As legacy payment companies lag behind in blockchain adoption, what will keep them competitive in Web3?

Legacy payment companies are not at the forefront of new blockchain solutions and, all things considered, are still quite late to blockchain adoption, being out-innovated by smaller, more nimble FinTech companies. However, we are finally starting to see more holistic movement on web3 from the biggest players in the space, with some like MoneyGram gaining industry-wide recognition for its blockchain-based on/off-ramp digital wallet service. Where do giants in the payments industry, such as Visa and MasterCard, stand when it comes to blockchain adoption? And how should they continue to move forward with solution development to stay competitive in the web3 field?

Visa, for example, is charging ahead with its CBDC and protocol team to study and build solutions using blockchain technology for future payment systems. These include use cases such as account abstraction and solutions for maneuvering 4337 paymaster contracts, as well as abstracting gas fees for users and allowing users to pay transaction fees using ERC-20 tokens. The company’s research aims to simplify transaction fees and improve the user experience. MasterCard is also dipping its toes in the water. Beyond a more public embrace of blockchain technology by MasterCard executives, the company isn’t just talking about the issue; MasterCard is launching cryptocurrency credential services for secure transfers of assets across countries, as well as actively seeking more partnerships with crypto firms to expand its cryptocurrency payment card programs.

While indicating a willingness to evolve, legacy payments companies still have a lot of blockchain catching up to do. Where does it make the most sense for them to place their research and resource energy to not only remain competitive, but advance the mainstream adoption of blockchain services? Several cryptocurrency, blockchain and web3 experts weigh in with their assessment, including:

Omid’s thoughts

“Let’s start by addressing what existing payment providers should not do, which is to assume that the architecture of how money moves around the world will remain the same in the future, and that they should only see blockchain as another tool that can help them improve what they are already doing. This is a mistake that incumbents often make, and frankly, if we look at the crypto experiments that payment providers and credit card companies have already done, they fall almost entirely into that bucket.

The right way to solve this is to start with a blank slate and the assumption that in the future this technology will allow anyone to have a digital wallet and all assets including money can be tokenized and people will be able to peer -to-peer payments in a way they cannot do today. And so to ask the question, in that world, what services can a company that has a lot of experience in payments and that has certain licenses and the trust of consumers offer that makes the innovative future even better? Of course, all of this assumes that the incumbents are okay with dealing with the possibility that they might be disrupted, but as the old saying goes, if they don’t accept that reality, their competitors surely will.”

Gabriella’s thoughts

“One area that legacy payment systems may want to strengthen is the user experience and user interface that retail consumers experience when engaging in the digital asset space. To this day, many digitally native firms lack and still have very clunky UX, UI, or user interface, user experiences, which makes it difficult to achieve mainstreaming Seamless integration into the already elegantly created interfaces and experiences that legacy payment systems have created for their consumers would be a great and easy way to try to engage, encourage and lead mainstream adoption of digital asset and blockchain technology .”

Peter’s thoughts

“I often get asked what can incumbent legacy payment providers do to ensure they are not disrupted by blockchain and crypto technologies? And after 25 years in Silicon Valley, my prediction is that history will repeat itself. The legacy companies will move too slowly and they will end up trying to catch up and buy smaller companies that are innovating much faster than them. There are several reasons for this. On the technology side, they are limited by the existing technology frameworks that they want to fit everything into. On the business side, they are afraid to adjust or perhaps cannibalize their business models.And then the employees are often set on their existing ways of thinking about technology and solutions.

So my recommendation is to create a series of small teams, experiment, learn and build new skills. Give them the freedom to innovate, experiment and create the right solutions quickly and without the existing constraints that we just talked about. They probably won’t get it right the first time, but then you can learn from it, and then you can figure out how best to apply and adapt what you learn and modernize existing solutions. And finally, maybe consider adding fresh external knowledge by partnering with smaller companies and learning from them as well.”

Article written by Daniel Litwin.