How Web3 Startups Are Revolutionizing Cross-Border Payments

Web3 startups are pivotal to reshaping cross-border payments., CXpose.tech discovered at the sidelines of Cyberport’s Venture Capital Forum 2024. While the cryptocurrency wave captured headlines, a quieter revolution in stablecoins emerged as the true game-changer for international payments and financial inclusion.

The year 2024 marked a crucial turning point for stable coin adoption. Following Ethereum’s Dencun upgrade last March, transaction costs plummeted to less than a penny, unlocking new possibilities for micro-payments and remittances.

This technical breakthrough shifted the focus from blockchain infrastructure to distribution and ecosystem development.

Alex Witt

“The future of payments is stablecoins,” noted Alex Witt, Founding General Partner at Verda Ventures, a venture capital (VC) firm focused on financial services enabled by blockchain. “As of 2024, processing or transferring stable coins costs less than one penny.”

Alex observed that before March 2024, there was too much demand for a limited amount of processing space, which had made it very expensive to process transactions on the blockchain.

“After March, a different data type was created that allowed for blockchains building on top of Ethereum to have a cheaper corridor for payments processing.”

With processing costs plummeting to essentially becoming free, there is now a paradigm shift to how the payments industry thinks about international money movement.

The MiniPay payment platform

Verda Ventures invests in tokenized financial infrastructure and has incubated MiniPay, which Alex described as the single largest source of daily active users for stablecoins, globally.

Stablecoins 101

Stable coins are tokenized assets pegged to fiat currencies like the US dollar.
Stable coins offer benefits like cheaper transactions and faster settlement times, especially for international remittances.
Nic Carter from Castle Island Ventures sees that the current user base of 25 million will increase ten-fold, in the next five years

In Africa, which has over 7 million active users and growing, imagine being able to buy groceries and pretty much anything else with a mobile wallet of stablecoins. The MiniPay wallet app on your phone converts stablecoins in US dollars to the local currency in Africa fairly cheap thanks to an intuitive interface and a very convenient mechanism – text messages.

“It’s super simple. You just need a mobile phone number. That’s it. That’s the power of the system and we’re tapping on the world’s largest network, which is mobile phone numbers,” Alex said, explaining that the mapping of mobile phone numbers to public key wallet addresses is abstracted away and hidden from the wallet users.

This ease-of-use as well as ‘onboarding’ of users to the service is enabled by tokenized infrastructure.

Distribution: The new battlefield

With a winning formula powered by blockchain that addresses Know-Your-Customer (KYC) processes, cost, and ease-of-use, what’s left to tackle is distribution. Alex admitted the focus after the Ethereum upgrade has shifted from technical infrastructure to distribution and ecosystem building. MiniPay usage reflects this with a growth of 1 million monthly active users to 5 million, at time of the interview.

But more can be done, and the Opera browser’s large user base is being tapped to achieve this. For example, from within the browser, users can directly access the MiniPay mobile wallet.

Photo by EVG Kowalievska: https://www.pexels.com/photo/photograph-of-person-holding-black-leather-wallet-with-money-1174750/

Also, MiniPay is integrating with local payment rails like M-PESA in Kenya, so as to be able to facilitate seamless conversion and spending of stablecoins. “Our goal is to make sure the MiniPay app can work in all the countries we are present in, so that it’s a seamless experience.

“That’s why we are so focused on emerging markets, because there is an opportunity to leapfrog the existing payment infrastructure.”

The Mission-Driven Advantage

Successful startups in the Web3 share a common characteristic: passion, motivation, and a clear mission beyond financial returns.

Alex put on his VC hat to respond to observations CXpose.tech shared about startups that set themselves up to be acquired so that its founders can exit with handsome amounts of money.

“It’s too hard to succeed in business without having a passion other than money,” Alex emphasized, adding as a VC founder that, “We’re focused on mission-driven founders who want to solve real problems and care about the customers they’re helping.”

Strategic investments

Working with the Opera browser had been a logical choice for Verda Ventures because of its large user base in Africa. “The Africa continent has 54 different countries and each has their own systems, own payment rails and so there is enormous friction for Africans to transact with one another.”

“It’s super simple. You just need a mobile phone number. That’s it. That’s the power of the system and we’re tapping on the world’s largest network, which is mobile phone numbers.”

As a venture capital fund, the kind of companies Verda Ventures looks for will complement and synergize with each other to thrive the ecosystem.

“So one example is Pretium which converts stablecoins into the local currency on M-PESA, and another company we invested in, Partna, has an API-based payment system that connects directly with banks allowing those with stablecoins to go into their local banks.

“So, all these local infrastructure players play an important part in connecting the ecosystem together and creating synergies.”

What’s left to do now but take advantage of the cohesive interoperability that MiniPay is creating to enable wider financial inclusion?

Alex admitted that MiniPay is a baseline infrastructure that is payment-based. “On top of that infrastructure, we are investing in applications like gaming, micro-work, and (more) last mile infrastructure for individual markets.” With M-PESA growing comfortably in Kenya, Verda Ventures has identified Southeast Asia as the next region it wants to remove payment friction for, and is working to be interoperable with local payment rails in Southeast Asia countries like the Philippines.