Worldpay Embraces USDC and Blockchain for Faster, Cheaper Global Payments

In a recent podcast episode, Neil Kreisel from Worldpay, a division of FIS, discussed the company's integration of USDC and blockchain technology into its payment processing systems. This move represents a significant step forward in the adoption of digital currencies and blockchain technology in the traditional financial sector. The conversation delved into the intricacies of payment processing, the benefits of blockchain-based settlements, and the future of global payments.

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What is Worldpay?

Worldpay is the world's largest payment processor, enabling businesses to accept consumer payments across various methods and currencies. As part of FIS (Fidelity National Information Services), Worldpay operates in over 50 countries, processing an astounding $2.2 trillion in payment volume annually.

Neil Kreisel explains, "We're probably one of the biggest companies you've never heard of, but use every day." This statement underscores the ubiquitous yet often invisible nature of payment processing infrastructure in our daily lives.

The Role of FIS in Financial Services

FIS is a large financial services infrastructure, technology, and regulated service provider. The company operates three primary business units:

1. Banking Solutions: Provides core ledgering systems and associated software for banks.
2. Capital Market Solutions: Offers technology and services for asset managers, hedge funds, and pension funds.
3. Worldpay: Handles global payment processing.

This diverse portfolio positions FIS at the heart of the financial services ecosystem, touching everything from everyday banking transactions to complex asset management operations.

The Four-Party Model of Card Payments

To understand the significance of Worldpay's USDC integration, it's crucial to grasp the traditional model of card payments. Kreisel outlines the four-party model:

1. Issuing Bank: The bank that issues the consumer's credit card.
2. Card Network: Companies like Visa or Mastercard.
3. Payment Processor: Entities like Worldpay.
4. Merchant: The business accepting the payment.

This model has been the foundation of card payments for over half a century, moving trillions of dollars annually with remarkable resilience. However, it's not without its inefficiencies, particularly in terms of settlement speed and cross-border transactions.

The Current State of Payment Processing

Despite the efficiency of the authorization process, which typically takes seconds, the settlement of funds can be significantly delayed. Kreisel points out, "If Visa instructs a payment on Friday evening or Saturday morning, that's not going to land until Monday morning at the earliest."

This delay is due to the limitations of traditional banking rails, which often don't operate on weekends or holidays. Moreover, even when operational, these systems can take several hours or even days to clear funds, especially for cross-border transactions.

USDC Integration: A Game-Changer for Settlement Speed

Worldpay's integration of USDC, in collaboration with Visa, aims to address these inefficiencies. By settling payments using USDC on blockchain networks like Solana, Worldpay can dramatically reduce settlement times.

Kreisel enthuses, "I'm still going to get it in 30 seconds or two minutes or whatever it takes depending on the chain that USDC is running on." This speed improvement is particularly significant for businesses that have already provided goods or services and are waiting on payment.

The Benefits of Blockchain-Based Settlements

The advantages of using blockchain and USDC for settlements extend beyond just speed. Key benefits include:

1. 24/7/365 Availability: Unlike traditional banking rails, blockchain networks operate continuously.
2. Cost Reduction: Blockchain transactions can potentially lower processing fees.
3. Cross-Border Efficiency: USDC provides a universal settlement currency, simplifying international transactions.

These improvements could lead to significant cost savings and operational efficiencies for businesses of all sizes.

Addressing the Demand for USDC Settlements

Worldpay's move to integrate USDC wasn't made in a vacuum. Kreisel reveals that there was significant demand, particularly from crypto and Web3 clients. "We work with about 30 or 40 different clients in the crypto space. So they go large exchanges, be up on ramps, brokers, wallets, et cetera," he explains.

For these businesses, receiving settlement in USDC can be a "business growth enabler and a money saver," allowing them to manage liquidity more efficiently and reduce costs associated with traditional fiat settlements.

The Internal Decision-Making Process

Integrating cryptocurrency-related services into a large, regulated financial institution is no small feat. Kreisel provides insight into the internal discussions at Worldpay and FIS:

"Our leadership team has got, I would say, a very strong base level of familiarity with the industry and what we do in the space and how it's relevant to payments, just because when you've been doing something for eight, nine years, you tend to learn a little bit about it."

