Why Merchants Can No Longer Overlook the Rise in Crypto Payments
- Scott Major, Chief Commercial Officer at Transact365
- 22.03.2023 10:45 am #crypto #payments
Cryptocurrencies are a trending topic regularly discussed yet rarely understood. The highly publicised price spike of Bitcoin in late November 2021 triggered a wave of public interest in decentralised finance, with businesses, consumers and investors seeking out new opportunities across the crypto ecosystem. However, the sudden willingness to embrace cryptocurrencies was immediately damaged following the volatile price collapse of all the major coins, ushering in the beginning of crypto winter.
While the market has bottomed out and there has been a very gradual price recovery, the price of major and altcoins are nowhere near the valuations once achieved. As such, there exists a level of distrust over the future of cryptocurrencies, and questions over whether this form of technology has any further role left to play.
In reality, the potential of cryptocurrencies is far from realised. This is due to a knowledge gap that exists between Web3 experts who understand the practical ways in which evolving technologies like blockchain and decentralised finance and those in the private sector who simply are not aware of these possibilities beyond the buying and selling of coins.
One exciting area perfectly positioned to be revolutionised by cryptocurrencies is the payments sector. Working closely with merchants engaged in emerging markets, the team at Transact365 has witnessed first-hand a shift in how crypto payments and Web3 technology is already changing how retailers engage with their consumers. This is particularly prevalent in places like India and LATAM where mobile adoption rates are increasing at a rapid rate.
It is estimated that the market size of the global cryptocurrency payment apps could reach over USD $2 billion by 2023, maintaining a compound annual growth rate of around 16.6% from 2022 to 2023. There are a few factors fuelling this growth, ranging from the adoption of blockchain technologies to a growing acceptance of cryptocurrencies as an alternative to fiat currencies in emerging jurisdictions, including LATAM and Southeast Asia.
As a decentralised form of finance, cryptocurrencies are being embraced by consumers in emerging markets as they help overcome many of the challenges they commonly face when engaging with traditional banks. Remittance payments are an example of this, with cross-border cryptocurrency transfers being a faster and cost-effective option. These benefits increase the likelihood of consumers in these countries holding cryptocurrencies alongside fiat in traditional savings accounts.
Changing perspective, there are numerous benefits of crypto payments for retailers and merchants. The cost involved in facilitating cross-border transactions is significantly lower, as is the speed in which transactions can be completed at the point of sale. Privacy and security can also help merchants address issues of fraud, with blockchain technology removing the process of chargebacks entirely, which ultimately protects the consumer and merchant.
Major retailers are taking note of this adoption trend, integrating new payment systems to ensure their customers can make payments in various cryptocurrencies. Research from BitPay has revealed that over 100,000 merchants currently accept cryptocurrency payments, including renowned brands like Gucci, Mastercard, Amazon and Lush.
While big brands have the resources needed to integrate non-fiat options into their payment systems, this could be a more challenging process for smaller and medium-sized merchants. Part of this is due to the reluctance by mainstream banks and financial institutions to consider new innovations, and a lack of understanding from merchants on how they could make such an integration work.
Traditional payment providers and large financial institutions are slow to embrace new innovations. Their risk-averse nature often means that their customers lose out on opportunities. In the case of merchants seeking to access consumers in emerging markets, the lack of crypto options could amount to millions of dollars in lost revenue. Rather than be held back by the unwillingness of their payment provider to facilitate crypto payments, merchants are turning to a new generation of fast-scaling fintech companies like Transact365 which can offer these services.
We are not suggesting that crypto payments will replace traditional card transactions. However, based on the current circulation of non-fiat transactions in emerging markets, it is clear that cryptocurrencies cannot be overlooked. Any merchant or retailer looking to engage with an emerging market must ensure their payment options include cryptocurrencies that are preferred in a particular jurisdiction. Payment service providers can provide that information and integrate into a merchants existing payment infrastructure.
Evidently, we are only on the cusp of truly realising the full potential of cryptocurrencies. As traditional barriers to cross-border transactions are broken down through web3 technologies like crypto and blockchain, the payments sector is positioned to lead on this innovation in the immediate and long-term. As such, retailers and merchants need to make sure they are taking advantage of new payment technologies now; failing that, there is a risk that they could be left behind.
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