This article describes a blockchain-based prepaid recurring payments solution that utilizes tokens. The gist is that in the Web 3.0 world everything will be decentralized and trustless. In this future the PARSIQ subscription model allows consumers to acquire products or services for a set period of time at a set value, as assigned by the service provider.
So I buy a token for 1 hour a day of a streaming service for a year. Bingo! I acquire a token issued by the streaming service. The streaming service can verify I am the token owner and enable me my hour of video on a daily basis. If I don’t need the token anymore, or presumably if I decide the service has nothing I want to watch anymore, my option is to “rent” the token to someone else. To be successful PARSIQ needs Web 3.0 deployed and both the merchant and the consumer need to adopt an entirely new payment model that apparently has no dispute process associated with it.
But this crazy product reminds me of a recommendation I made to a global network several years ago suggesting they implement specific recurring contracts that merchants could adopt if desired.
For example, health clubs love recurring payments and consumers have become let’s call it wary. So one health club takes a leap of faith and offers a payment contract that is enforced by the network. The contract specifies that the recurring payment will be made unconditionally for four months but after that time the consumer can cancel or suspend payments at any time. The health club gets sufficient monthly payments to cover the onboarding process and a small profit. If it keeps the client satisfied it has an ongoing stream of revenue. The consumer knows that they are committed for 4 months but can easily bail after that time without the account constantly being debited and disputed. Banks get a stickier recurring product because they provide the consumer details of the recurring relationships and contract terms via the online/mobile channel and enable the consumer to end relationships that are no longer wanted.
Leaving the terms of a recurring relationship entirely between the consumer and merchant is a major cause of disputes and costs that are driven by merchants that have long-term contracts with consumers and deliberately offer no way out. These merchants are not likely to embrace a contract that enables a consumer to withdraw, but all it takes is one health club to decide it may get more clients by being consumer-friendly, and eventually, the rest will follow:
“In the world of Web 3, the definition of “how payments work” will be enhanced. While the familiar concept of payments today is one party transferring a store of value to another party for the purchase of goods or services, a similar exchange on the blockchain could also be done by holding a special type of currency – specifically designed to allow the holders to consume a good or service while held under their possession. How is this possible?
PARSIQ’S IQ Protocol
PARSIQ is the world’s first company to release a risk-free, collateral-less solution to tokenize subscriptions in the Software as a Service (SaaS) market. They are the creators of the IQ protocol, which was built to support subscription-based service models in the blockchain world.
How Does It Work?
In a traditional subscription model, customers make regular (e.g. monthly) payments to the providers of a good or service. As an example, a monthly music subscription may cost a user $9.99 per month, which is actively deducted from their credit card at the beginning of each month. This model is generally standard across all subscriptions – whether it be a subscription to a food delivery service, or a content streaming account. But what if there was a way to have a subscription model where a user did not have to make monthly payments – but where both the business was still earning payments and the buyer was still regularly receiving the good/service?
With PARSIQ’s IQ Protocol, not only is this possible, but this is exactly how the solution was designed to work.
IQ Protocol works by creating a special type of token on the blockchain. These tokens, known as “Life-Time Value Tokens (LTV Tokens)”, are assigned a life-time value tied to a particular good or service. For example, one LTV token may grant a token holder the right to watch one hour of TV shows per day for the next 365 days. These tokens are then released into the marketplace, available for interested buyers to purchase.
Once a company has tokenized a good/service for consumption, interested customers have one of two options. They may either become LTV token holders themselves, or, they may rent a LTV token from a “renting pool”, which is comprised of LTV tokens owned by other buyers who are interested in renting out their LTV token asset.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group