With Leading The Recovery And Rally, What Are The New Highlights Of The PayFi Sector?

[TL；DR]:

Against the backdrop of an overall market correction, the PayFi sector has performed relatively strongly, attracting a large amount of capital attention, with a market cap of over $2 billion, accounting for 5.2% of the total crypto market cap.

Innovative projects, including AI payment, micropayment, deposit and withdrawal solutions, and supply chain finance, have emerged, injecting strong momentum into the PayFi sector, such as Gate Pay’s diversified payment solutions, Skyfire’s AI payment layer, and Huma Finance’s supply chain finance.

PayFi faces challenges such as low user awareness, uncertain regulatory policies and high technical barriers, but with technological advancement and growing market demand, PayFi is expected to become the core infrastructure of a trillion-dollar market, which may be the best time for investors to make a layout.

Introduction

Since the beginning of February, the crypto market has been in a correction and volatility trend. Still, the PayFi sector has risen against the trend, attracting a lot of capital with its unique payment and financial service integration model.

At the forefront of blockchain technology innovation, PayFi not only carries technological innovations in crypto payments but also shows great potential in combination with DeFi, RWA, AI, etc., and is gradually becoming the next growth point of the market.

The Market Generally Fell Back, But PayFi Rose Against the Trend

Recently, the overall sentiment in the crypto market has been relatively cold, and the prices of major mainstream cryptocurrencies have generally fallen back, and the market sentiment is relatively depressed. However, in this wave of general decline, the PayFi sector has performed relatively strongly, attracting a lot of attention from funds.

Source: sosovalue

According to SoSo Value and CoinGecko data, the market cap of PayFi-related tokens (such as stablecoins and payment protocol tokens) exceeds $2 billion, accounting for 5.2% of the entire market. Among them, Ripple (XRP), Telcoin (TEL), Verge (XVG), and others led the gains slightly, becoming one of the few areas to achieve net capital inflows.

Source: SoSo Value

Here is a brief introduction to PayFi. PayFi, which stands for Payment and Finance Integration, is an innovative application model that combines payment functions with financial services based on blockchain and smart contract technology. It not only covers traditional payment functions, but also covers financial investment, asset management, credit assessment, and other fields, providing users with a one-stop financial service experience.

It should be noted that although high-fee cross-border payments that support stablecoins, such as PayPal, avoid some clearing links, they still rely on the traditional SWIFT , fundamentally different from PayFi we are discussing here.

Source: Odaily

The development of PayFi can be traced back to the early stages of blockchain technology. With the birth of cryptocurrencies such as Bitcoin and the continuous maturity of blockchain technology, some blockchain projects, such as bitPay, began to try to develop blockchain-based payment s. Still, due to technical limitations and low market awareness, these projects did not achieve much success.

Source: bitpay

However, with the continuous advancement of blockchain technology and the improvement of market awareness, the PayFi field represented by Ripple (XRP) has gradually become popular. More and more AI, RWA, DeFi, and Wallet protocols have begun to enter the PayFi field and launched a series of safe and efficient payment and financial service products, making the PayFi sector one of the important growth points in the future crypto market.

Gate Pay’s Diversified Payment Solutions, from Payment Tools to Financial Eco

The PayFi sector has taken over AI, RWA, Meme, etc., to become the new eco in this round of bull market. Especially with the launch of Bitcoin spot ETF and Trump’s crypto-friendly policy, the integration of crypto payments and the real world has accelerated, and many blockchain projects have launched payment and financial service products with their own characteristics.

Source: Foresight Ventures

Take Gate Pay as an example. This project is a Web3 payment solution created by Gate.io. Through Gate Pay, users can spend more than 300 major cryptocurrencies, just like using traditional currencies, meeting the needs of merchants and individual users for Web3 payment scenarios. Gate Pay supports merchants in distributing funds to multiple wallet addresses simultaneously, which is very suitable for large-scale transactions or batch payments.

Source: Gate.io

In addition to leading projects such as Gate Pay in terms of deposit and withdrawal facilities for payment consumption, the PayFi sector has also seen the emergence of the following scenario use cases in the following sub-sectors.

-AI Payment: Skyfire builds a payment layer for AI Agents to support high-frequency, small-value transactions. For example, AI assistants can automatically call Skyfire APIs to complete real-time USDC settlements for services such as ordering food and taking taxis.

-Reward payment: Sidekick’s handling fee is reduced to 1%, and rewards are credited to the account in real time.

-Supply Chain Finance: Huma Finance tokenizes accounts receivable, and suppliers can obtain instant financing with on-chain credit. It cooperates with Walmart Supply Chain to shorten the payment period from 90 days to 24 hours.
According to the Atradius report, 55% of companies in the United States receive overdue invoice payments, and 9% face bad debts. Huma has tried to introduce a decentralized and automated accounts receivable financing method to reduce delays, increase fees and other issues.

Source: Huma Finance

-Stablecoin payment: Agora launched the stablecoin AUSD, which is fully collateralized by the U.S. Treasury bonds. It obtained a FINMA license and can circulate in 180 countries and regions. It has recently been connected to a pilot with Alipay and others to support offline merchant scan code payment.

PayFi Opens the Last Stop of the Global Payment Network

It is not difficult to see from the above that in this round of bull market dominated by the integration of crypto technology in the real world, the PayFi sector has shown a relatively strong trend, especially the emergence of innovative projects such as AI payment, micropayment, deposit and withdrawal solutions, and supply chain finance. It has not only injected strong momentum into the PayFi sector, but also brought more possibilities for the business boundaries and product innovation of the entire crypto market.

Global payment revenue is expected to reach $3.3 trillion by 2031, but high fees, slow settlement times, and inefficiencies constrain legacy s. PayFi solutions address these challenges, reducing cross-border fees by up to 90% and accelerating settlement times to seconds.

Source: CoinGecko

However, it should be emphasized that although PayFi aims to become a connector between traditional finance and the crypto world, it still needs to overcome the following challenges:

Low user awareness: Many Web2 users and merchants are still unfamiliar with PayFi. According to Visa’s latest survey, more than 60% of small and medium-sized enterprises are still skeptical about stablecoin payments. Therefore, popularizing this cutting-edge technology solution still requires a lot of time and cost for user market education.

Regulatory policy uncertainty: Although Bitcoin has begun to be recognized worldwide, the taxation and reserve auditing standards for stablecoins vary from country to country/region, resulting in the lack of such regulation being both a development opportunity and a compliance risk.

High technical threshold: High technical thresholds and low penetration of mobile networks also limit the popularity of PayFi and restrict the implementation of PayFi. Despite this, we have also seen some new trends, such as USDC issuer Circle and digital payment provider PayPal taking the lead in establishing the “Global Stablecoin Alliance” (GSA) to unify technical specifications.

In my opinion, PayFi is not only a technological revolution, but also a practice of financial democratization. Its essence is to compete for the pricing power of legal currency payment channels. The key to breaking away from the competition with traditional payments lies in meeting regulatory requirements, reducing transaction and user cognitive costs, and improving capital efficiency.

As a16z partner Chris Dixon said: “The explosion of blockchain payments is not a question of ‘if,’ but a question of ‘when.’” With the integrated application of technologies such as multi-model AI and privacy computing, PayFi projects represented by Gate Pay are expected to cover 1 billion users by 2030 and become the core infrastructure of a trillion-level market. For investors, now may be the best time to lay out the PayFi track - not only to pay attention to technology leaders, but also to have insight into those long-termists who quietly build eco connectors.