A financial infrastructure that can support how the Internet will continue to grow is necessary. However, as a trade-off for ensuring the integrity and security of financial transactions, financial institutions have constantly hampered innovation and growth.
A financial network should be fair, transparent, efficient and inclusive, unlike ours today:
1. The payment network today is far from perfect. Transaction costs and time — especially for cross-border payments — are excessive and inefficient. For overseas purchases, consumers usually pay additional fees amounting to 3–5% on top of the original purchase amount. Likewise, merchants who receive the payments have to pay 2–5% in transaction processing fees and some have to wait 2–3 days for the funds to reach their account.
2. There are no reliable methods to assess the trustworthiness of buyers and sellers. The reputation systems in current online marketplaces try to partially address the problem through user ratings alone, but this system is highly subject to abuse and fraud and it is typically not transferable to other marketplaces or contexts. Likewise, for merchants, consumer fraud is another huge problem: card fraud is expected to rise to US$31.7 billion by 2020, with 92% of online merchants maintaining that fraud will remain a prime concern for online payments.
3. There is selective and deliberate exclusion from our financial systems today. This is especially prevalent and obvious in Southeast Asia (SEA): 73% of the 600 million SEA residents have no formal access to financial institutions. This leaves about 400 million people in the region without a bank account, preventing them from saving, borrowing or investing money properly. As a result, they often have to rely on alternative financial institutions like pawnshops or loan sharks for payday loans where interest rates can be as unreasonably high as 100% APR per year.
Welcome to Rate 3 (RTE)
We aim to create a new global e-commerce ecosystem that ties consumers, merchants, suppliers and other intermediaries together with a native cryptocurrency that facilitates all transactions efficiently, cheaply and quickly.
Rate3 (RTE) is a new payment token built on the Stellar horizon network. This is on the conditions that Stellar can fulfil their mission as their network ability scales further. If it does not, we will explore other protocols. However, by and large, the Stellar network is the best for our use case currently. By building on top of the Stellar network, we leverage on the key strengths of Stellar: significantly cheaper transaction costs, faster transaction speeds and a truly decentralized distributed exchange.
There would be no gas fee for program executions and only a negligible transaction fee (0.00001 XLM — a fraction of a fraction of a penny) is required. By using Stellar, Rate3 also enjoys low latency rates in transactions. It takes an average of 5 seconds to process a transaction with Rate3, compared to the current 3.5 minutes on Ethereum.
Most importantly, Rate3 will be able to facilitate the exchange of different assets easily. Let’s say that you make an offer to buy 10 RTE for 2 ETH. If a prior offer exists to sell 10 RTE for 2 ETH, your original offer will be accepted as a transaction — you’ll be 2 ETH poorer but 10 RTE richer. However, if your offer is not complemented by an existing offer in the network, your offer is saved in the orderbook until it is either taken by another offer, taken by a payment, canceled by the account that created the offer, or invalidated because the account making the offer no longer has the asset for sale. For subsequent offers placed at the same price, earlier offers are filled before the newer ones.
The Rate3 Solution
First, it is cheaper and faster for both merchants and consumers if a single unified token of exchange is used. Merchants pay minimal processing fees. Consumers, on the other hand, do not have to pay unfavorable exchange rate conversion fees. Currency conversion fees are minimal, if not none at all. In eradicating most intermediaries in the process, we make it up to 5 times cheaper and 1000 times faster for consumers and merchants to transfer and accept payments with Rate3.
Second, every transaction will be properly stored on the blockchain ledger and no one can tamper with these transaction ledgers. Both consumers and merchants can rate each other better and resolve claims or manage conflict in a transparent way. By decentralizing trust, fraud from the consumer side would be less likely to happen and merchants are more beholden to provide the products or services as advertised and in good condition.
Third, incentivizing consumers for their online purchases will be easier for merchants. For example, merchants will be able to offer instant cashback to consumers or immediately incentivize loyal customers with points, which they can then spend on other products on the merchants we partnered with. The process will be seamless, instant and easy — much more efficient than the traditional method. Currently, merchants have to ensure that it is a verified purchase with no risk of chargeback or fraud before they pass on the cashback savings through third party affiliate players. As a result, this process typically takes 15 to 60 days for completion. In Rate3’s case, cashback is instant and verified— a truly disruptive method in the e-commerce landscape today.
Last and fundamentally, the Rate3 ecosystem will serve those currently disenfranchised by the financial systems in SEA. We aim to create a globally portable and inclusive credit profile, thus reducing the need for opaque credit scores and unnecessary documentation required for credit applications. By building on the transactions recorded in the blockchain ledgers, introducting new identity attesters, consolidating new data sets such as mobile top-ups or remittance transactions and even peer scoring, we can extend necessary credit to more participants in SEA. This is where Rate3 helps traditional lenders issue credit for our token users: an end to end protocol eventually to serve billions of people. We will move deeper into this in subsequent articles.
We’ve built two products in the payments space thus far. Our first product, RateX is a desktop browser extension that helps consumers pay the mid-market exchange rates, as opposed to exorbitantly high bank rates, saving them up to 10–20% on overseas purchases. On top of that, we built additional features into the extension, such as a coupon code aggregator that allows online shoppers to apply the best coupon codes for any purchase in a single click.
Our second product is our mobile app RateS, built to cater to the increasingly mobile consumers in SEA. On top of the features we have in RateX, RateS has an additional element of deals discovery and social shopping. Together, we have facilitated purchases amounting to millions in GMV. We have helped consumers save over US$200,000 in cross-border payment fees and more than half a million dollars saved on coupon discounts.
The intersection between payments and e-commerce is an interesting one. Our team has lived and breathed this space for years, while experiencing the challenges first-hand during our stint at Silicon Valley & New York City. Through our own experiences, we learnt how the existing issues run deeper than we thought. We live in a global society today but our financial systems are not global: it is inefficient, costly and exclusive.
We have gotten the support of various institutional funds and angel investors, but really, we are just starting our journey of envisioning and creating a new 21st e-commerce and payment ecosystem. We hope you can join us today in our mission.