Web3 And Blockchain Technology For Small Business: Utopia Or Soon-To-Be Reality?

Stakeholders who are deeply engaged in the technological aspects of Web3, or passionate about its transformative potentials, will often, at least in a whisper, acknowledge its PR challenges. The natural human propensity to approach novel technologies with cautious scrutiny only intensifies when the innovative realm seemingly aligns with a culture of swift monetary gains, accompanied by an atmosphere of frenzied speculation and an alarming allure for questionable characters. 

This characterization, however, should not overshadow the truly transformative potential of Web3. It's vital to move beyond this reductive narrative and recognize Web3 as a powerful tool capable of revolutionizing the world of small businesses, and by doing so, itself becoming more grounded in the possibilities for the technology, rather than primarily as a means to get rich quick. 

Web3 has been instrumental in addressing some of the more pressing challenges faced by small and medium enterprises (SMEs), and is on the pathway to offer even more tools for these organizations which according to the World Bank represent about 90% of businesses and more than 50% of employment worldwide. The integration of blockchain technology and decentralized payment systems can lead to a more cost-effective, transparent, and autonomous business environment and are the new frontier in utilizing the technology in-real-life, rather than primarily as a platform for speculation. 

Swipe Fees — The Disproportionate Burden On SMEs

According to the National Retail Federation small businesses are hit hardest by swipe fees. These are the fees that credit card providers like Visa and Mastercard charge merchants for processing payments. For some retailers, it even exceeds the total utility costs, including perishable goods and frozen items.

In FY 2021-2022, swipe fees increased 25% to cross $138 billion, representing merchants’ most significant operating expense after labor costs. This also drove up the average yearly consumer spending by $700 in the US, which has the highest credit card swipe fees among leading economies worldwide. 

American businesses pay roughly 7x and 5x swipe fees compared to their European and Chinese counterparts, respectively. One reason for this is the monopoly of Visa and Mastercard. Holding 80% of the payment processing market, they imposed a $1.2 billion fee hike in April 2022 despite widespread criticism. But more generally, they also strong-arm smaller retailers into paying more fees than larger firms with national networks and millions of transactions. 

Fostering Greater Parity And Autonomy With Web3

The scenario with swipe fees shows how the balance is perpetually tipped against SMEs in traditional industry models. Web3, however, provides the tools to solve this crisis not just in theory but also in practice. 

Revolutionary platforms are already using blockchain technology, digital currencies, and decentralized payment networks to help smaller businesses eliminate swipe fees. The removal of intermediary parties promotes direct, transparent interactions between firms and customers, reinstating control and autonomy to SMEs.

Web3-native retailers can directly transact with consumers without third-party payment processors because such transactions are settled and recorded securely on underlying blockchain ledgers. These decentralized, peer-to-peer models return control and autonomy to SMEs, empowering them against unfair monopolies. 

Moreover, the community-oriented nature of Web3 platforms provides stakeholders with a meaningful say in decision-making. This means SMEs can actively participate in determining charges like fees or subscriptions, wherever relevant. Their interests are fully preserved in this way, protecting smaller firms against the kind of manipulation that is usually found running rampant in traditional setups.

Widening The Horizon With Stablecoins

Not only do emerging Web3 platforms provide the framework and tools to build non-intermediated relationships, but they also offer alternative currency systems. Stablecoins, such as USDC bypass the volatility typically associated with cryptocurrencies, presenting a stable peer-to-peer payment channel for businesses.

Unlike cryptocurrencies such as bitcoin and ether, stablecoins—as the name suggests—allow merchants and consumers to bypass volatility and uncertainty. This is especially beneficial in economies struggling with weak fiat currencies, high inflation, and regulatory obligations.

Stablecoins used with Web3 technologies can also reduce transaction fees by nearly 99%, promoting a viable alternative to credit card dependence by allowing both individuals and SMEs to break free from perpetual high-interest debt cycles.

Randal Quarles, Vice Chairman of Supervision at the US Federal Reserve Board, requested citizens to “not fear stablecoins” and take into “strong account” their potential benefits. Similarly, the Digital Euro Association emphasized the role of stablecoin-based micropayments in boosting digital competitiveness in Europe. 

Prominent figures like Randal Quarles, Vice Chairman of Supervision at the US Federal Reserve Board, and entities like the Digital Euro Association, have endorsed the potential benefits of stablecoins. Such endorsements suggest an impending favorable regulatory environment for stablecoins, offering additional support for their integration into SME payment offerings in the long run.

The Cultural Impetus For Web3 And SMEs

So much for the specific, somewhat technical problems that Web3 helps SMEs tackle. But there’s also a solid cultural (even moral!) case for connecting the two. Web3 provides the toolkit for highly transparent businesses—something that in particular consumers under the age of 50 value immensely. 

Obscurity has been a major issue in legacy systems for merchants and consumers alike. Corporations can act however they please—maximizing profits no matter what—because of the opacity currently permeating every level of business interactions. And as shown by the swipe fees case, SMEs are always the ones hit worst when this happens. 

Web3 brings a progressive philosophy grounded in truth, equity, and fairness. Businesses can remain profitable—more so, in fact—without putting an undue burden on other stakeholders. The motive of balancing collective progress with individual self-interest is perhaps Web3’s biggest plus point for SMEs. 

Thanks to community orientation and user-centricity becoming the norm with Web3, smaller firms can finally leverage innovative technology without facing obstacles from the big players. If done well, which is highly likely, that’ll make anti-competition a thing of the past.

Therefore, from a broader perspective, Web3 is anything but a meaningless dream or a trap to continue the status quo while introducing new challenges. Instead, it’s the source of possibilities; a means to correct not one but many historical wrongs facing smaller businesses. And thanks to innovators with dedication, Web3 is becoming a reality..