This familiarity, combined with clear business cases and revenue opportunities, helped pave the way for the USDC integration project.

The Future of Blockchain-Based Payments

While USDC settlement is a significant step, it's just the beginning of what could be a broader transformation in the payments industry. Kreisel discusses various potential futures, including:

1. Central Bank Digital Currencies (CBDCs)
2. Continued growth of stablecoins
3. Increased use of cryptocurrencies like Bitcoin for everyday transactions

Worldpay's strategy is to remain flexible and prepared for any of these scenarios, positioning itself as an innovative leader in the evolving payments landscape.

Regulatory Considerations and Compliance

As a regulated financial institution, compliance is paramount for Worldpay. Kreisel emphasizes, "As a large regulated financial institution, compliance is paramount. And, you know, we can't operate the scale we do without trust."

The company undertook extensive regulatory analysis before rolling out its USDC settlement services. This diligence is crucial in navigating the complex intersection of traditional payment regulations and emerging crypto-asset regulations.

The Impact on Merchants

For merchants, the integration of USDC settlements through Worldpay offers several potential benefits:

1. Faster access to funds
2. Potentially lower fees compared to traditional credit card processing
3. Simplified international transactions

However, Kreisel notes that most merchants won't need to worry about additional regulatory requirements: "Most merchants, you know, they shouldn't have to have some sort of, you know, payment institution or electronic money authorization. They're just selling a good or service."

The Role of Stablecoins in the Future of Payments

When discussing the future of stablecoins, Kreisel provides a nuanced perspective. He points out that operating a stablecoin is fundamentally different from processing payments:

"Starting and operating and running a stablecoin is a very different business than processing payments. Like, yes, at the highest level, they're both, you know, financial services, you could say. But they're quite different from a business model perspective and economics perspective, risking compliance and licensing requirement perspective, et cetera."

This insight suggests that we're more likely to see specialization in the industry rather than payment processors launching their own stablecoins.

Worldpay's Long-Term Vision for Crypto and Blockchain

Worldpay's ambitions in the crypto and blockchain space are significant. With nearly a decade of experience in the sector and strong leadership support, the company is well-positioned to adapt to the evolving landscape.

Kreisel states, "We keep a really close pulse on all those different pieces, whether it's stable coin payments, whether it's CBDCs, whether it's payment acceptance on the inbound side for crypto, whether it's stable coin or other. And so as the market continues to evolve and, you know, as a player that's in the heart of that market, you'll, you'll see us kind of act and follow what's going on."

The Potential for Direct Bank Account Transfers

Looking ahead, there's potential for even more direct integration of blockchain technology with traditional banking. Kreisel mentions the concept of tokenization of bank deposits, which could revolutionize how individuals interact with their money held at banks.

"I think whether it's stable coins, whether it's CBDCs, whether it's tokenized deposits, like all three of those things probably have some role to play in that going forward. I don't think it's going to be either or," he explains.

The Importance of Speed in the Current Interest Rate Environment

One factor driving the push for faster settlements is the current high-interest rate environment. Kreisel notes, "As you can imagine, time value money is higher than ever. And people want that money faster."

This economic reality makes the speed improvements offered by blockchain-based settlements even more valuable to businesses of all sizes.

Addressing Chargebacks and Disputes in Blockchain Payments

One of the key differences between traditional card payments and blockchain-based transactions is the issue of chargebacks and disputes. While credit card transactions are famously reversible, blockchain transactions are not.

Kreisel provides a balanced perspective on this issue: "Depending on who you ask, like where they send the ecosystem, they will say the fact that a dispute or recall or reversal mechanism not being available. Was either a really good or really bad thing."

He points out that many merchants appreciate the finality of blockchain transactions, while consumers might prefer the protections offered by traditional payment methods for certain types of purchases.

The Global Context of Real-Time Payments

Worldpay's USDC integration is part of a broader global trend towards faster payments. Kreisel mentions several countries that have implemented real-time payment systems:

"In the UK, we have the faster payment system, which has been around for several years. Basically any transaction, I believe it's under a million pounds will, will settle and clear almost instantly. It's, it's quite impressive. Um, Singapore, for example, Thailand, Malaysia, they all have real time payment systems."

