Visa intends to add a feature that ensures crypto users can make automatic payments with their Ethereum wallets. This feature will enable crypto users to automatically pay their bills via their self-custodial wallets without needing a bank or any other centralized body.
The world’s largest payment processor, Visa, has proposed a possible solution that ensures providers automatically derive funds from users’ Ethereum-based crypto wallets without needing the user to approve every transaction manually.
In the traditional banking ecosystem, auto-payment for intermittent bills is a norm, allowing users to approve certain service providers to fetch funds from their selected bank accounts to pay off bills. Platforms like Spotify, Apple, and Netflix can receive automated payments from users’ bank accounts.
Visa’s Head of Central Bank Digital Currencies and Protocols, Catherine Gu, explained that the company is focused on growing its “core competencies in Web3 infrastructure layers and blockchain protocols driving crypto development,”
According to Visa, such a mechanism isn’t possible for owners of self-custodial wallets, noting that automated programmable payments that pull payments from a user’s account at recurring intervals “requires engineering work.” The focus areas include security, scalability, interoperability, privacy, and use cases of different protocols.
This is because, in self-custodial wallets, the user is the only person in control of the private keys, meaning they need to manually sign off on transactions as “a smart contract cannot initiate transactions on its own.”
Visa stated in its post that automatic intermittent payments through crypto would be realized via a new version of self-custodial wallet identified as “delegable accounts,” which is centred on the “Account Abstraction” (AA) idea.
Through an AA-based self-custody wallet or delegable account, the Visa team states that user accounts would “function like smart contracts,” meaning that people can schedule transactions without signing off to initiate each transaction.
“This application could allow a user to set up a programmable payment instruction that can push funds automatically from one self-custodial wallet account to another at recurring intervals, without requiring the user’s active participation each time,” the post reads.
Visa’s innovative plan, a significant push for crypto in its seemingly most prolonged winter period?
Visa acknowledges that auto-payments can be adopted relatively stress-free through wallets launched by other parties, such as exchanges. This means that users would have to trust these parties with their funds. However, there has been a drastic loss of trust in exchanges by users considering FTX shocking bankruptcy and other affiliated exchanges.
The feasibility of Visa’s plan reaching its full potential depends on how far exchanges can go to ensure that their services are transparent, trustworthy, and accountable. Exchanges like FTX, Celsius, BlockFi, and Voyager have enhanced a lack of trust for exchanges in the minds of crypto users. Thus, reviving that will take a great deal of transparency and accountability.
The post also highlights that AA has been proposed as part of multiple Ethereum Improvement Proposals over the years but ultimately hasn’t gone through due to difficulty in implementation. This requires many protocol changes and “security guarantees to be met.”
The Visa team stated it has already successfully tried its delegable accounts on a private chain from the layer 2 scaling solution StarkNet, as the network supports AA.
As such, the post concludes that auto payments are not far away, given the Visa team was able to implement delegable accounts within StarkNets’ “account model.”
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