PayFi: how blockchain is changing traditional payments

At the early stage, around 2020, the DeFi space was quite limited: the main role was played by individual decentralized exchanges.

Over time, the decentralized finance ecosystem has expanded significantly. By April 2026, the total value locked in DeFi exceeded $90 billion. This led to the emergence of distinct segments within the market, one of which is PayFi (Payment Finance).

PayFi is a model of financial operations in which payments are carried out via blockchain within decentralized applications, and the execution of transaction terms is ensured by smart contracts.

The term PayFi was proposed by Lily Liu from the Solana Foundation in 2024. The concept is based on the principle of TVM (Time Value of Money), which holds that money today is more valuable than the same amount in the future, since it can be invested today to generate income.

Real-world assets represented digitally on the blockchain play a key role in PayFi . These include:

The main idea of PayFi (payment finance) is to make money work continuously. Funds should not be stored; they should be immediately used for payments, investments, and other operations.

The main difference between PayFi and classical decentralized finance is the focus on payments and speed of access to money.

In traditional finance, operations such as lending can take days or even weeks. This is due to the involvement of intermediaries and the need to comply with regulatory requirements (a system of rules and procedures that ensure adherence to laws and regulatory requirements).

In PayFi :

If decentralized finance is primarily focused on generating returns, PayFi emphasizes fast and global payments.

One of the key ideas of PayFi is the use of future income instead of current funds.

For example, instead of taking a loan to make a purchase, a user can place a deposit in stablecoins and use future interest to pay for the purchase.

This approach can be described as “buy now, pay with future income.”

For users:

For businesses:

Despite its potential, PayFi (payment finance) has a number of challenges:

Smart contracts are the foundation of PayFi, but any error in their code can lead to serious consequences. If a developer makes a mistake or leaves a vulnerability, attackers can exploit it and withdraw funds from the protocol. Unlike traditional systems, such errors are difficult to fix quickly because blockchain transactions are irreversible.

To mitigate risks, code audits are used, as well as mechanisms to temporarily freeze funds — if suspicious activity is detected, operations can be paused until clarification.

The DeFi and PayFi sectors still lack unified and clearly defined rules at the global level. In different countries, regulatory approaches may vary significantly: in some places, such projects are supported, while in others they are restricted or banned.

This creates uncertainty for companies and investors: projects often do not know which requirements they must meet, and major players in the traditional financial sector (banks, funds) are hesitant to invest due to legal risks. As a result, market development may slow down.

Blockchain is inherently a transparent system: all transactions are recorded in a public ledger and can be viewed by any user. Although wallet addresses are not always directly linked to a person, additional analysis can reveal who is behind transactions.

For individual users, this is not always critical, but for businesses, transparency can be problematic. Companies want their payment details, transaction volumes, and counterparties to remain confidential. Therefore, one of the key challenges in the development of PayFi is finding a balance between blockchain transparency and the need to protect commercial information.

A platform that allows borrowing against future income (such as salary, recurring payments, or investment income).

It also takes into account income from staking (the process of locking cryptocurrency to earn rewards).

Ondo Finance - is a platform for tokenization (conversion into digital form on the blockchain) of real-world assets.

Among its products:

An infrastructure project that combines blockchain solutions and real-world assets, enabling transaction flow management and fund distribution without intermediaries.

PayFi is the next stage in the evolution of decentralized finance. It combines payments, real-world assets, and automation, allowing money to be used more efficiently.

If DeFi made finance accessible, then PayFi makes it fast, flexible, and integrated into everyday transactions.