Learn how digital dollar stablecoins provide an internet-native payments infrastructure for digital-first retailers and online marketplaces.
Whether you are buying tickets for an NBA game on Stubhub, booking a flight on Expedia, or hailing a cab using the Uber app, you are taking part in the multi-trillion-dollar digital economy.
According to Statistica, global retail e-commerce sales hit $3.53 trillion in 2019, and online retail revenues are projected to grow to $6.54 trillion by 2022. And these figures do not even include travel, transport, or events.
While the internet has been around for mainstream use for over 25 years, the opportunities that internet-native commerce provide remain plentiful, and the demand for digital-first products and services are on the rise. However, that does not mean that digital-first businesses are not facing their own set of challenges.
Arguably one of the biggest challenges is payments.
Legacy digital payments platforms enable businesses to accept payments online and allow consumers to make purchases. However, they are not equipped to handle all types of transactions that digital-first businesses encounter.
Micropayments, for example, are a challenge. Music streaming services that pay small amounts to artists per stream, for example, have to process thousands of microtransactions per day. Using existing digital payment platforms, however, that poses difficulties.
Global reach is another challenge. Most payment providers and fintech solutions typically operate locally and often work with legacy payment rails. That means internet businesses struggle to reach a global audience. A young artist living in Kenya who may not have a bank account, and instead uses mobile money in lieu of a bank, would struggle to receive royalty payments from an online streaming service that exclusively uses legacy banking rails.
Cross-border payments are also a big hurdle for businesses. For example, an online retailer in Mexico that needs to pay a supplier in China typically has to make at least one wire transfer, use a digital payment service, and face currency conversion fees, making the payments expensive and slow.
New innovations in business models and digital marketplaces have posed rising challenges on how to optimize and route funds between the different participants on the platform. Traditional bank accounts and service providers often don’t have the capability to customize the needs of every client, leaving ledger and routing practices of money to the owners of these digital marketplaces.
Fortunately, all of these issues can be solved using digital dollar stablecoins and blockchain technology.
Digital dollar stablecoins, such as USDC, enable seamless US dollar value transfer over the internet. Anyone across the globe can store, send, and receive digital dollars regardless of where they are located or whether they have access to traditional banking services.
Legacy digital payment channels typically require banking relationships or KYC processes that crowd out large parts of the global community. What’s more, most leading online payment systems do not operate globally.
Conversely, global stablecoins are accessible to anyone as they operate on permissionless ledgers. That means anyone with an internet connection can go online, convert fiat currency into digital dollar stablecoins and start sending digitized dollars around the world. While there are huge benefits to the consumer, digital dollar stablecoins can be even more impactful for businesses.
Internet-native businesses can utilize stablecoins in addition to or as a replacement of legacy online payment channels.
Before we jump into use cases that illustrate how businesses can utilize global stablecoins, let’s look at the benefits of USDC integration for businesses first.
USDC enables businesses and individuals to send and receive digital dollars across the globe. For example, an ecommerce platform based in California could receive borderless payments from customers all over the world via USDC, thus increasing their customer reach.
Additionally, the online retailer could seamlessly process mass payouts to suppliers, staff, and freelancers in digital dollars globally. Using the Circle Payments product, an internet business can payout stakeholders in both fiat currency and digital dollars.
The integration of USDC can also help businesses reduce costs as digital dollar transfers are typically cheaper than traditional payment methods. An on-chain stablecoin transaction usually costs between a few cents to a few dollars. Conversely, leading digital payments providers charge up to 3.5% of the transaction amount plus bid/offer on the currency conversion.
As an internet-native payment processing solution, stablecoins can be easily integrated into any ecommerce platform, online marketplace, or mobile application.
Using the Circle Marketplaces product, for example, a digital marketplace can accept traditional payment methods (like debit cards, credit cards, and ACH), and stablecoin payments and process multi-sided payout to marketplace participants. In effect, online marketplaces can use USDC in combination with Circle’s product suite as a plug-and-play payments infrastructure.
Global marketplaces can also seamlessly top-up dollars accounts using fiat currency payment methods in local currencies using a debit or credit card.
