PayPal to pollypay - the future of a better web

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Digital habits have surged in the past two years, accelerating online behaviours to new levels. But we need to look no further than Facebook's awkward rebrand in 2021 to see that all things Web 2.0 are coming to an end. Investors are now setting sights on Metaverse technology and anything Web 3.0. The blockchain is creating new markets for digital content, fashion and art, dismissing the centralised systems and intermediaries that have long been the bedrock of our online lives. What we buy and where we buy are changing. The way we pay for it, who owns it, and who earns from it is changing too. What’s coming is a revolution in payments, including how money moves online and offline. In fact, without a redesign in web payments, it’s unlikely that Web 3.0 can achieve its dreams. 

Payments transformed the web, but now lag

Payments didn't matter much in Web 1.0. The birth of the internet was about access to the world’s information and electronic communication. Web 2.0 was the turning point for payments, synonymous with the e-commerce revolution. With secure debit and credit card payments online, users could suddenly buy things, book travel tickets, and even listen to music. This newfound ability to transact reshaped the economy and our lives. Coincidental as it may be, the wealthiest person emerging from the Web 2.0 revolution didn’t invent the smartphone, social media, web search or one-click delivery but the world's most valuable digital payments platform - PayPal.

Through the pandemic, we became entirely dependent on digital platforms. Our appetite to buy things online grew, as did our digital expectations. Whilst two decades of capital has been poured into making online shopping beautiful, fast and convenient, the user experience of payments has lagged: a sluggish mess of multiple steps, bank payment codes, and UI that feels like it was designed in the 1990s.  It’s also an expensive way to do business. Sell something via PayPal for £10,000 in the UK, and you'll pay a £230.30 fee. Sell that same product to someone in the US, and the fee doubles to £595.75.

It’s not all Web 2.0’s fault

Banking’s global financial information technology is built on a computer programming language called COBOL, invented in 1959. It was designed for large-scale data processing of business transactions, like payroll and accounts payable. The problem is that it’s hard to write new code in COBOL and even harder to maintain the old code because it isn’t being taught anymore.

Today, around a trillion dollars in payments are made. It's inefficient and expensive. A single digital transaction involves many intermediaries, each of which takes a cut and adds a delay. Banks have to buy, integrate and maintain hardware and software. The entire system is slow, often taking days.

The web still hasn’t unlocked the power of micropayments

In the early days of the internet, there was a lot of excitement about the potential for micropayments. One of the first micropayment systems developed in the 1990s used a technology called 'digicash' invented by David Chaum, a cryptographer and computer scientist. BitPass, FirstVirtual, Cybercoin, Internet Dollar, Pay2See, Flooz, and Beenz launched micropayments and failed. Several large companies, including IBM and Compaq, also tried. The technology just wasn’t there. 

Micropayments still don't exist today. PayPal considers a micropayment to be anything under £5 or $10 and their standard rate on a £1 sale is a whopping 59p - a percentage that's crazy for any small business to pay. Paypal has introduced a micropayments plan to eliminate the unequal fees, but it’s not available as standard and is “sort of hidden so that people don't know about it” (Wise). 

Announced in June 2022, Facebook's new virtual fashion store offers virtual clothing ranging from $2.99 to $8.99. Designed by fashion brands Balenciaga, Prada and Thom Browne, the prices for digital clothing are much lower than the real-world equivalents (Balenciaga’s laser-cut faux fur coat sells for £12,060).  We’ve come a long way since the $0.99 songs on iTunes or the dollar power-ups in Candy Crush. Fashion influencer Leah Ashe purchased her Roblox avatar four Gucci purses, a pink Rolls-Royce and an assemblage of sprawling pink mansions. For sure, the media has been hyping up this trend for a while now.  But the web becoming more immersive will mean a change in the way micropayments are used, with people making many more small but significant purchases online.

Introducing pollypay by Millicent

Millicent is a UK-founded and London-based venture building a new global network for finance. Millicent is the only solution that's constructed a strategy for broader adoption, developing a network solution for finance called Millicent and a consumer micropayments platform built on it - pollypay. 

And its team are heads-down avoiding the hype: there are no mythical leaders, gonk mascots, and you won’t find any WAGMI T-shirts lying around the office (the meme acronym of crypto “We All Gonna Make It” used to rally blind faith in the movement). Millicent's seed funders include the UK Research and Innovation Fund, an important foundation stone for a network that envisages a better-regulated future for crypto. They have also recently been accepted for support from the Financial Conduct Authority’s Innovation Pathways programme.

This is a full-circle moment for the movement. Bitcoin was created in 2009 on the heels of a global financial meltdown as a peer-to-peer ‘Trustless’ system that would no longer require us to have faith in banks and other intermediaries. Many years on and there are now many intermediaries in the decentralised finance category, and the markets themselves are incredibly volatile. The technology may be ‘Trustless’, but the reality is very different scientists have found. We need the best - and not the worst - of both worlds. 

