The value of cryptocurrencies has fluctuated nonstop over the pandemic. They have, for the most part, grown immensely in popularity, with 29% of all consumers, in a survey conducted by Skrill, saying that they are more familiar with crypto than 12 months ago. 47% of all consumers say they don’t know enough about cryptocurrencies to use them for payments currently and 24% would like to invest in crypto but don’t know which ones to buy.
With momentous events in crypto taking place like Elon Musk accepting Bitcoin as a viable payment option for Tesla, and then proceeding to reject it once more, and El Salvador announcing it made Bitcoin legal tender – these events and more all beg the question: are we reaching a tipping point for crypto as a payment method?
Rossen Yordanov is the Consumer Senior VP at Skrill and NETELLER. Yordanov oversees consumer business for Paysafe’s digital wallets, Skrill and NETELLER, with a focus on driving the mainstream adoption of these services globally, striving towards a vision where the boundaries between payments, remittances, spending and personal finance are no more.
When discussing the question on crypto as a viable payment method, Yordanov said this:
The resurgence of cryptocurrencies to the top of the news agenda has been one of the defining trends in fintech of the past six months.
This, of course, has been driven in part by the rise in the value of Bitcoin and other cryptocurrencies. The profits crypto investors have seen recently has piqued the interest of others looking to get into trading, and this is driving momentum for crypto awareness as a whole.
But it isn’t only crypto’s worth as an asset that is generating headlines. For years we’ve been waiting to see when digital currencies would reach their full potential as a payment method as well as a store of value. And, despite the continued wild fluctuations in the value of Bitcoin and other cryptocurrencies throughout 2021, there are signs that this may be the year we see progress.
For example, El Salvador has recently passed legislation establishing Bitcoin as legal tender, which is a first for the industry. More nations in Latin America are also indicating interest and will potentially follow suit.
Businesses are also beginning to publicise that accepting cryptocurrencies is in their future, which is contributing to its promotion as a viable payment method. In the UK, the country’s most expensive property has recently gone on the market for £175million, and the developer has said that will accept Bitcoin as a payment. Amazon and Starbucks are just some of the other examples of retail giants that are accepting crypto payments in some form.
But is widespread acceptance of crypto payments on the horizon? The answer to that question begins with consumer demand.
Consumers want more payment methods generally
One factor that has opened the door to a rapid growth in crypto payments is increased consumer demand for alternative payments generally. In April 2021 we commissioned a survey of 8,000 consumers in the US, UK, Canada, Italy, Germany, Austria, and Bulgaria, and a key takeaway from the research is that the digital payments landscape is shifting significantly.
This was true before covid-19, but there is little doubt that the pandemic has accelerated the trend. Overall, 86% of consumers told us that their online payments habits had changed during covid-19, with alternative payment methods such as digital wallets and direct bank transfers being among the most popular. Almost a quarter (23%) of consumers said that they used a digital wallet for the first time.
And this change looks set to be irreversible. Over a third (38%) of consumers are more familiar with alternative online payment methods to credit and debit cards now than they were before the covid-19 pandemic and close to a third (31%) say that they are more likely to use alternative payment methods now than in the future.
Where does crypto fit into the picture today?
During the same recent research we asked consumers about their experiences using cryptocurrencies as a payment method. The data showed significant rapid growth.
Overall, 9% of consumers told us that they had used cryptocurrencies to make a payment in the past month, and of these 97% said that they had used this payment method for the first time within the past 12 months. The majority (59%) of these new crypto consumers said that they were now using crypto to pay frequently and 44% said this was now their preferred payment method. Consumers aged 25-44 are the significant driving force behind crypto adoption, with 13% of 25-34-year-olds and 14% of 35-44-year-olds using crypto for payments in the past month.
Are we on the cusp of mainstream adoption?
When we ask consumers about their outlook on the future of cryptocurrencies, an even more positive picture emerges. Digital currencies have certainly infiltrated public consciousness in the past year, with 29% of all consumers saying that they are more familiar with crypto than 12 months ago. And when we asked consumers which cryptocurrencies they recognised, only 16% of consumers couldn’t identify any at all.
And overall they are buoyant on crypto’s future as both an investment and a payment method. Lack of understanding is still a barrier to growth (47% of all consumers say they don’t know enough about cryptocurrencies to use them for payments currently and 24% would like to invest in crypto but don’t know which ones to buy).
However, despite this, currently 23% of consumers think crypto payments will be mainstream in the next 12 months, and 27% think crypto is the future of payments. So there is a lot of reason to believe that the future s bright.
The pitfalls of crypto as a payment method haven’t gone away. The major cryptocurrencies are very volatile, meaning it can still be difficult to understand the value you are paying for something even though there are some stable coins pegged to major fiat currencies that travel on crypto rails and are not volatile. And they are still too confusing to understand for many consumers. The UX for both consumers and merchants needs development, and regulation make play a role yet. But these don’t necessarily mean we are a long way from mass adoption, as both consumers and businesses appear increasingly positive on crypto payments.