How to Get Started with Payments on the Exchange?

Cryptocurrency exchanges are the primary platforms for buying and selling cryptocurrencies. Their main functions include asset trading, liquidity provision, custody services, derivatives trading, and currency acceptance, among others. As the largest participants in the crypto ecosystem, exchanges have built a robust infrastructure based on crypto assets, achieving a complete closed loop for the value exchange of crypto assets.

Cryptocurrency payment refers to the use of cryptocurrency as a means of payment to purchase goods or services in real life. This involves payment gateways, merchants accepting cryptocurrency, currency liquidity management, currency deposit and withdrawal acceptance, asset custody, KYC/KYT/AML compliance, and other functional requirements. For exchanges, most of these requirements have already been well established.

The cryptocurrency exchange and the cryptocurrency payment system have formed a symbiotic relationship: the exchange is the "entrance" for cryptocurrency payments, providing asset acquisition and liquidity support; cryptocurrency payments are the "exit" for the exchange, expanding the practical application scenarios of cryptocurrencies. This "exit" of cryptocurrency payments can effectively address the issues of user stickiness, retention, and conversion for the exchange on the C-end, while also forming B-end capabilities, expanding to external scenarios beyond the exchange.

exchange payment 1.0

In the early development of exchanges, some leading exchanges such as Binance, Crypto.com, and Gate launched trading closed-loop functions based on their own ecosystems, such as merchant malls, gift card centers, etc., supporting merchant entry and allowing users to use cryptocurrencies for payment and cryptocurrency payment cards. The core essence of exchange payment 1.0 is a business aimed at C-end users, designed to meet the real consumption needs of a large number of C-end users of the exchange, maintain user retention, and increase user activity and loyalty through incentive measures.

Under this centralized exchange and internal payment closed-loop system, users' crypto assets at the exchange are actually settled with merchants after being cashed out in exchange currency. This relatively centralized crypto payment method can be referred to as Exchange Payment 1.0.

Exchange Payment 2.0

The core of exchange payment 2.0 is focused on B-end businesses, aiming to compete for merchant resources. It integrates the infrastructure of the exchange to form external B-end capabilities. The logic of exchange payment can be compared to the logic of spot deposit and withdrawal on the exchange.

• Strengthen the spot recharge and withdrawal capabilities to enterprise-level Payin & Payout capabilities, including millisecond-level transaction frequency, high-capacity channel for large single transactions, high-concurrency processing, enterprise-level operational backend, and reconciliation system.

• Based on this, the compatibility of multiple currencies and multiple chains, as well as liquidity management capabilities, is difficult for general crypto payment companies to achieve.

• By combining the exchange's multi-jurisdictional regulatory licenses, strict compliance capabilities in KYT/KYC/AML, it can maximize asset security on payment links while also supporting compliant channels for On/Off-ramp currency acceptance in multiple fiat currencies.

The larger goal of Exchange Payment 2.0 is to serve external users of the exchange. On one hand, it can leverage the various mature modules already built by the exchange to better expand B-end business. On the other hand, it can also indirectly facilitate the conversion of some C-end users, maximizing the advantages of both B2B and B2C.

Future Development of Exchange Payments

( On-chain

With the development of blockchain technology, exchange payments are also moving on-chain. Many large exchanges are actively laying out their own public chains or Layer 2 solutions in order to occupy a favorable position in the future on-chain financial ecosystem.

![Interview with Gate Pay head Feng, how can exchanges start doing payments?])https://img-cdn.gateio.im/webp-social/moments-4e1d2e1a280231542b44eea0f5ad5a43.webp###

( PayFi concept

PayFi is a product form that combines payment with decentralized financial services. One potential development direction is to move traditional financial credit and interest-generating services onto the blockchain, such as relocating personal credit systems to a more transparent and decentralized blockchain, to activate lending services on the blockchain, while also giving rise to a series of ecological products like blockchain personal insurance.

![Interview with Gate Pay head Feng, how can exchanges get started with payments?])https://img-cdn.gateio.im/webp-social/moments-0bd6fb6f3c60c267cb7d5a7c8ebcc0c0.webp###

( The impact of artificial intelligence

AI Agents may be deeply integrated with Web3 payment products in the future. For example, AI Agents can automatically complete tasks like bookings and shopping based on user instructions, while Web3 payments can seamlessly integrate into the payment process. Smart contracts based on blockchain are easier for AI Agents to operate than traditional bank accounts. In the future, AI Agents might even help users find the most suitable investment portfolios and directly invest in various DeFi products through smart contracts on the blockchain network.

![Conversation with Gate Pay head Feng, how can the exchange start doing payments?])https://img-cdn.gateio.im/webp-social/moments-607014f3841837ebe8e900e2ab4f4b68.webp###

Conclusion

The development of Web3 payments is moving towards a more inclusive direction. Although there are still some challenges at present, ongoing technological innovations and the expansion of practical application scenarios are expected to bring convenience to more people, especially providing financial services to those who cannot access traditional banking services. This development will promote cryptocurrency and blockchain technology towards a more equal and inclusive direction.