Square, the merchant payment platform from Block (SQ +0.89%), has become a go-to payment solution for thousands of businesses big and small. The network can accept Visa, Mastercard, American Express, and Discover credit and debit cards, making electronic payments easy for businesses.
But these payments could eventually move to a blockchain that's faster and less expensive than credit and debit cards today. Is Solana (SOL +2.96%) the future payment network that could surpass Square?
CRYPTO: SOL
Key Data Points
The true cost of digital payments
Square's standard fees are 2.6% of each transaction, plus a $0.10 flat charge. So, if you spend $100 at a merchant that accepts credit cards with Square, they only keep $97.30 of that transaction. These fees go to companies like Block, along with banks and credit card companies.
In the future, payments could also be accepted on Solana and go to a digital wallet, which would be faster and have lower fees. The fees are easy to understand. A transaction on Solana costs less than $0.01 in blockchain fees, and there may be a fee on top of that for the company that provides the payment interface, like Square. But costs could be a fraction of what we pay today.
This is the big advantage the blockchain holds for payment networks. It's cheap and easily scalable by building on a public blockchain. No proprietary networks or applications to fill out, either -- it's available to everyone.
The additional value in the blockchain is in the nearly immediate settling of transactions.
Time is money
It usually takes two business days for credit card transactions to settle, which means if a business takes a credit card on Saturday, it won't get the money until Tuesday or Wednesday. It's hard to explain how long that time can be for a small business that has bills to pay.
Solana's time to settlement can be measured in seconds. And the money is immediately available for other purposes. This may not be a big deal for public companies with a big balance sheet, but for small businesses with tight finances, this could be an important change.
Tools for building
Another advantage of the blockchain is what's known as composability. This means that blockchain components can be stacked together like building blocks. Smart contracts can be deployed on the blockchain and used by anyone, which can make it easier for developers or businesses to add the functionality they need.
In this respect, a single company like Block or Visa doesn't need to build the entire payment stack. Small components can be built by small developer teams. Maybe one company will create a digital asset like a loyalty card, another has built a payment interface, and another offers lending tools.
Many of these tools exist today; it's just a matter of developers tapping into them.
Solana's future
Over time, I think the low cost and speed of Solana will make this an attractive blockchain for payment companies to build on. It may take time, and developers need to make it possible to pay for goods and services without the friction of crypto wallets, a change that's coming slowly but surely. And that's very bullish for Solana.