In emerging markets nations, where there is a lack of banking services, digital dollar stablecoins can effectively replace a traditional banking infrastructure for internet-native businesses.
When a business signs up for a Circle Account and makes use of Circle’s suite of API products, it can accept and make digital dollar and traditional payments globally without the need for a traditional banking relationship.
Adopting USDC, could, therefore, help startups and SMEs in emerging economies leapfrog traditional banking and enter the digital age.
While it is still early days for stablecoins in the digital economy, the potential use cases for digital dollars suggest that we likely are only a few years away from widespread adoption among internet-native businesses.
To provide insight into the opportunities and benefits of digital dollar stablecoins in commerce, we want to highlight three use cases:
An app-based ride-sharing service that matches up drivers and customers, for example, would be primed to benefit from stablecoin integration.
A sharing economy platform focused on ride-sharing has several stakeholders and multi-dimensional payment streams. Typically, payment streams for such a service would include customers paying drivers, drivers paying a share of revenue to the platform, and the platform paying staff and third-party service providers. For ride-sharing startups, that would mean multiple payments providers and banking partners, especially if the platform would operate internationally.
Using Circle’s products and USDC, a ride-share company can implement a plug-and-play internet-native payments infrastructure that can accept fiat currency and stablecoin payments, manage multiple payment flows, and process global payouts.
An online marketplace for freelancers and remote workers provides another excellent use case for digital dollar stablecoins.
Freelance jobs marketplaces typically match up enterprises and startups with individuals from across the globe. Moreover, freelancers are often located in countries with low banking penetration and limited accessibility to legacy online payments providers, which poses a challenge for job seekers.
Through the implementation of digital dollar stablecoins, such as USDC, combined with Circle’s Marketplaces product, an online job marketplace would be able to seamlessly accept and make global payments without the need for a traditional banking relationship while the platform’s transaction currency would remain the US dollar.
Anyone with an entry-level smartphone and an internet connection could accept USDC payments, which come near-instantly and at a lower cost than traditional digital payment methods.
Moreover, USDC held by vendors or received by freelancers can be held in yield-generating accounts on the Internet to earn a higher US dollar interest rate than dollars would in a bank account. For both companies and individuals, this poses a substantial value-add.
Additionally, companies that hold USDC in their wallet could use the stablecoin as collateral to borrow funds for other business needs.
OpenSea is a blockchain-powered marketplace for crypto collectibles. From virtual kittens that “live” on the blockchain to blockchain gaming cards, you can purchase a wide array of digital limited edition goods.
To enable marketplace users to buy and sell digital items using a price-stable currency, OpenSea integrated USDC into its platform in November 2018. Anyone looking to list a product, make an offer for an item or make a purchase can use the digital dollar stablecoin.
USDC takes price volatility out of the equation, which means sellers receive exactly the amount they are listing their products.
Moreover, USDC is a multi-chain stablecoins that also operates on the Ethereum network - on which OpenSea is built. The technical integration of USDC was, therefore, not a challenge for the marketplace.
“Digital dollar stablecoins are money for the internet that enables anyone with an internet connection to take part in the multi-trillion-dollar digital economy. Using a stablecoin like USDC, businesses and individuals can hold, send, and receive digital dollars without the need for a banking relationship. And they can even earn a higher yield than they would holding dollars in a bank account.”
— Jeremy Allaire, CEO of Circle
USDC is the world’s fastest-growing, fully reserved digital dollar stablecoin that enables individuals and businesses worldwide to transfer digitized US dollars over the internet.
USDC is managed and issued by regulated financial institutions and redeemable 1:1 for US dollars. To provide utmost trust and transparency, all US dollar reserve assets backing USDC are attested by global accounting firm, Grant Thornton LLP, on a monthly basis.
USDC provides all the features that an internet-native payment infrastructure requires to fulfill the needs of today’s digital commerce:
What’s more, Circle provides a plug-and-play, full-stack payment infrastructure that internet-native businesses can adopt to enter the next-generation of payments.
The USDC stablecoin ecosystem continues to grow as more and more internet businesses are acknowledging the potential of digital currency and are integrating this new payments technology into their products and services.
Let us connect you with the right team at Circle. Just tell us a little about you and your business.