Confronting the Global Payment Frontier: Are Open and Permissionless Platforms a Solution to Frictions of the Global Mobile Payment Market?

Global mobile payments form the cornerstone of international trade and financial transactions, facilitating economic interactions across borders. The global mobile payment market reached $2,127.1bn in 2022 and is expected to quickly grow. However, the landscape of global mobile payments is riddled with complexities and challenges that pose significant hurdles to seamless transactions. This overview aims to elucidate the multifaceted challenges encountered in the realm of global payments, and how we can overcome them with open, permissionless platforms leveraging blockchain technology.

Can Regulatory Fragmentation Be Unified?
One of the foremost challenges in global mobile payments pertains to regulatory fragmentation across different jurisdictions. Divergent regulatory frameworks, compliance requirements and varying standards often lead to ambiguity and inefficiencies in cross-border transactions. However, we see more and more positive developments on the regulatory side when it comes to Web3. Singapore now has a regulatory framework for stablecoins. The Markets in Crypto Asset Regulation (MiCAR) is coming into effect in Europe this year, providing a regulatory framework for crypto-assets, as well as regulations for crypto-asset service providers. What does this mean for Europe's global payment market? With clear guidelines and regulations, corporations can confidently enter the field of Web3 and be more eager to invest resources into developing innovative payment platforms which will foster adoption and new use cases for stablecoins.

Reducing Cross-border Transaction Costs with Decentralized Mobile Wallets
The cost associated with cross-border payments represents a significant barrier to seamless global transactions. Traditional payment systems entail substantial fees, foreign exchange costs, and intermediary charges, thereby diminishing the affordability and accessibility of cross-border remittances, particularly for individuals and businesses in emerging economies. In October 2023, fees for traditional bank transfers from Germany to Ghana for instance peaked at around 17%. Recently, the weighted average prices of global remittances have started rising again. These high fees, combined with long transfer times of up to 6 days, present major obstacles for individuals looking to send or receive money. We are addressing the issue of exorbitant transaction costs with open, secure, scalable and permissionless platforms that can offer cheaper transactions: For example Celo has already settled 400mn transactions so far and continues to grow daily. The fees of a global transaction of Mento’s decentralized cEUR, cUSD, cREAL or eXOF stablecoins are below one basis point. There are more user-friendly mobile wallets, like MiniPay or Valora, ensuring global accessibility. This momentum is particularly significant in regions with limited access to traditional financial services, where blockchain technology and decentralized finance (DeFi) solutions can facilitate various use cases such as saving, lending, borrowing, and remittances via mobile phones. This widespread adoption is driving momentum.

Exchange Rate Volatility
Exchange rate fluctuations pose inherent risks to global payments, exposing transacting parties to currency volatility and potential losses. The dynamic nature of foreign exchange markets and macroeconomic factors contribute to uncertainty in exchange rates, complicating financial planning and hedging strategies for businesses engaged in international trade. Using digital currencies can enable smoother processes and lower costs. With the introduction of local currency stablecoins, users can maintain funds digitally until required for fiat currency transfers. The open-source Mento Platform is providing accessible local stablecoins in multiple currencies, enabling users in every country of the world to access either a USD stablecoin, or their local digital currency via various wallets. Mento Labs is looking to partner with DeFi platforms that want to build FX and FX-derivative solutions on top of Mento to further cater to the FX market.

How Secure Are Digital Transactions: Blockchain For Trust
The proliferation of digital and mobile payment channels amplify security and fraud risks in global payments. Cyberattacks, data breaches, and fraudulent activities pose grave threats to the integrity of payment systems, undermining consumer trust and confidence in online transactions. Blockchain technology provides a transparent, safe, and trustless environment for transactions, implementing robust authentication protocols, and leveraging advanced encryption technologies that are imperative to fortify the resilience of global payment infrastructure.

Financial Inclusion and Accessibility
Achieving universal access to financial services remains a paramount challenge in the realm of global payments. Millions of individuals worldwide, particularly in underserved regions, lack access to formal banking facilities and are excluded from the digital payments ecosystem. According to the Global Findex Survey, 57% of the population in Sub-Saharan Africa still lacks any form of bank account. In Ghana, for instance, only one third of the population has a bank account, yet nearly 95% own a mobile phone. Mento facilitates the launch of permissionless, transparent and stable assets so that affordable payment solutions tailored to the needs of marginalized communities can become more accessible. Getting access to a stable USD-coin, the highly overcollateralized cUSD, on the same platform where users can get access to local currencies, e.g. the cEUR, eXOF or cREAL, with many more stablecoins to follow, provides universal access to stable transactions, saving, lending, borrowing, remittances and many more.

The challenges confronting global payments are multifaceted and require concerted efforts from stakeholders across the public and private sectors to address. Mento’s multi-currency EVM stablecoin platform enables stablecoins for every country in the world, therefore addressing the need for more accessible FX platforms that enable cross-border transactions.

About the Author

Authored by Markus Franke, CEO of Mento Labs