Solana Pay: Use-Cases and Winning the Asian Markets [GTM]
Understanding Solana Pay, exploring potential use cases, and designing a Go-To-Market strategy for Solana Pay.
From its earliest days, the Crypto ecosystem has imagined a rapid, simple, and low-cost means of payment in everyday life. Reasons like high price volatility & gas fees, low transaction throughput, and clunky UX with a missing app layer have put blockchain payments out of reach for the masses. This has led to low adoption by merchants, which in turn decreases the utility of crypto payments. Who would use crypto for payments if no one accepts it?🤷♂️
To solve this challenge, Solana Pay was launched in early 2022.
It’s a new set of decentralized payment standards for merchants to enable direct acceptance and settlement of digital dollar currency, such as USDC, at both the point of sale (POS) and online. Solana being a low-cost & fast blockchain, will enable instant & cheap settlements and unlock access to more than $5 Billion in USDC in circulation on the Solana blockchain, apart from other digital assets.
Payments is a $100 Trillion+ dollar industry and a long-term focus of the Solana ecosystem. However, enabling mass adoption is not an easy task and has to be done step-by-step, geography-by-geography. In this essay, we will discuss key markets with high opportunity by researching the payments landscape, identifying missing gaps and potential partners, and making recommendations to the Solana Pay team.
Ready? Let’s dive deeper!🤿
What’s Solana Pay?🛒
Solana Pay is a standard for developers to build payment applications on Solana. Integrating Solana Pay is simple for a merchant: It enables a QR code on a merchant’s website or at the point of sale, allowing merchants, be they large or small, to easily accept Solana (SPL) tokens like USDC or USDT. It can be easily integrated into existing:
- E-commerce platforms
- POS providers (including Android devices)
- Printed static QR
- Payment aggregators
In simple terms, it allows consumers with a Solana wallet to spend their cryptos by scanning a QR code at their nearest stores and paying their bills via USDC. There is no need for off-ramping to fiat and instant payments powered by blockchain.
There are already 20+ live players in the ecosystem who are building Solana Pay-friendly wallets and POS solutions. Some of my favorites are:
- Sleek Wallets: Ottr Finance and Decaf
- POS and E-commerce solutions: Coinable, Parallax, Candypay, Sphere and Helio
Not just them; giants like Stripe, Shopify, and Worldline are also part of the ecosystem!
While paying via QR is nothing new, Solana Pay unlocks a whole range of new possibilities, like sending reward tokens or NFTs, enhanced loyalty programs based on activities on-chain, and other targeted offers based on quick and direct interactions.
Further, CRM solutions focussing on wallet intelligence (e.g., Absolute Labs) can allow merchants to analyze the wallet-level data and manage and grow their customer relationships in one platform.
All this is cool, but just like any other payment network like Visa, Solana pay has two simple challenges to solve:
- Demand (Consumer): As more and more consumers start adopting, holding, or earning crypto, they would need ways to spend their cryptos. They can either use crypto-backed Cards (tapping Visa’s network) or payment networks built by exchanges and blockchains.
- Supply (Merchants): Once merchants see enough demand for crypto, they start integrating an additional crypto payment method, resulting in additional sales.
It’s a chicken-egg problem; demand and supply need to grow continuously to make a payment network like Solana Pay sustainable. It’s certainly not possible to tap the whole world’s population at once, and the payment networks need to go and tap a certain niche first and then expand from there on. This niche can be either a target persona like crypto freelancers, certain crypto-friendly geographies like the Dubai/Cayman Islands, or anything that ensures faster Go-To-Market.
Identifying Niche & Markets:🌏
Let’s start by picking two key high-growth & untapped regions: Middle East and South-East Asia. While the Middle East has been growing rapidly, with Dubai as its crypto epicenter and one of the highest-volume remittance corridors with top tourist destinations. Similarly, SEA has Singapore as its crypto epicenter and has a high promise with one of the highest crypto adoptions.
Let’s have a look at a few crypto tailwinds in both of these markets:
- UAE becoming a global crypto hub: With crypto-friendly zones like ADGM (Abu Dhabi Global Market) and DIFC (The Dubai International Financial Centre), which issue their own licenses. Many global exchange giants like Binance have flocked to UAE to set up their shops. Exchanges are instrumental to consumer crypto adoption.
- Bahrain is one of the few countries worldwide where the central bank issues crypto licenses! Qatar will have global attention for 2 months — thanks to the FIFA world cup, which has many crypto sponsors like Crypto.com and Algorand.
- As per Visa, nearly 2/3rds of Southeast Asian consumers (64 percent) have indicated an interest in using cryptocurrencies for payments. Indonesia, Vietnam, the Philippines, and Thailand lead the region in this trend. Cambodia, Vietnam, Philippines have one of the highest crypto adoptions in the world.
- Singapore is becoming the global financial hub, with MAS (Monetary Authority of Singapore) being an active regulator welcoming non-speculative and real use-cases of crypto.
While these are high-opportunity markets, it’s also critical to understand the potential use cases for Solana Pay specific to these regions.
Use-Cases for Solana Pay:🛠
While there can be numerous use cases for Solana Pay, let’s throw light on the most interesting use cases:
1. Tourist-Merchants Use-case:
Let’s take Dubai, for instance, which is in the top 4 visited cities in the world with the highest spending by tourists in a city (~$30.82 Billion annually). International Tourists traveling have two options which are quite expensive:
- Either exchange for local currency in cash, where they have to pay 2–4% as exchange fees.
