Crypto is slowly but surely creeping into the mainstream, but in a practical, real-world setting, what does that actually look like? And what type of challenges must both merchants and consumers overcome to bring the possibilities of crypto into the everyday?
Providing the readers of The Fintech Times with a fascinating insight into the current state of progress within the industry, here Sung Choi, VP of business development at Coinme, examines retail’s ongoing adoption of crypto and the benefits and challenges for retailers embracing its adoption, while highlighting the importance of bridging the gaps in consumer access to crypto when creating new opportunities for retailers.
It feels like almost every week, we hear about another big retailer or service provider accepting payment in cryptocurrency. AMC, the popular movie theatre chain, recently announced it now accepts payment in bitcoin, litecoin, dogecoin and other cryptocurrencies. It’s an excellent sign for the crypto industry that the mainstream world is starting to accept crypto for goods and services. Enabling small, routine payments for everyday things will help make this new technology feel more accessible and approachable.
Currently, it is relatively easy for a buyer to send crypto as payment using a standard crypto wallet. Where it gets challenging is on the seller’s side: there are hundreds of cryptocurrencies a seller could choose to accept, and each crypto may require a different wallet that needs to be monitored for incoming payments. This can become especially difficult if the seller doesn’t want to hold crypto due to its potential underlying volatility and requires treasury management. On a small scale, this could work while crypto payments are still at a novelty stage. However, it isn’t a stretch to imagine how much confusion and frustration this could cause at the scale of mass adoption.
Ultimately, the buying and selling experience of using crypto becomes seamless. It should be as easy as scanning a QR code or touching a phone to a near-field communication (NFC) card reader. And in the end, it shouldn’t matter what crypto the buyer is sending or the seller is receiving — it should all just happen quickly and quietly in the backend.
Lowered costs and NFC technology
The most significant benefit of crypto payments is lower costs for businesses accepting payments and the creation of universal access for buyers and users. For example, a small business wouldn’t need a bank or a credit card processing contract. A phone and a crypto wallet are all that would be required.
Traditional card-based systems charge substantial transactional fees to retailers, and retailers pass on their costs to the consumer as a direct fee or margin. Services like PayPal and Venmo have begun challenging this model with QR code-based payments. And even more interesting — in terms of payment infrastructure capabilities — is what is happening with contactless payments like Apple Pay and Google Pay, which both use NFC technology.
It will be interesting if crypto payment services can piggyback on the rollout of NFC payment infrastructure but do it on crypto rails rather than on those maintained by Visa, MasterCard, or other card payment processors.
Bridging consumer access to crypto
One big issue with making crypto more accessible to everyday consumers is the bottleneck of efficient integration of banking services and crypto wallets. As a result, many solutions today still feel like workarounds that are less than perfect.
For example, if a business accepts crypto payments, it shouldn’t have to think too hard about how and where it shows up. Suppose a consumer wants to purchase something in bitcoin, and the business owner wants that money to be deposited in their bank account in dollars. In that case, infrastructure needs to be in place to automate this functionality. As of right now, much of that processing is still manual and can be time-consuming and complex.
Another big challenge for crypto payments is the digital divide more broadly. Right now, cash is still the preferred payment format in many parts of the world. However, solution providers are working hard to make crypto payment services available to people in the cash economy so the digital transformation does not leave them behind.
One big push that needs to happen industry-wide is more of a focus on education — especially to help get businesses onboarded for accepting crypto payments. A survey published by CryptoLiteracy.org found that 96 per cent of Americans don’t understand the basics of cryptocurrencies. If people don’t understand something, they won’t adopt it. The crypto industry needs to make a concerted effort to educate consumers about the fundamentals of crypto and businesses to implement it into their operations.
Considering business logistics
In addition to some of the technological infrastructure mentioned earlier, other significant components needed infrastructure-wise are more geared toward business logistics. One challenge for business owners accepting crypto payments, especially at a meaningful scale, is the accounting and tax reporting implications. This is especially true because crypto is such a volatile asset.
A suite of services still needs to be developed to help businesses track and manage crypto payments in a way that can be tailored or customised to individual needs. These services almost need to be like enterprise crypto wallets combined with commercial-grade treasury management.
In many ways, that’s what would be required for pure crypto payments. But there is a move by many crypto exchanges and services to allow buyers to use debit cards to pay for things using traditional payment rails. Their purchases are debited against balances held in crypto. This setup is not necessarily peer-to-peer-style crypto payments. Still, it might be a necessary first step to demonstrate the market size and scope and inspire the development of future crypto payment infrastructure.
How close are we to wide adoption?
We are in an exciting time regarding crypto payments. Recently, there has been a lot of innovation in the space enabling debit card crypto payments and new kinds of rewards programs that payout in crypto or take advantage of some of crypto’s attributes.
It’s almost like when the internet went from an entirely desktop experience to a mobile and desktop experience. Right now, we are in that in-between time that the commercial web was in pre-iPhone. For more people to jump to the mobile internet, it took better hardware (like smartphones) and a better UX/UI design.
That’s what’s happening now in crypto. Wallets and other critical infrastructure are becoming way more intuitive and easy to use. Services enabling cash-to-crypto transactions and vice versa are becoming more commonplace. Eventually, crypto will become a complete, standalone alternative to all forms of finance, fueling everything from payments for everyday goods and services to a full suite of banking products.