This white paper explores global cross-border payment challenges, a proposed technology solution with transformative potential, and the business and technical perspectives of the proposed solution. Highlights are as follow:
Global cross-borders e-commerce has tremendous potential. In 2015 alone, total Gross Merchandise Value (GMV) for cross-border e-commerce stands at USD 300 billion, with a growth rate of about 25% per annum. This is expected to continue annually till 2020.
By 2020, the global market for cross-border e-commerce will account for about USD 900 billion, a 22% share of the entire global e-commerce market.
However, three significant problems continue to plague the ecosystem.
The existing financial infrastructure is a closed system, where transaction costs are high, and money moves slowly across countries, mostly due to political and geographic boundaries set in place by human factors. Many are left unserved and unbanked, especially in emerging markets.
High processing fees and processing time – Cross-border interchange and transaction fees are higher than domestic fees, often resulting in an additional 3-5% on top of the total purchase amount. This is due to the increased number of intermediaries involved: payment gateways, correspondent banks, currency exchanges, financial messaging networks who take a cut of the transactions. The additional risk and compliance costs, technology infrastructure costs also contribute to higher processing fees and time for both the consumer and merchant.
Trust and reputation problem – Building trust is difficult, and trust is centrally governed by big marketplaces now. There is an inability to transfer trust from one centralized service to another, and thus a need to establish relationship with each merchant separately. Moreover, a merchant or consumer’s history is not properly recorded, so there is no ability to punish fraudulent buyers or merchants. Likewise, settling claims or chargeback disputes is usually highly contentious without trustworthy records.
Lack of access to credit – Globally, over 2 billion people have no access to banking services, especially credit. In Southeast Asia itself, only 27% of the 600 million residents have a bank account — leaving essentially 438 million people unbanked. Without a proper bank account, it is almost impossible to borrow, save or invest money through traditional financial institutions like national banks. As a result, most of the unbanked turn to alternative financial institutions like pawnshops or loan sharks, where annual interest rates can be as unreasonable as 100% per year.
Rate3 is a universal blockchain-based token within a wider ecosystem connecting shoppers, merchants and other intermediaries.
Single Token Payment Solution: Cross-border payments within the ecosystem can be completed with only one step and a one-time fee, making them up to five times cheaper and a thousand times faster, compared to current payment processes. For consumers, they can convert fiat currency to Rate3 tokens easily and use the tokens to pay for cross-border purchases in a transparent fashion. For merchants, a simple integration with the Rate3 payment gateway allows them to accept Rate3 tokens and convert them to local fiat currencies of their choice easily.
Transaction and Credit Scoring System: The blockchain will record information captured in all transactions including but not limited to: time required to make the transaction, wallet addresses, warranty conditions, delivery time, reviews, etc. Apart from helping both consumers and merchants solve claims or fraud, the smart contract will automatically change the trust level for each of the parties involved.
Additionally, by tapping on the consumers’ transaction history and other identity data, Rate can issue a credible credit score to these consumers and offer them affordable credit through partnerships with other lending institutions.
Incentive System for All Participants: The value of any ecosystem lies in the twosided network effects. With more consumers in the ecosystem, merchants are more attracted to join the Rate3 network. Likewise, with more merchants, there are better incentives for consumers to join. With Rate3 tokens, cash-back incentives can be easily programmed through smart contracts to retain consumers. For merchants, they can create incentives for consumers easily too. Moreover, this can all be applied and facilitated instantaneously through the Rate3 network.
Rate3 is the most suitable to do this, given our existing products, users and networks. Founded in 2016, Rate is a fintech startup focused on cross-border e-commerce transactions. Our flagship product is RateX, a browser extension which enables easy payments with exchange rates more favorable than those offered by PayPal, credit card companies or banks. RateX aims to eliminate hidden transaction fees and unfavorable exchange rates incurred by consumers when they purchase overseas products.
Additionally, RateX aggregates coupon codes from various merchants and allows users to apply all coupon codes in a single click during checkout. Apart from RateX, Rate has a newer product: RateS, a mobile app with the features of the RateX extension but also an additional element of deal discovery.
The founding team of Rate comprises of Mr. Goh Jian Kai (Jake), the Chief Executive Officer (CEO), Mr. Davis Gay and Mr. Lim Jing Rong, the Chief Technology Officers (CTO). Including the three founders, Rate currently has eighteen employees and this number will increase as the firm continues to grow after successfully closing its preseries A round of financing.
Rate currently has partnerships with globally recognized e-commerce platforms such as Amazon, Taobao, and Hotels.com. Our key philosophy is to empower consumers with the best and cheapest shopping experience, so both products are entirely free for consumers. Instead, Rate earns affiliate fees from merchants by helping them increase affiliate sales.
Given Rate’s existing operational experience in the intersection between payment and cross-borders e-commerce, the Rate3 token is the most suitable one to power the future of the global e-commerce ecosystem. Staying true to our original vision, Rate3’s business model will not charge any transaction fees from merchant and consumers. Our three primary revenue streams are: digital prepaid card fees, affiliate marketing fees and credit loan interest. More details will be elaborated in the subsequent sections.
Rate3