- Pay via credit cards or Apple/Google pay, but the adoption is low amongst small Merchants, where the interchange/markup fees are between 1–3%. Further, Merchants need to pay 2–3% to Visa/Mastercard.
Tourists have the unique opportunity to spend their USD in the form of USDC via Solana Pay in a fast & cheap way. At the same time, merchants can adopt crypto and save on merchant fees to Visa/Mastercard.
Further, Crypto-native consumers have a higher tendency to spend via crypto because of on-chain capital & liquidity. This directly corresponds to higher chances of increased sales!💸
Apart from international merchant payments, Solana Pay can also unlock domestic payments but will need to offer some localized features like:
- Local Stablecoins: Local Merchants would find it very inconvenient to deal with USD and would prefer to accept in their local currencies. Local stablecoins can unlock massive domestic value and potentially onboard such merchants onto global financial rails!
- Integrations and Management: The POS solutions should easily integrate into their existing payment solutions and support their local languages. To make it more localized and merchant-friendly, innovative POS solutions like ‘Audio Box’ can be created, which gives a sound alert in their local languages that the money has been received in their wallet.
Solana pay can be a good use case for remittance and promoting financial inclusion. For instance, many Middle-east construction workers are sending outward remittances to South Asia. While this is a very big market, many remittance recipients are unbanked. Traditionally, it’s done by a network of brick-mortar cashout points, and everything is done via Cash. These are either through local dealers or via remittance incumbents like WesternUnion, and MoneyGram. It’s expensive, ~4–5%. While the share of digital remittances is rising rapidly, it’s still just 12% of the total remittance share, as per the World Bank.
What can Solana Pay do?
- Partner with brick-and-mortar cashout points/Kiosks: Optimising costs would be essential and can act as a strong value proposition.
- Partner with Exchanges: P2P crypto transfer is prominent in SEA, India, Pakistan, and Bangladesh, with high ex-pats working in MEA.
Case-in-Point: Coinbase x Remitly
Mexicans working in the US can send cryptos from the US to Mexico via Coinbase and cash out via Remitly, which has 37K+ physical retail outlets across Mexico. Recipients can even keep crypto in coinbase to hedge against the depreciation of Mexican currency against the dollar!
3. Luxury Brands:
Middle-East cities like Dubai, Riyadh, and Doha are becoming the world’s luxury capital. Luxury brands like Farfetch (in partnership with Luno POS) and Gucci (Apecoin) have already started accepting Crypto, showing initial signs of market fit. Further, NFT + Luxury is a perfect match, which the Tiffany & CryptoPunks have already proved.
Why would Luxury brands be open to adopting Solana Pay?
- They have been an early adopter of new technologies and would be great publicity to attract a crypto crowd.
- Increased sales & penetration in the crypto community.
Benefits for Solana Pay:
- An extremely high-quality cohort of users on-boarded to Solana
- Extremely high Ticket size, hence higher volumes
- A luxurious perception and publicity — Can be used as a reference to onboard smaller merchants.
- Most have a “House of Brands” model, which gives access to immense distribution.
Potential Partners for pushing adoption:🤝
While Solana Pay is a payment standard, local & strategic partners are crucial to pushing the mass adoption in a particular niche. To help the Solana Pay team, we identified key partners in both regions, which can be categorized as follows:
- Crypto payment gateways: They are already helping merchants accept crypto and integrate Solana Pay as an additional payment method.
- Off-Ramp players & Exchanges: Merchants’ revenue might be in Crypto, but their spending will always be in Fiat (at least in the near future), and hence they need a reliable off-ramp that also provides them with essential tooling.
- Global payment giants: With many payment incumbents now entering crypto, integrating directly can give access to immense distribution from Day 1.
Airports as a launch hub:
Airports serve as suitable places to launch Solana Pay:
- High Visibility: Dubai and Singapore airports serve as major transit hubs for regional and international passengers.
- Large ticket size: High-end luxury goods, including watches, perfumes, and liquor, constitute most of the sales at duty-free zones of these airports.
- Convenience: The need for currency exchange and high fees on international fiat payments make Solana Pay an attractive value proposition for international passengers.
The Trillion dollar payments opportunity💰
Solana Pay is a simple yet powerful leap in making payments a real use-case for crypto and moving apart from speculative use cases. It will help drive how the advancement of blockchain technology reshapes the commercial payment infrastructure for enterprises and small businesses like never before. Merchants should benefit from all of the advantages that on-chain decentralized payments can provide, such as network cost savings, DeFi access, instant settlement, and ownership of the customer relationship.
Overall, we will see the crypto payments ecosystem develop significantly in the coming 2–3 years and emerge as a competitive alternative to traditional payment rails. Certainly bullish on both the B2C and B2B use cases!
If you are someone building or looking to build on or integrate Solana Pay or in general looking to chat payments in Crypto, feel free to hit me up at @yashhsm — would love to help in any way!
Found it insightful? Please do share on your socials or with your friends — it helps me a lot and makes weeks of effort in researching and putting it together worthwhile by getting more eyeballs! You can also tip me via Solana Pay.
Check out solanapayments.fun for a complete understanding of payments on Solana!