypto payments in store. And the merchant especially will need to go through some onboarding flow with us at the moment to make sure that they fulfill all the requirements of our off-ramping partners. So there's a little bit of an onboarding process that the merchant goes through. And the motivations for merchants to switch this on again are really varied depending on who they are and where they are. In some places it's because they have a high international, global nomad population around them. And they want to kind of encourage people to be able to accept crypto. In some places they're really looking to reduce the payments costs by moving payments away from card payments to alternative rails. In some places card limits are tapped out. Think luxury hospitality. I'm in a cool nightclub and it's $120,000 bottles of champagne. That's going to tap out your card limit pretty quickly. And so it really varies depending on the motivation of the merchant why they want crypto, but as you can see, there's lots of various reasons that somebody might want to do that. And for them, the benefits are of course lower fees. They're getting much faster settlement time. Those are the kind of the two key ones. You can argue that there are others. Maybe they position themselves as looking cooler than some of their competitors, for example. But the core economic ones are really around settlement time and fees. For the acquirer, the acquirer can add an acquirer fee on top of WalletConnect Pay in the same way that they add acquirer fees on many other payment methods. So depending on who your acquirer is, they will have a different model for that. Some put a flat fee on APMs, others put additional basis points on top. Really varies. But basically, the acquirer should think about this as the same decision process as whether I should enable any other APM. I can still charge fees on it and I can deliver potentially some benefits to my end merchant base. So those two things combined hopefully for them for the acquirers it's relatively neutral or they're comparing this against a broad set of APMs because for them they don't have to learn about crypto and do the additional like operational overhead that they might have to do if they wanted to build this themselves. And for the merchant a couple of benefits as well.
Yeah, and maybe just to quickly define but APM alternative payment method, right? And yeah, there's like e-checks, there's, you know, different deposits, there's pay by bank, and so all these are, you know, a set of APMs that are out there today. Maybe just a quick fun question just going back to like your champagne reference, but if you had to guess like, and maybe you're seeing some of this data already, but is there a certain type of merchant base that you're seeing natural like gravitation pulls from where they're like, 'Yeah, this is like a no-brainer for us. We've seen this request from, you know, our users and our customers historically.' You mentioned, you know, tongue in cheek with like, you know, luxury or nightclubs. But I'm curious if like there's certain cohorts or categories of merchants you're expecting more interest from versus others.
Luxury is definitely one. Tends to have like high international kind of purchases often especially in like luxury hospitality. Cross-border processing as we all know is even more expensive. So there's additional incentives maybe for merchants who have a lot of international traffic. So that's definitely one. Others we see in places where like the penetration of crypto holders is high people want to be able to accept those. So Latin America for example, we see a lot of people now wanting to hold crypto assets and stablecoins specifically often as a motivation to get exposure to the US dollar and reduce exposure to their local currency. So in a place where a lot of local people are holding stablecoins and especially actually in South America where the QR code is quite a familiar form factor, the switching cost and the incentive to get somebody to shift over to a crypto payment with WalletConnect Pay is actually relatively lower than it might be somewhere where like cards are the predominant form factor. So we also see a lot of appetite in those places. And there we're not talking tens of thousands of dollars of transaction value. We're talking people just buying their everyday coffee or ice cream. So it really is very different depending on the geography.
And then from like a merchant standpoint, like is there any like changes in like reporting or like are they having to like track their crypto payment purchases differently than they would with their traditional fiat purchases? And I guess like maybe just like walk us through like yeah like how do like what does the operation look like and then also if they have to manage refunds or other types of things like what happens there as well.
Yeah. So our goal and like we're still at the beginning of the road in this but our goal is that like we will provide as much of this in the form factor that the PSP is used to. So we can provide all of the reconciliation that the PSP would get from any other alternative payment method in exactly the same way. You can kind of actually think about this in some ways like a subset of account-to-account payments or anything else. And so we can provide the same reconciliation tooling and information. We've got merchant dashboards, things like that. Not all of it is maybe as advanced as some of the more established alternative payment methods, but like that's our goal is that the PSP shouldn't really need to do anything differently than they already do. And we'll plug it into their existing systems. Flows like refunds that you mentioned. We have a refund flow. Again, it's a little complex today because you got to on-ramp typically where the PSP isn't holding their own stablecoin balance. You have to do an on-ramp before you can do a refund. So there are a few complexities there that we can manage, but again, we try and make that, we try and do two things. One is like explain it in terms that our payments partners understand. So we don't talk to them about okay you have to on-ramp. We just say you need to settle these funds and then we manage the refund process for example. So one is just about how we build it in a way that feels familiar for them and just removing as much of that like crypto knowledge as possible. Of course, if they want to learn about crypto, I'm very happy to give them the full rundown, but in an ideal world, like they don't have to change their operational processes in order to switch this on.
Right. And obviously reducing friction is a key way of gaining adoption. But also, how do you change people's perspectives on crypto? And you mentioned there's luxury, there's Latin American countries where this is probably much more familiar. But I imagine with any large-scale change in payments adoption or payments functionality, there's a bit of evangelism that you need to do and maybe even pushing people over the edge. I don't know if it's incentives or kind of appealing to the buyer or appealing to some profit margins by saying that, hey, your merchants can get their money faster. You'll be able to be more competitive. Can you talk us through how you think about pushing adoption through each of those channels? The acquirers and the merchants and maybe whether there's any kind of incentives at play as well.
