[Interview] How does Huma Finance Solve the Hassles of “Cross-Border Payments” with High Remittance Fees and a Three-Day Wait?

Huma Finance – The First PayFi Network Protocol

PayFi, also known as payment finance, is a term that has sparked a lot of discussion in the cryptocurrency community in the second half of 2024, and is considered one of the key solutions to current financial service pain points.

The most representative one, Huma Finance, is the first PayFi network protocol, belonging to the financing layer in the entire PayFi framework. Huma Finance’s on-chain financing protocol allows businesses to receive immediate support from stablecoin liquidity pools, solving the problem of immediate turnover for businesses.

“Our goal is to achieve real-time settlement and efficient capital mobilization, while addressing the inefficiencies of traditional cross-border payments,” said Richard Liu, co-founder of Huma Finance.

PayFi Stack: Financing Layer

This layer includes protocols and infrastructures for risk management, credit rating, underwriting, and RWAs. Huma focuses on short-duration financing, essential for payments. @CredoraPlatform deepens liquidity with credit rating solutions, while… pic.twitter.com/Y3Rx7DFTSC— Huma Finance (@humafinance) August 23, 2024

How does PayFi solve the pain points of “cross-border payments”?
It is easy to understand that businesses need money and borrow from the funding pool, but what does the funding pool have to do with “cross-border payments”?

Richard explains that traditional cross-border payments involve high costs and lengthy processing times. For example, a remittance from Taiwan to South Africa often requires multiple layers of intermediary banks and may take 3 to 4 days, or even longer, to complete. In addition, this payment method is accompanied by high transaction fees, which is a significant burden for many small businesses.

The solution provided by Huma Finance changes this situation. Richard gives an example of a cross-border payment funding pool, where funds from liquidity providers are held in a stable system. Businesses can access stablecoins from the pool for remittances when needed, and because it is a cryptocurrency, real-time transactions can be achieved.

As a result, businesses that frequently need to make cross-border remittances do not need to constantly lock large amounts of funds in a specific country or region. They can simply flexibly utilize the funds in the Huma Finance funding pool.

So, what is the relationship between Huma Finance and ordinary retail investors?
Richard states that ordinary users can become liquidity providers in the funding pool. In addition to earning stablecoin returns, in certain situations, partners may offer additional incentives to liquidity providers. Therefore, ordinary users can participate from an “investment” perspective.

Traditional finance is both an opportunity and a challenge
According to official data from Huma Finance, the protocol has provided a total of $1.42 billion in funding support to businesses and has recovered repayments of $1.39 billion, with no credit defaults to date.

However, even though Huma Finance has enormous potential, the company still faces numerous challenges. Richard admits that Huma Finance must face fierce competition from traditional financial institutions and other blockchain projects. Traditional banks and financial institutions already dominate the cross-border payments field, as they possess strong infrastructure and customer resources, as well as advantages in compliance and security.

Furthermore, market acceptance is also a challenge. Although blockchain technology has gradually entered the public eye, many businesses and users still have doubts and uncertainties about new technologies. Especially in the financial industry, the application of cryptocurrencies and blockchain is still in its early stages of development, and many users do not fully trust these new payment systems.

However, Richard emphasizes that the future goal is to further deepen the financing layer capabilities of Huma Finance and enhance the platform’s funding supply capacity and liquidity. “Huma Finance has already achieved a certain scale in the PayFi field, and our blockchain infrastructure is strong enough to support further business expansion,” Richard confidently says.