Every year a whopping 350 billion dollars is paid in credit card and debit card processing fees. If you go to a business and purchase something for $100 with a credit card, you might think that the merchant receives all of that money. In actuality, the merchant is getting about $97.50 because of a sneaky 2.5% processing fee that credit card companies impose on vendors. The merchant also experiences a delay in receiving the money upon payment. This is because the money must go through intermediaries such as the credit card company and issuing bank before it shows up in the merchant’s account. If you are reading this and thinking there is an opportunity for improvement, CEO Geoffrey Cairns and CTO Ken Mages of Hamilton’s Reserve Inc. would agree.
We are excited to announce that Hamilton’s Reserve Inc. has teamed up with Crowdbotics to utilize web3 applications to disintermediate the current settlement processes in the financial payment industry.
“We intend to disintermediate all the unnecessary layers of nodal transaction points that essentially "tax" consumers and merchants to facilitate the acceptance of payment cards and the settlement of the debt between the consumer and their preferred merchant,” said Geoff Cairns, CEO of Hamilton’s Reserve. “Hamilton’s Reserve will disrupt banking and payments much like Uber did taxis.”
Ken and Geoff have devised a way to essentially bypass that typical settlement process and created a route for a merchant to settle directly with a consumer instantaneously. They are doing this with the help of Hedera Hashgraph, a platform that presents itself as a faster and more secure alternative to blockchain. Hedera settles and validates transactions in 3-5 seconds and provides the “highest grade of security possible(ABFT)". It also prides itself on being much more energy-efficient, sidestepping energy-intensive mining by using a technology called Directed Acyclic Graph. Geoff and Ken took all of this into consideration when choosing a decentralized infrastructure.
Ken and Geoff have figured out a way to have crypto be used and instantaneously leveraged at the point of sale. “It’s almost like saying you have a line of credit in cryptocurrency. You may not have cash but can instantly tap into your cryptocurrency as an asset,” said Geoff Cairns. All a consumer has to do is agree to collateralize their crypto with Hamilton’s Reserve, and Hamilton’s will front the cash to the merchant instantly and then the consumer pays Hamilton’s back later.
Their card and app provide Hamilton’s clients with simple tools to instantly pay with crypto assets and save as they spend, enabling users to round up purchases, save crypto, and receive cash or crypto back as a reward for spending. Merchants can also settle instantly and pay “zero interchange” using traditional payment gateways.
Hamilton’s Reserve's debit card program can be quickly deployed by other institutions looking to make the bridge from TradFi into DeFi, offering consumers an easy way to both acquire crypto with zero fees and use crypto to save, pay, and borrow.
Institutions may also expand their lending programs with Hamilton’s, enabling crypto to be collateralized, whether that be through simple credit over the debit rail or working to provide sophisticated buy now pay later programs with Hamilton's and merchants. Hamilton's means that funds do not need to be liquidated when paying in crypto.
Hamilton's architecture demanded a high-speed and efficient smart contract mechanism to manage and track payment obligations and direct settlement outside the traditional payment network. This innovation is why they chose to build on Hedera with support from the HBAR Foundation.
About The HBAR Foundation
Founded in 2021, the HBAR Foundation fuels the development of the Hedera ecosystem by providing grants and other resources to developers, startups, and organizations that seek to launch decentralized applications in DeFi, NFTs, CBDCs, Sustainability, gaming, and other sectors. In addition to providing funding through a streamlined grant process, the HBAR Foundation acts as an integrated force multiplier through expert support across technical, marketing, business development, and other operational functions that are required to scale.
Merchants have tried to solve this problem in the past and failed. A company called Merchant Customer Exchange (MCX) attempted to address this issue starting in 2012. MCX was created by a consortium led by merchants such as 7-Eleven, Alon Brands, Best Buy, CVS Health, Darden Restaurants, HMSHost, Hy-Vee, Lowe's, Michaels, Publix, Sears Holdings, Shell Oil Products US, Sunoco, Target Corporation and Walmart. The initial retailers that were part of the company accounted for about $1 trillion in annual sales.
MCX made the fatal mistake of changing the way consumers pay for items. It launched a product called CurrentC, a mobile payment plan which utilized a smartphone app and digital wallet: to make a purchase, the user scans a QR code shown on the cashier's screen, or has the cashier scan a QR code from the phone's screen. This ended up being a technical roadblock for users and was not widely adopted.
Learning from MCX’s approach, Geoff and Ken decided that it was important to keep the existing card payment transaction processing system and manipulate the network behind the scenes. They realized it absolutely will not work if you tell merchants and consumers they need to change their current transaction process. So Hamilton’s Reserve is not asking merchants or consumers to change their behavior at all. They provide you with a card and you’re welcome to use it anywhere online or at a store simplifying the onboarding and adoption process.
Ken Mages is the inventor of the technology that went into the square reader and also the ear jack connection that enabled square to create the original smartphone payment card swipe reader. Geoff met Ken while Geoff was working at Microsoft and managing their hospitality and travel sector worldwide.
At the time, Ken had a business called Home ATM and was working on enabling ATM transactions with a swipe device at home. Geoff was working with airlines to try to create a cheaper payment system utilizing a new reservation system they were building. The project was eventually held back, but Ken and Geoff hit it off and started to work together shortly after.
The biggest problem that there has been in the world of cryptocurrency is the ability to actually buy something with your cryptocurrency. As of today, you have to liquidate it and move it into fiat funds and then you write a check or put it on a card before you can use it. (Fiat money is a government-issued currency that is not backed by a commodity such as gold.) That’s the way the world currently works.
If you have a merchant account, Hamilton’s will enable transactions to be settled even though they start on the payment network as it exists today. Hamilton’s will pull and cleave the transactions off and settle them directly with the merchant. This means merchants will get their money faster and save them a ton of money.
Another issue that Hamilton’s Reserve is working to solve is the potential risks of using blockchain bridges. Here is an article outlining the problem in more detail. Ken and Geoff are fully aware of the risks involved and have teamed up with Crowdbotics to create concrete solutions to protect their customers.
Crowdbotics will enable Hamilton’s to modulize their service into a plug and play component that banks will be able to integrate and implement easily. Hamilton’s aims to make it a seemless integration tool akin to products like Stripe. If merchants want to participate, they will be provided tools that can be implemented on their .com site to route traffic to Hamilton’s.
They realize that going to banks and asking them to change their mobile banking interface is unlikely to happen. So instead, Hamilton’s is working with Crowdbotics to provide banks with a set of API’s and integration work that banks can channel through your existing infrastructure. This is where Hamilton’s Reserve is leaning on Crowdbotics development resources to make this idea a reality.
“We are really excited by Crowdbotics’ ability to modularize and create components. This will give consumers tools to change rules on how they want payments to work and give merchants tools to decide how they want to route payments,” said Geoff Cairns.
Hamilton’s started working on this project with Crowdbotics 3 months ago and this work has the potential to make a huge impact on the payment processing industry.
April 25, 2022