Ep. 12: How are stablecoin payments changing merchant payments? Jess Houlgrave of WalletConnect explains

Here’s the cleaned transcript, with filler words removed and line breaks added for readability. I’ve kept the meaning and wording intact rather than rewriting it into polished prose.

Welcome back to The Payments Shed Podcast. Today we are joined by Jess Houlgrave, CEO of WalletConnect.

Firstly, thank you, Jess. Tell us a little bit more about you.

JESS HOULGRAVE:

So I'm Jess, CEO of WalletConnect.

WalletConnect is a network that comprises about 700 different wallets and over 60,000 different applications in Web3. We allow wallets and apps to connect and communicate with each other.

It's that interoperability. We work across chain, across asset, across device to facilitate these interactions.

HOST:

Fantastic. So we anticipate you mentioning before $400 billion in network volume. What's driving that growth? It's incredible, but what's really driving the force?

JESS HOULGRAVE:

So that's the volume that our network will process this year.

About 65% of that is DeFi, so decentralised finance, things like staking, lending and other things.

Some of the fastest-growing areas are, number one, institutional capital. So these are funds that hold crypto, but they want to do more now than just hold crypto. They want to stake those assets. They want to use those assets in payments flows and other things.

The second really big driver has been payments.

Stablecoins are obviously the top topic for everybody at the moment. It's partly driven by regulation and things like the Genius Act.

We are seeing more and more payments providers coming onto the network in a way that enables them to accept crypto payments from any of the wallets.

This makes it really interoperable for end users and for businesses, for PSPs and for all of their merchants to accept crypto, manage crypto payouts, even do things...

One of the things we launched recently was a point-of-sale SDK.

So for point-of-sale devices, you can now just scan the WalletConnect QR code and instigate a crypto-native payment.

HOST:

Fantastic. Pretty impressive.

Now, when we talk about embedded finance, yes, it's a buzzword, but actually everybody's using it, right? And if they're not using it, everyone's getting involved in using it.

How are user-control models, do you think, playing their part in enabling that growth of the embedded finance ecosystem?

JESS HOULGRAVE:

So I think in crypto this idea of the user being able to control their assets and their data is really core to the industry at its heart.

What it means is providing a wallet, in this case, and the private key that controls that wallet. The tooling to enable me as an end user to disclose my information, to make a payment, to control my asset.

So in some ways crypto is like one of the OGs of embedded finance because it really puts the user right at the centre.

It's interoperable because I can take that wallet anywhere across Web3.

I think as we see this integration of crypto and traditional finance, we're seeing more and more of these things shared, where traditional fintech, or a traditional fintech if you can call it that, has crypto features.

Applications themselves are embedding crypto, and I think for the user it's going to eventually, hopefully, become a much more seamless journey across these two worlds.

HOST:

Where's the risk, do you think, for two things there?

One, is there a risk to consumers here?

And two, we talk about payment companies, gateways, acquirers wanting to get involved in the world. There's always been a slight concern about the cannibalisation of card volume.

Where's also the risk to them, do you think?

JESS HOULGRAVE:

I think what is really interesting when you think about card volumes is that today one of the hot topics is crypto-backed cards.

But what that looks like is I'm connecting a wallet, basically doing an at-time-of-transaction conversion into fiat, and then it's running purely on those card rails from that point onwards.

One of the things that we are seeing demand for is this new point-of-sale SDK, which means that the transaction is actually crypto-native from the moment that it's initiated through the PSP until it's settled to the merchant.

Then it can be converted into fiat for that last settlement leg.

It completely bypasses the card networks.

For an end user, this kind of is like for like. But for merchants, obviously, it gives them potentially the ability to save quite a lot on acquiring fees.

So we are seeing, again, it's very early days. Don't get too excited because there's still a lot of work for better user experience.

But I think it's something that is top of people's minds. It's like, how do we disrupt the old way of doing acquiring?

I think, having said that though, there are still a lot of challenges to overcome.

User experience is one of them. It's still quite painful when you're using crypto today.

We're trying to solve a lot of that. Not needing to know which asset my chain is on, not needing to know the difference between the 108 different stablecoins that are all USD something.

So there are still some things that the industry needs to work on so that end users have a safe and secure experience.

HOST:

When we talk about interoperability and stablecoin, we know it's huge. We talk about Web3 and we hear it every single day.

What does Web3 mean to you as an individual within this ecosystem?

JESS HOULGRAVE:

I guess on the personal side, I think self-custody, or the right to self-custody, is really important.

That doesn't necessarily mean that everybody will want to self-custody, but giving people that option to do that, and also to not be completely cut out from the traditional financial world, is really important.

We've been working as a company on lots of things like Travel Rule verification or message-signing capabilities for wallets so that they can interact with the more traditional financial services in a seamless and compliant way.

So that's one thing that's super important for me because I think that, over time, individuals, especially from some particular places around the world, will want the ability to really control and hold their own assets.

Then I think the second thing is that we see just so much demand for these better rails.

How do we make all of this way more efficient?

Ultimately, it doesn't even need to be about self-custody, but it's about removing some of these actors from the ecosystem who are very rent extractive whilst continuing to provide a better service for consumers.

HOST:

Fantastic.

We're here at Money20/20. What's been your highlight so far? Your lows?

JESS HOULGRAVE:

I think the highlight for me is, having been here for several years now, this year feels like the year where most of the questions about crypto are actually really sophisticated.

It's no longer like, "Oh, what should we be doing?" or "What does this mean?" or "Isn't crypto just a scam?"

They're really sophisticated questions about, "Okay, if I'm thinking about doing this X, Y and Z, what do I need to do?"

And that, for me, marks this inflection point, I think, for the industry, where the traditional players are taking this very, very seriously and have actually woken up to the fact that they need a strategy here and they need to do something.

So I think that's probably the highlight for me.

In terms of the lowlight, Vegas is always exhausting and the air conditioning is too much and dries out my skin.

But I think the other lowlight for me still continues to be one or two conversations where people don't bother to take the time to really understand what crypto and blockchain really is, and they can be quite dismissive of it without taking time to understand.

HOST:

It's definitely the minority though, right?

If we rewind four or five years ago, it was very much, crypto is going to come into our world, it's full of scammers.

Now it's, my goodness, this is going to help me run my business and drive more revenue, right?

JESS HOULGRAVE:

Exactly.

HOST:

Fantastic.

And the last question, Jess, that we ask all of our guests: the Shelf of Shame.

What is your ick in this world? What grinds your gears in the payments industry?

JESS HOULGRAVE:

I think it's still really hard for merchants to understand all of the different layers and to give them enough information to choose how they should do this.

We know that payments is a really lucrative space. That's why so many people build businesses there.

It's also a really complex space.

But I still think, especially for some small merchants, the cost that they pay for their payments is too high. It affects their margin so much.

I would love to see that side change.

HOST:

I think I agree with that.

It used to just be the plain old four, five-party model, right?

And now it's grown arms and legs, and the four-party models and the individuals in that are now gaining their own four and five-party models beside it, right?

JESS HOULGRAVE:

Yeah.

And for a small merchant, if you're like a mum-and-dad shop, how do you even navigate all that?

How do you learn about it in a way that you're not getting completely ripped off by somebody, or it's not just taking too much of your time?

Ultimately, it should be really simple for you.

HOST:

So how can we educate the end consumer, right?

JESS HOULGRAVE:

Exactly.

HOST:

Fantastic. Jess, thank you so much for your time. Enjoy the rest of the show.

JESS HOULGRAVE:

Thanks. Thank you.