[Interview] How does Huma Finance tackle the issue of “cross-border payment hassle” with high remittance fees and a 3-day wait?

Huma Finance – The First PayFi Network Protocol

PayFi, also known as Payment Finance, is a term that has generated a lot of discussion in the cryptocurrency community in the second half of 2024. It is considered one of the key solutions to current financial service pain points.

Huma Finance, the most representative project, is the first PayFi network protocol and belongs to the financing layer of the entire PayFi framework. Huma Finance’s on-chain financing protocol allows enterprises to instantly obtain 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 why enterprises borrow money from funding pools when they need it, but what does this have to do with cross-border payments?

Richard explains that traditional cross-border payments are associated with high costs and lengthy processing times. For example, a remittance from Taiwan to South Africa often requires multiple intermediary banks and may take 3 to 4 days or even longer to complete. Moreover, 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 uses the example of a cross-border payment funding pool, where funds from liquidity providers are kept in a stable system. Enterprises can access stablecoins from the pool for remittances when needed, and because it involves cryptocurrencies, real-time settlement is possible.

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

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

Traditional finance presents both opportunities and challenges
According to official data from Huma Finance, the protocol has provided a total of $1.42 billion in funding support to enterprises and has recovered $1.39 billion in repayments without any credit defaults.

However, despite Huma Finance’s enormous potential, the company still faces numerous challenges. Richard admits that Huma Finance must contend with fierce competition from traditional financial institutions and other blockchain projects. Traditional banks and financial institutions already dominate the field of cross-border payments, possessing 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, 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, enhancing 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 stated.