Blockchain technology has been touted as a revolutionary force in the payment industry since Bitcoin’s whitepaper first emerged over a decade ago. Despite years of promise, widespread adoption remains limited. While many blockchain projects focus on technical innovation without clear use cases—often criticized as “looking for nails with a hammer”—payment stands out as one of the few domains where blockchain can genuinely offer a tenfold improvement over existing systems.
At AppWorks, we apply first principles thinking to evaluate real-world problems: What pain points can blockchain solve better than traditional infrastructure? Our analysis identifies payment as the most promising application—because Web3-based payment systems are not just novel, they’re actually better in key ways. Payments are universal, recurring, and deeply embedded in global commerce. If blockchain can deliver superior performance here, mass adoption becomes inevitable.
But why hasn’t it happened yet?
Let’s explore the transformative potential of blockchain in payments through four core advantages:
- Near-instant settlement: Transactions settle in seconds to minutes, depending on the network.
- Low-cost micro and stream payments: Enables continuous, granular value transfer.
- Borderless clearing: No geographic restrictions or intermediaries.
- Programmable payments via smart contracts: Payments that execute automatically based on predefined conditions.
These capabilities open doors to solving long-standing inefficiencies in today’s financial infrastructure.
👉 Discover how next-gen payment rails are redefining global finance.
Problem 1: SWIFT Is Slow, Costly, and Geographically Limited
The SWIFT network connects thousands of financial institutions worldwide but operates on legacy 1970s architecture. Cross-border transactions often take 3–5 business days, incur high fees (especially with intermediary banks), and exclude regions without SWIFT access.
While fully decentralized networks like Bitcoin or Ethereum face regulatory and compliance hurdles, a more plausible path lies in adoption by established players like Visa or Mastercard. These companies already have global reach, trust, and infrastructure—making them ideal catalysts for blockchain integration.
In 2023, Visa’s crypto lead Cuy Sheffield announced:
“We’ve been testing USDC settlements on Ethereum because SWIFT limits how frequently we can move money.”
A typical credit card transaction involves three stages:
- Authorization – Verifying the transaction is valid.
- Clearing – Calculating who owes whom.
- Settlement – Transferring funds between banks.
Visa aims to replace the final settlement layer with blockchain using stablecoins like USDC. The impact? A $100 transfer from the U.S. to Europe costs ~$7.75 via PayPal (fees + FX). With USDC on Layer 2, gas fees drop to ~$0.20—a dramatic reduction.
This shift would allow settlement between “addresses” instead of banks, removing reliance on traditional clearing institutions. Even non-bank entities could issue cards or process payments instantly. Off-ramping crypto becomes seamless, accelerating capital flow across borders.
However, critical challenges remain:
- Risk-managed issuing partners: Few institutions are ready to hold stablecoins on balance sheets. Projects like Stables (partnered with Mastercard) and crypto-native neobanks like Palladium are early movers.
- On-chain fraud detection: Traditional networks use behavioral data (location, history, amount) for risk scoring. Blockchain needs equivalent tools. Startups like Sardine and Taiwan-based Chainsight (YC-backed) are building Web3 anti-fraud systems that detect private key theft or suspicious transfers before they happen.
- Liquidity for local currencies: While USD ↔ USDC liquidity is solid via Circle, converting USDC to local fiat (e.g., SGD, EUR) requires robust off-ramps. The BIS’s Project Mariana explores using AMMs for multi-currency liquidity pools—hinting at a decentralized future for cross-border clearing.
👉 See how modern settlement layers are streamlining international payments.
Problem 2: Payment Agreements Are Costly and Prone to Disputes
In the gig economy, freelancers and clients rely on payment agreements—escrow, milestone-based, or recurring payments. Yet current systems suffer from ambiguity, high fees (5–20% platform + 2.5–5% processing), and fraud risks.
Blockchain offers a better way:
- Smart contracts encode agreement terms and trigger payments automatically.
- Oracles (like Chainlink) feed real-world data—project milestones, delivery confirmations—enabling true automation.
- Escrowed funds live on-chain, reducing counterparty risk.
For example, Offramp.xyz uses Chainlink to connect with Wise’s API. When fiat arrives in a bank account, the oracle triggers an on-chain payment within 20 seconds—a seamless off-ramp experience powered by smart contracts.
Moreover, invoices can be minted as NFTs, creating portable, verifiable records for decentralized credit scoring. This enables invoice factoring, reputation portability across platforms, and financial services based on real transaction history.
Still, gaps persist:
- Offline condition triggering: Can we verify physical deliveries or service quality? Expanding oracle access to banking APIs or Open Banking standards will broaden applicability.
- Dispute resolution: Automated execution shifts responsibility to platforms. Services like Kleros provide decentralized arbitration using jury-like models.
- Reputation building: Reliable credit histories reduce disputes. On-chain data could power dynamic risk scoring—something traditional finance lacks.
Problem 3: Recurring Payments Are Inflexible and Expensive
Recurring payments make up 18% of global online transactions (per Stripe), including subscriptions, payroll, and supplier payments. Yet they’re constrained by rigid cycles and 2–3% credit card processing fees.
Blockchain enables stream payments—funds flowing continuously by the second. Use cases include:
- Crypto companies/DAOs paying contributors via platforms like Request or Zebec—no monthly payroll overhead.
- Low-income earners receiving wages in real-time, reducing reliance on predatory payday loans (which charge 200–700% APR in the U.S.).
- Shorter subscription models: From monthly to per-second billing via Superfluid, increasing conversion rates.
- Token vesting: Investors receive tokens streamed per second, avoiding market dumps and easing liquidity management.
While stream payments aren’t universally superior, they offer strategic advantages in specific contexts—especially when combined with push payment models, where users send funds directly (vs. credit cards’ “pull” model). This bypasses Visa/Mastercard networks entirely, saving billions in fees annually.
FAQ
Q: Can blockchain really replace SWIFT?
A: Not directly—but Visa and Mastercard adopting blockchain for settlement could make SWIFT obsolete over time.
Q: Are stablecoins safe for everyday payments?
A: Regulated stablecoins like USDC are backed 1:1 with reserves and audited regularly—making them among the safest crypto assets.
Q: How do smart contracts prevent payment fraud?
A: They eliminate manual intervention and enforce rules transparently. Combined with oracles and fraud detection tools, they reduce dispute risks significantly.
Q: What stops stream payments from going mainstream?
A: User experience and fiat integration. Most people aren’t ready to get paid per second—but gradual adoption in niche markets (DAOs, gig platforms) will drive broader use.
Q: Will banks adopt blockchain settlements soon?
A: Major institutions like JPMorgan (Onyx) have experimented—but progress is slow due to competition and compliance concerns. Private consortia may lead before full decentralization.
Q: How does blockchain improve credit scoring for freelancers?
A: On-chain invoices and payment history create immutable, portable reputation records—enabling access to loans or services without centralized intermediaries.
Final Thoughts: The Path to Mass Adoption
Blockchain won’t disrupt payments by being “decentralized” alone. Success requires integrating crypto rails into existing financial workflows while delivering clear tenfold improvements:
- Faster, cheaper cross-border settlements.
- Automated, transparent payment agreements.
- Real-time payroll and flexible subscription models.
But to win over traditional players, blockchain must also offer—or surpass—their current services: fraud prevention, AML compliance, dispute resolution, and user-friendly interfaces.
The future isn’t “blockchain vs. banks.” It’s blockchain within global finance—enhancing speed, programmability, and inclusion. With continued innovation in privacy (ZK tech), oracles, and regulatory clarity, that future is closer than we think.
👉 Explore how you can be part of the next evolution in digital payments.