–
Deep Dive
What if PSPs could generate revenue from processing payments, instead of just charging fees?
Blockchain payments have always been approached as cost + margins, just like traditional payments. But decentralization creates unique value capture opportunities that could transform payment economics entirely that is too often missed — and that’s MEV.
“Your liquidity is only discoverable by those who are looking for it, and in the dark forest, those are seldom your friends.” — Valantis Labs
This is true in both traditional payments, and blockchain based payment systems. In an effort to redefine payments, blockchain based solutions whether they are using stablecoins or not have essentially replicated the traditional payment model over to a new paradigm. Let's compare on a high level:
Note this is not conclusive, but meant to illustrate the parallels. As you can see, all we did with blockchain payments is actually just reduce the amount of the fees, while replicating the same structure. Fees add up from the base all the way to the end-user. This has its own problem of causing payments to become a race to the bottom in margins for PSPs, and their margin becomes a reflection of how much power they have in the market.
Stripe Card Payments: 3.5%
Stripe Crypto Payments: 1.5%
Coinbase Commerce and most crypto PSPs: 1%
Rest: 0.5% or less
This limits the potential for payment providers to innovate and build new solutions. When margins are compressed, teams face barriers to expanding beyond basic services or investing in game-changing infrastructure.
I get it — every mention of stablecoin payments will hammer in the fact that you pay less fees than traditional payments, specially for cross border and for much faster speed. While true, it completely misses the most important point in all of this—which is MEV. Every PSP processing blockchain payments is generating MEV value in the market, yet captures none of it.
Why? Decentralization. This key fact generates a new additional vector that is unique to blockchain payment systems that has been largely, ignored not just in the PSP payment context, but as highlighted here in general also for the application and account layers like wallets.
The problem today is PSPs create essential value through their effort and risk-taking, yet the MEV value from their volume flows to other participants instead of strengthening the ecosystem they're building.
High level view of the order flow - Thanks Flashbots for this piece of art on orderflow.art
Blockchain payments involving DeFi steps do not simply go to a network to get executed, there is an entire MEV supply chain that occurs where certain transactions create value through arbitrage, liquidation events, and in the worst cases — front-running and sandwich attacks which actually harm the execution of that transaction resulting in worse execution for end-users and PSPs, all happening in an invisible way when a user sends their transaction to a mempool. Eliminating MEV isn't the answer either, as long as we have decentralization, there will always be MEV, instead of trying to eliminate it, the question to answer is who gets what?
For example, what can appear to users as a simple transaction actually triggers an intricate chain reaction of value-generating events. Consider this transaction (Metasleuth), it involved:
1 solver auction coordinating execution on CowSwap
12+ specialized solvers competing for optimal routing
3+ decentralized exchanges providing liquidity
3+ liquidity providers enabling the trade
Multiple order flow auctions capturing value
4+ atomic searchers optimizing execution
7 block builders competing for inclusion
Several other specialized participants
That's 35+ different entities coordinating together to execute what looks like "just a payment" to the end user. Currently, all the value generated through this type of order flow coordination flows to everyone except the payment providers who facilitated it in the first place!
As you can see, there is an entire set of value of MEV that is currently inaccessible to PSPs and their users due to lack of suitable MEV-aware payment infrastructure. The responsibility of MEV recapture and redistribution is currently left in the hands of end-users, which is a ridiculous amount of complexity to drop on average everyday users.
So who gets what? Paygrid aims to answer that question, what if we thought about blockchain payments in its entirety, including MEV not as a weakness to eliminate but as an opportunity to harness in a positive way that improves the cost structure dynamics, unit economics and the overall value for all the marketplace participants? What if PSPs were cemented as part of the MEV supply chain and the order flow? If payments are really a core future for our industry after stablecoins being labeled the “product/market fit of blockchain”, we definitely need to do better to answer those questions.
The role of chain abstraction in all of this
We are in a multi-chain reality, more L2s are being built, and more are being decentralized overtime. Furthermore MEV extraction is getting more and more sophisticated capturing opportunities across DEXs and CEXs, and the bar to manage this is getting more and more specialized that only the most sophisticated, well funded market makers, solvers and LPs are actually able to leverage it. Where there is money to be made, the competition naturally gravitates, and there is more than $900M estimated in MEV value out there.
Chain abstraction defines a few key points on how all of this works with the role of solvers/fillers and intent-protocols, abstracting away chain specific complexities down to solvers. So instead of users figuring out all the complex parts of interacting with blockchains, solvers do that instead with a intent. It's a simple yet powerful concept and is inline with onboarding the next generation of crypto users. This is how the internet scaled all along.
Paygrid: Enabling MEV-Aware payment clearing through payment for order flow auctions
The key question here is, what if PSPs could actually make revenue from processing payments?
