Feature Piece - "Continuous Payments"

Potentially the most commonly discussed use case for blockchain is cryptocurrencies. The primary application of cryptocurrency discussed is international or domestic remittance. However, we believe that one extremely valuable application of crypto assets is the concept of 'continuous payments'.

Today we will introduce you to the new and vastly unexplored concept of 'continuous payments' that cryptocurrencies could aid in enabling. Simply the concept would allow for real time payment for services rendered to the second/minute/day rather than weekly, fortnightly or monthly. A few examples will help to break down this concept and make it a lot clearer:

  1. Salary payments - We would be willing to wage that the majority or readers (and the global employed polulation) are paid fortnightly or monthly. And a large portion of these live paycheck to paycheck, requiring personal budgeting and financial predictability. If we apply the concept of continual payments to salary, employees could get paid at the end of each day for work rendered. Through deploying individual employee smart contracts, employees could get paid for the hours worked during the day and funds could be released on the blockchain. This could also help companies streamline and automate the often cumbersome payroll process.

  2. Subscription services - as is the case with Netflix, Spotify, Amazon Prime and most other subscription services, companies cannot price discriminate between customers, meaning the customers who use the services least are subsidising those that use it the most. Blockchain and cryptocurrencies have the potential to aid in allowing these companies to charge per unit of usage in a much more efficient way. For example imagine being charged $0.50 for every hour of Netflix watched or $0.01 per song listened to on Spotify, rather than a fixed fee at the end of the month. This would help reduce the inefficiencies in the current pricing model of subscriptions. 

  3. Utility bills - I won't assume many are like me but I hate getting my monthly or quarterly utility bills only to be shocked by what I'm charged. Blockchain and cryptocurrency could provide the ability for daily settlement of utility usage. This could help provide more feedback for consumers and allow them to rectify overusage before a monthly or quarterly bill.

After discussing continuous payments and potential use cases such as these in depth at Magnet Capital, we concluded that whilst the technology is not yet there, it is not far away from continuous payments becoming a reality and continuous payments are not currently done with the existing financial system because of slow settlement times and the relatively high cost to verify micro transactions. Blockchain helps simplify and significantly reduce the cost of verification and micro remittance payments that could become an important and disruptive payment method of the future.

We hope this piece was thought provoking and has you thinking of how real time micro payments for services rendered could improve on existing models. But we also want to acknowledge that none of these use cases described above are as simple as they sound and that there are a lot of kinks that have to be removed before this becomes a reality.

Disclaimer: Magnet Capital does not accept any liability for any financial decisions made on the basis of the information provided. The above opinion does not constitute financial advice and should not be taken as such. Magnet Capital urges you to obtain professional advice before considering any investment decisions.

Egor Sidelska