However, he notes that these systems are often not interconnected, creating inefficiencies in cross-border transactions that blockchain-based solutions like USDC could potentially solve.

The Competitive Landscape of Stablecoins

When discussing the future of stablecoins, Kreisel acknowledges the current dominance of providers like Circle (the issuer of USDC) but also considers other potential scenarios:

1. A single provider dominating the regulated market
2. Traditional financial institutions issuing their own stablecoins
3. Payment processors like Worldpay launching stablecoins

However, he expresses skepticism about the last option, emphasizing the significant differences between operating a stablecoin and processing payments.

The Role of Solana in Worldpay's USDC Integration

While not explicitly discussed in great detail, the mention of Solana in the context of Worldpay's USDC integration is significant. Solana's high-speed, low-cost blockchain infrastructure makes it an attractive option for financial institutions looking to leverage blockchain technology for payments.

The potential for near-instant, low-cost settlements on Solana could provide Worldpay with a competitive edge in the rapidly evolving payments landscape.

The Intersection of Traditional Finance and Crypto

Worldpay's integration of USDC represents a significant milestone in the convergence of traditional finance and cryptocurrency. By leveraging blockchain technology and stablecoins, established financial institutions can enhance their services while maintaining compliance with existing regulations.

This hybrid approach could pave the way for broader adoption of blockchain technology in the financial sector, potentially leading to more efficient, transparent, and accessible financial services for businesses and consumers alike.

The Impact on E-commerce and Global Trade

The improvements in settlement speed and cross-border transactions offered by USDC integration could have far-reaching effects on e-commerce and global trade. Kreisel provides an illustrative example:

"I could order an Amazon package for next day delivery. It'll be at my house, potentially even that evening, if not the next day on Saturday, but Amazon's not going to get paid for that until Monday at the earliest."

By reducing settlement times, businesses could improve their cash flow, potentially leading to faster shipping times, better inventory management, and enhanced customer experiences.

The Role of Payment Processors in the Blockchain Era

As blockchain technology continues to evolve, some might question the need for traditional payment processors. However, Kreisel's insights suggest that companies like Worldpay will continue to play a crucial role:

1. Regulatory Compliance: Payment processors handle complex regulatory requirements across multiple jurisdictions.
2. Integration and Aggregation: They provide a single point of integration for multiple payment methods and currencies.
3. Risk Management: Payment processors take on financial risk in transactions, a service that remains valuable even with blockchain-based payments.

The Potential for Cost Reduction

While Kreisel doesn't provide specific figures, he suggests that blockchain-based settlements could potentially reduce costs compared to traditional payment methods:

"I haven't done like the numbers. Analysis, I can't say, you know, definitively do we expect this to be cheaper than cards or other existing payment methods today. What I would say is as the world has rolled out these real time payment systems in different countries and as things like QR code, base payments and account job payment, a capsule account payments have, you know, taken hold in a lot of places. Typically those are cheaper, at least than a credit card."

This potential for cost savings could be a significant driver of adoption for both merchants and consumers.

The Challenge of Payment Method Proliferation

One interesting challenge Kreisel highlights is the proliferation of payment methods around the world. He uses an analogy to illustrate this point:

"I saw this meme a couple months ago and it basically had a picture of an iPhone where like, if you listen to every single request for a consumer, what would an iPhone look like? It would probably be some jumbo portable device that has like a keyboard and like, you know, 7.1 surround sound and like all this stuff, right?"

This analogy underscores the difficulty payment processors face in balancing the desire to support numerous payment methods with the need for operational efficiency and simplicity.

The Future of Bank Deposits and Digital Currencies

Looking ahead, Kreisel touches on the potential for further integration of blockchain technology with traditional banking:

"I think this actually dovetails really well into at least something here in the UK. That's been a huge topic, which is tokenization of bank deposits. And what that actually means for like the future of how you interact with your money, that's held at the bank."