Think about it, PSPs do the work of building valuable dApps and services, the end-users would have not spent this money if not for the PSP. So what if instead of the MEV going out to random incentivized players, the value actually went back to them? This naturally unlocks a whole new paradigm and way to think about payment unit economics:
Payments are no longer a cost center that must be minimized, but can actually generate revenue.
MEV revenue can impact the bottomline for PSPs, or it can be used to subsidize free payments, or even reward end-users to further incentivize more users to use blockchain payments. “Your margin is my opportunity” situation.
Blockchain PSPs will have an entirely new way of not just surviving, but to thrive in a new economy, turning blockchain weaknesses into their biggest strength, something that traditional payment dynamics can never do, not with Open Banking, Account to Account, and not with CBDCs either, sorry no MEV there for PSPs.
What's your choice? Tell us your answer and why — Telegram
The idea of payments for order flow (PFOF) isn't new either, this is how Robinhood first enabled commission-free stock trading, and it is an existing and well regulated aspect in the US. It's just that payments are regulated on a federal level and the lowest prices are fixed from a scheme level. While for blockchain payments the dynamics are not the same at all, therefore the approach shouldn’t be the same either. Robinhood's August 2023 numbers show how capturing order flow value enabled free trading while generating significant revenue ($53.5M from various trading types). The parallel for payments is clear: MEV capture could enable similar transformation of payment economics.
CoW Protocol is perhaps the most successful blockchain protocol that executes on this idea as well, and they have been since 2021. In December 2024 CoWSwap generated 0.6% of their total volume in additional MEV value paid out as surplus, so for every 10M processed, their solvers generated 60k for their end-users. We believe there is much more value yet to be captured specially for payments, with Paygrid’s payment specific optimizations, clearing mechanism, marketplace coordination and leveraging the context behind payment flows to drive solvers to provide the best surplus generating executions.
Order flow auction refunds are an additional source of monetization for solvers, frontends, wallets, and users. CowSwap generated nearly 400 ETH in additional value from May to December 2023 leveraging order flow auctions in the MEV supply chain. For PSPs, this represents an entirely untapped revenue source from their existing payment flows by being left out entirely. This is essentially the cost of letting your users go elsewhere to finish their payment intent!
Don’t let your users leave your payment service is a key takeaway for PSPs here. For example:
Alice wants to pay Bob with $1,000 USDC from Ethereum.
Bob wants to receive his funds in USDT on Polygon.
You do not support cross-chain flows. What does Alice need to do?
Alice goes to another order flow to get the job done, leaving your payment service for this step.
Alice gets her funds in USDT on Polygon finally.
Alice pays with USDT to complete her payment intent. All you do here is a simple token transfer, capturing only the last step.
Not only is this bad UX, but you essentially just lost the entire MEV opportunity to someone else, even though the value was created because of your product. This is the equivalent of going to pay with your US Dollar in Europe with EUR, the entity that takes on your FX conversion is the one that wins the FX revenue, so the card network and the bank are both incentivized to offer the service to you because they make a lot of margins on it, but imagine instead they say its unsupported and force you to go to an FX office to exchange it there, who in turn captures that payment intent FX conversion revenue.
Same story with same chain swaps, or using existing popular aggregators and bridges who are really doing you no justice for the value you make. Leave those for the solvers instead.
Not to mention when PSPs do not participate in the order flow, they cannot protect their users from the execution quality. The SEC released a whole regulation to protect users in PFOF Stock Market, with “National Best Bid and Offer (NBBO)” and recently proposed a change in equities market structure from PFOF to 100 to 300ms order-by-order auctions — something that DeFi have been experimenting with at scale for a few years now!
In short, don’t let your users leave your payment process, take control of the entire payment value chain. Our main Payment API product does exactly this.
How Paygrid creates a PFOF marketplace for payments
All these insights drove us to build Paygrid. Payment networks are essentially a marketplace such as Visa/MasterCard, PayPal, etc.
Paygrid at its core is a clearing marketplace for PSPs who generate the volume, and solvers/fillers who have the technical expertise for chain abstraction, MEV, and access to liquidity to execute on that volume. Moving from Payment for order flow (PFOF) → to Payment order flow auction (POFA) mechanics.
While the marketplace is primarily 2-sided, it is designed to be a connector that cements PSPs on the application layer into the MEV Supply Chain, instead of being external participants.
Application-driven MEV supply chain proposal - Expand image
Paygrid Payment Clearing Protocol: Payment order flow auction (POFA)
This core layer enables collaboration between ecosystem participants, creating value through:
Intent order flow
Collect payment intents from PSPs
Batch by clearing context (B2B, retail, etc)
Package them with valuable payment context for solvers to help them solve better and have more room for MEV extraction.