To the same end, while some thought Bitcoin and the blockchain would solve all the technical problems we face, Millicent is a next-generation Layer 1 protocol that is able to bridge legacy financial rails with the world of Web 3.0. That way, data can move from old physical systems like servers into cyberspace more successfully. Millicent uses a directed acyclic graph (DAG) for speed and scalability and is built on the Cosmos SDK for security and interoperability (allowing it to exchange value across a wide variety of different platforms). Millicent is also developing an Automated Market Maker/ decentralised currency exchange (Dex) for stablecoins since currency exchange forms a considerable part of the global payments challenge.

In sum, Millicent brings together a near-instant speed, near-zero fee way to make and receive payments that works across all the necessary new and old finance systems. With pollypay as an easy-to-use, and highly rewarding user-facing micropayments solution, Millicent has the key to unlock Web 3.0.

Let’s look at some potential applications:

1 - pollypay means you’re not forced to subscribe to the web

Because individual transaction costs are so high for small payments, internet services have favoured membership and subscription models that use bundled pricing.

Subscriptions work for both consumers and investors alike. Consumers like saving money and time sticking with trusted brands they know. Investors love recurring revenue models: companies with higher market capitalisation have been those with growing, predictable revenue.

US household subscriptions rose from less than two in 2020 pre-pandemic to over five by the end of 2021 (Forbes). Today in the US, more people have an Amazon Prime subscription than decorate a Christmas tree, vote, attend Church or own a gun.

But analysts are warning that "The Great Unsubscribe" is upon us. Netflix’s subscriber growth dropped for the first time in over a decade, spooking the market (and crashing its share price). In the UK, over a million people cancelled music subscriptions in Q1 2022, according to Kantar. 

During lockdowns, subscriptions were a way to keep cupboards stocked, enjoy restaurant-quality meals, and add a little joy by receiving an unexpected package on the doorstep. Now the cost of living has shot up, and belts are tightening - do we need all these subscriptions?

Subscriptions also rely on a one-fits-all approach. You either subscribe, or you don’t. But people are different and have different needs. Micropayments unlock the value of the internet because they allow for a more granular level of payment, catering for billions of occasional users rather than just superfans.

2 - pollypay means better, more accessible content

Today, advertising funds the internet. Websites provide content for free in exchange for our attention and data. This system has led to many problems. First, we have a world where most of the value created on the web accretes to a handful of conglomerates: Amazon, Google and Facebook account for over 64% of the value created on the internet. Second, we have a world where these companies constantly hijack our attention to sell it to advertisers. Clickbait, fake news, and other low-quality content can flourish because that drives engagement and attention. Social media is why we have bias, division, outrage and record levels of teenage depression.

Fact-checked journalism also lives behind paywalls with the same problems as subscriptions. Some people want to read five articles, some want to read ten articles, and others only want to read one article. With micropayments, people can pay for exactly what they want, when they want it, without having to commit to a subscription. Meanwhile, micropayments could mean a better-monetised system of journalism which is also better for society. 

3 - pollypay can enable a shift in how the web works for the better

In his book 'Who Owns The Future', Jaron Lanier wrote about the concept of an internet that had two-way payments between user and platform. He foresaw a world where we would be paid for the data we generated or any content we contributed by using the internet. A digital world that can calculate the value of your contributions in fractions of a penny allows trillions of nano-payments to be made in the form of usage royalties.

Through micropayment payments, consumers become 'prosumers', both consumers and producers. In other words, they get paid for the data they generate (i.e. by using the internet or other connected devices, be they TVs, cars or fridges). The same idea applies to creators who should be able to make a living from publishing their work online because, as the viral TikTok song goes, “exposure doesn’t pay the bills”. 

Micropayments can also power community action. In Scotland, people are participating in a Deposit Return Scheme (DRS): people download an app and scan the barcodes on single-use plastic, receiving 25 cents for every bottle they recycle.

Creating distinctive value using And Rising’s Creative Capital

Blockchain technology and micropayments will disrupt the e-commerce and content world, creating new, valuable markets for products and services. But now, all things blockchain have a considerable adoption gap, not least as crypto’s value tumbles in a domino of post-pandemic macroeconomic effects. And Rising has invested in both Millicent and pollypay using the Creative Capital model, creating two separate brands, both network (Millicent) and consumer payments (pollypay).

With the stock market off its high, including big tech, the idea of getting our heads around the future of finance isn't evident. But Web 3.0 is coming, ready or not. As expert Chris Dixon, GP of a16z, said - “we’re looking at ten to twelve-year horizons, and expect some bad headlines in-between” as the venture firm confirmed its $4.5 billion fund in the space in May 2022, doubling the size of its previous fund just one year ago. 

Millicent is not only creating the future finance network but is also baking a new consumer brand into the technology through pollypay. Trust is an essential part of any brand. It lets customers feel confident in a product or service, knowing they will get what they expect. And while the term "trustless" describes blockchain technology, it's important to remember that these technologies still require first-party human trust to scale as brands and cross over into the mainstream. With a trusted brand, the space for innovation with micropayments is near-endless.

And Rising is delighted to welcome Stella, Kene and the entire team at Millicent and pollypay to the portfolio as we build towards exciting futures.