This concept of tokenized bank deposits could represent the next frontier in the evolution of money and payments, potentially blurring the lines between traditional bank accounts and digital currencies.

Conclusion: A New Era of Global Payments

Worldpay's integration of USDC and blockchain technology represents a significant step towards a more efficient, faster, and potentially cheaper global payment system. By leveraging the strengths of both traditional financial infrastructure and innovative blockchain solutions, companies like Worldpay are paving the way for a new era of global commerce.

As the financial landscape continues to evolve, it's clear that blockchain technology and digital currencies will play an increasingly important role. Worldpay's forward-thinking approach positions it at the forefront of this transformation, ready to meet the changing needs of businesses and consumers in an increasingly digital and interconnected world.

Facts + Figures

• Worldpay processes $2.2 trillion in payment volume annually.
• FIS operates in over 50 countries.
• Worldpay works with 30-40 different clients in the crypto space.
• The company has been involved in the crypto space for nearly 10 years.
• Traditional card payments involve a four-party model: issuing bank, card network, payment processor, and merchant.
• USDC settlements on blockchain can reduce transaction times from days to minutes or seconds.
• Worldpay offers settlement in over 20 different currencies, with USDC now added as an option.
• The UK's faster payment system can settle transactions under a million pounds almost instantly.
• Worldpay's website might be slightly outdated, as Kreisel mentions they're now doing $2.2 trillion in payment acceptance around the world, up from the $1.7 trillion listed on the site.
• Credit card settlements in Brazil can take up to 30 days.
• Worldpay has been in the crypto space since 2015, with Coinbase as their first client in this sector.
• The company processes about 40 billion transactions per year.

Questions Answered

What is Worldpay?

Worldpay is the world's largest payment processor, enabling businesses to accept consumer payments across various methods and currencies. It's a division of FIS (Fidelity National Information Services) and operates in over 50 countries, processing an astounding $2.2 trillion in payment volume annually. Worldpay provides the infrastructure and services that allow businesses of all sizes to accept payments from consumers using credit cards, e-wallets, local payment methods, and bank transfers in multiple currencies.

How does the traditional card payment process work?

The traditional card payment process follows a four-party model. First, there's the issuing bank, which provides the consumer with their credit card. Second is the card network, such as Visa or Mastercard. Third is the payment processor, like Worldpay, which facilitates the transaction. Finally, there's the merchant accepting the payment. When a consumer makes a purchase, the money moves from the issuing bank to the card network, then to the payment processor, and finally to the merchant. This process can take several days, especially for cross-border transactions or during weekends and holidays.

What benefits does USDC integration offer to payment processing?

USDC integration offers several key benefits to payment processing. Primarily, it significantly speeds up settlement times, potentially reducing them from days to minutes or even seconds. This is possible because blockchain networks operate 24/7/365, unlike traditional banking rails. Additionally, USDC settlements can potentially reduce costs associated with cross-border transactions and currency conversions. For businesses, especially those in the crypto space, receiving settlements in USDC can improve liquidity management and reduce costs associated with traditional fiat settlements.

How is Worldpay addressing regulatory concerns with crypto integration?

Worldpay takes regulatory compliance very seriously in its crypto integration efforts. The company conducted extensive regulatory analysis before rolling out its USDC settlement services. This involved working with external experts to ensure compliance across multiple jurisdictions. Worldpay's approach is to ensure that they meet all necessary regulatory requirements so that their merchant clients don't have to worry about additional compliance burdens. The company navigates the complex intersection of traditional payment regulations and emerging crypto-asset regulations to provide a compliant service to its clients.

What is the future of stablecoins in the payment processing industry?

The future of stablecoins in the payment processing industry is likely to be one of coexistence with traditional currencies and emerging central bank digital currencies (CBDCs). While some speculate about payment processors issuing their own stablecoins, Kreisel suggests this is unlikely due to the significant differences between operating a stablecoin and processing payments. Instead, we may see a landscape where multiple types of digital currencies, including stablecoins, CBDCs, and tokenized bank deposits, play different roles in the global financial system. Payment processors like Worldpay will likely continue to focus on providing platforms that can handle all these different types of currencies efficiently and compliantly.