Auction Coordination.
Specialized auction mechanics designed for payments.
Select winning solver based on surplus returned.
Verify execution and unlock funds as necessary.
Example: A batch of high value B2B payments, with a priority of cost > speed could be cleared over 10-30mins, maximizing the auction competition and solvers ability to maximize surplus generation.
Solvers as Clearing Agents
Clearing agents (solvers) are highly specialized operators in the network, by working with them, end-users and PSPs have access to highly advanced execution mechanisms that would otherwise be unreachable to regular users, and to PSPs without significant investment into arguably an entirely different business. Their key role is:
Settlement optimization based on context.
Employing payment clearing mechanisms such as:
Finding Coincidence of Wants
Netting in cycles
MEV capture
Some highly sophisticated solvers today such as Barter even employ clearing strategies such as CoWs between various DEXs in their own individual solving process. We are working on empowering the Clearing Agent Experience with context rich order flow to optimize the executions and MEV capture, and create new clearing mechanisms.
PSPs - Payment Intents Originators
PSPs play a central role and the primary beneficiaries, with benefits that are extended to their end-users. PSPs send their payment intents to Paygrid via smart contract interactions or simple API/SDK calls:
Payment workflow context and execution priority requirements such as cost, speed, risk, reliability, etc.
Receive the surplus generated by the clearing agents (solvers) through POFA.
This even opens a whole new dimension of optimizations, PSPs can actually clear between each other, replicating efficiencies banks have had with payment schemes for decades but was never in the territory of PSPs. Netting cycles can be used for PSPs who decide to manage their own liquidity, in turn skip liquidity providers all together, and sourcing external liquidity just in time to settle any missing gaps!
Tying it all together
The marketplace builds on inherent network effects that are poised to add value to the market across all players.
Solvers don't just get random transactions, they get highly valuable and context rich batches of payment intents that allows them to make even better solutions. This improves their execution ability and accessing a private order flow giving them leverage over the MEV market.
PSPs get key benefits to compete in the next generation of payments:
Chain abstraction: EVM networks, non-EVM, Bitcoin, support them all and meet users at their point of liquidity.
Receive an entirely new revenue stream, rewarding risk takers, innovators and value creators. In valuable MEV generating cases — instead of paying for orders, get paid for them.
Reduced infrastructure costs, no need to pay RPC servers and other operational costs figuring out routing, bridges, DEXs, per chain infra, etc.
End-users get highly sophisticated executions without lifting a finger, single step UX, full gas abstraction, chain abstraction, and are free from the constraints that they face today with fragmentation and sneaky network lock-in.
For example: Based on our study of a high-value B2B PSP volume, a payment batch might generate 0.3-1.2% in surplus value through:
Cross-chain DEX and CEX arbitrage opportunities.
Netting and Coincidence of Wants matching.
Queueing & Batching optimizations.
Context-specific clearing mechanisms involving dynamic cycles and time windows where cost and MEV value optimization matters more.
Overall negative MEV protection and positive capture, specially handy for high value.
Unlike traditional payment networks and existing blockchain payment approaches where more volume just means more fees, in Paygrid's model:
More volume → Better solver competition
Better competition → More value capture
More value capture → Better unit economics
Better economics → More volume
A well-designed clearing network can generate more total value than the sum of individual uncoordinated transactions. This could fundamentally transform payment economics rather than just shifting existing value around.
Conclusion
The next generation of fintech deservers freedom. We've always thought about payments in the same exact lens, and we mainly changed the actors and the labels. Blockchain MEV weaknesses are actually its biggest strengths, and the teams that capitalize on those strengths will be the ones that change the future of payments first.
Better payment clearing efficiency and MEV represents not just additional revenue, but a chance to really flip the unit economics of payments in favor of the value creators. Both traditional and blockchain native PSPs have generally been the ones making all the value, yet having no say in how their volume executes, receiving nothing out of the value it creates beyond adding their margins and instead just paying the fees upstream for it.
Join Paygrid Network
We're creating this network together with forward-thinking PSPs and solvers, building the foundation for the next decades of payments that align incentives for all participants.
For PSPs:
Chain abstraction benefits.
Revenue generation potential.
Integration support.
Early network advantages.
Make the network you love.
We’d love to work with you to model your volume on potential MEV capture opportunity and infra cost savings, if this sounds interesting to you, reach out to us for a no-strings-attached clearing report.
For Solvers:
Access to context-rich private order flow.
Access to payment corridor data to help anticipate future moves, predictable seasonality and more.
Opportunity to employ more specialized clearing mechanisms.
Help design the solver experience you love, that will actually allow you to do what you do better than before.
If this resonates with you, we'd love to chat. Reach out on email or Telegram.
Latest updates
