Fantom Confidential — 3. Fantom Pay Insights
by Fantom Innovation Team
The Current Fantom Pay Business Model
Our evaluation, analysis and user interview (end-users and businesses) insights have provided several reasons for not pursuing the current Fantom Pay business model.
Some highlights (All values in USD unless specified)
- Revenue & the business model: For Fantom Pay to make $10M revenue at 2.5% margin (merchant & consumer fees), Fantom needs to achieve $400M of sales through multiple channels.
- BitPay, a large 7 year old company dealing in cryptocurrency payment solutions, generates only $12M a year in revenue, processing nearly 200,000 Bitcoin transactions monthly with more than 60,000 merchants in six continents and has competitive fees of 1% only.
- Currently, most of the crypto users see cryptocurrencies as an investment, not as a form of payment.
- Major design flaw with the value flow (parity stability). No hedging in place and risk rise with the volume traded in the platform.
Case Study — Australia
- Expected Market Share by Category
Living Room of Satoshi is the largest and most well-known cryptocurrency bill payment solution in Australia. The customers can pay Australian bills with cryptocurrencies across more than 100 Australian billers. We are estimating that their market share is 10% of the total crypto-spending market here in Australia, and this represents approximately AUD $6M (Entire Australian cryptocurrency spending is $60M).
Of this AUD 6M, 65%+ was spent on paying credit cards and utility bills which is approximately $3.9M.
According to our analysis, discretionary expenses, which Fantom Pay is targeting, such as shopping and entertainment, accounted for just 14% of this spending in Living Room of Satoshi. If Fantom Pay had this market, it would represent a total of $840,000 in transaction volume, and at 2.5% fees, it would generate $21,000 in gross revenue for the full year for Fantom Pay.
The profitability of $6M transaction value, at 2.5% is $150,000 gross revenue. If Fantom Pay became the whole business of Living Room of Satoshi in Korea, at 2.5% transaction value, the gross revenue could only equate to $750,000 in 2018 (5x that of Australia).
2. Expected Market Share by Crypto Currency
Let’s consider it from cryptocurrency distribution perspective.
- Bitcoin accounts for 60%
- Taking Monero as an achievable target after substantial marketing, Fantom Pay market share could be around 1.1% of the total market.
Australian & Korean Markets
Our research concluded that there are between 2–3M Korean crypto holders with a total investment size of more than $10B as of the end of December in 2018.
Based on our research on the Australian market, we have identified that approximately 14% of crypto expenditure is for discretionary items, which is Fantom Pay’s target market.
Conclusion
A large portion of crypto expenditure is used to pay off bills for credit cards, utility/gas and phone/internet. Fantom Pay, as it is now a crypto-to-fiat mobile payment solution, will not be able to generate sufficient revenue to make enough profits targeting discretionary spending.
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