Crypto payments are gaining ground thanks to centralized payment processors

The cryptocurrency market has grown above many people’s expectations over the last decade. The nascent industry has managed to change the mainstream perception quite significantly, especially in 2021, when many traditional financial institutions adopted crypto in one form or another.

Some of the largest public companies such as MicroStrategy began using Bitcoin (BTC) as a treasury hedge, while such as PayPal, Mastercard and Visa paved the way for the general public to use crypto as a form of payment. While many experts are still skeptical about the use of crypto as a payment method, given the price volatility, recent market trends and data suggest that crypto is increasingly being used to buy goods for daily use.

A recent report from fintech payment infrastructure provider checkout.com, which surveyed 33,000 business executives, revealed an increase in consumers’ interest in paying with crypto. The report indicated that 40% of 18-35 year old consumers want and plan to use cryptocurrencies to pay for goods or services within the next year. That is up from less than 30% last year.

The increase in digital payments aided by the COVID-19 pandemic has only made it easier for crypto to become more mainstream. People are more familiar with QR code payments today, making it easier for regular payment processors like Visa and Mastercard to introduce cryptocurrencies on the network without having to build their own infrastructure.

Miles Paschini, CEO of fintech bank FV Bank, told Cointelegraph:

“The use of cryptocurrencies as a form of payment has developed over the last year, but primarily in the area of ​​settlement classes, progress has been made with stable coins, especially with the USDC and to some extent XRP. The development we have seen in the settlement class is not exactly I think we will see more of this type of settlement team integration in the future as stable similar ones become more efficient and programmable than traditional settlement systems. “

The growth of crypto payment networks and public interest

According to a report from Visa, the network processed over $ 1 billion in crypto transactions in the first quarter of 2021, which increased to $ 2.5 billion by the first quarter of 2022. The report highlighted that cryptocurrencies have become increasingly popular with the increase in the use of stablecoin payments.

Mastercard partnered with USD Coin (USDC) stablecoin issuer Circle to facilitate crypto-based payment options for millions of users.

With the increase in crypto-linked debit cards, Nexo has come up with its crypto-security credit card in collaboration with Mastercard. Nexo has issued 55,000 cards since its launch in April that can be used by around 92 million merchants worldwide, allowing investors to use up to 90% of the fiat value of their crypto.

Antoni Trenchev, co-founder and managing partner of Nexo, told Cointelegraph about the emergence of crypto as a form of payment, claiming that cryptocurrency cards make it easier for retail customers to use their digital assets just like fiat. He explained:

“The concept of HODLing is well understood in crypto, but with crypto-supported cards it is now possible to hold your digital assets while also using these to use in daily transactions. This in turn has created a way where crypto can be both an investment and a form of payment, which increases utility as an asset class. ”

He added, “Cryptocards provide the ability to use your crypto directly, which automatically converts your crypto from a linked wallet to the fiat currency you need to pay.”

Many analysts also like to point to the increase in stablecoin adoption as a key value for cryptocurrencies. Brandon Rochon, a computer scientist at Web3 infrastructure provider Covalent, explained how stablecoin USDC has managed to see a 10% increase in adoption from year to year (YoY) despite a decline in the market. He explained:

“When we look at the USDC, the supply grew from $ 373 million in July 2019 to $ 1.0 billion in July 2020, representing a ~ 168% increase over the one-year period. The same growth of 168% was achieved in the first three months by October 2020. Over the next year, the offer grew at a rate of 2500% to ~ 25 billion dollars, when Mastercard went in and launched its simplified payment card offer with Circle in July 2021. Since that time, the stablecoin supply has continued to grow at a rate of over 120% YoY despite the market decline in the -50% + area, which means strong benefits. ”

Omid Malekan, an adjunct professor at Columbia Business School – where he teaches crypto – believes that stablecoin is a fair calculation to measure the payment usage of crypto at the moment. He told the Cointelegraph:

“One way to measure cryptocurrency usage in payments is to track stablecoin volumes since they have a much more limited function than pure cryptocurrencies. Volume in the payment chain has been very strong lately. Most of this is to accommodate speculative activity ( people who buy and sell crypto, borrow in DeFi, etc.), but payment is a payment, and a significant part of the traditional system’s payment volume is also related to capital market activity. “

Crypto payments beneficial for both sellers and consumers

While the infrastructure side of cryptocurrency has seen tremendous growth, it would not have been possible without the sellers’ willingness to accept it. Several studies and reports have highlighted that sellers have benefited just as much from the cryptocurrency payment integration despite technical barriers and complexity.

Another report from PYMNTS highlighted that more than 75% of customers in the US are looking forward to using crypto as a form of payment in 2022. While 85% of businesses with over $ 1 billion in annual sales integrate crypto payments to get more customers, many others have Merchants said that their foreign transactions increased and that they found a new customer base after cryptocurrency integration.

The main reasons listed by sellers for accepting cryptocurrencies as payments include significant cuts in transaction costs, elimination of intermediaries and the introduction of new customer bases from around the world.

Stablecoins make up a significant part of consumer spending. However, many analysts also point to significant growth of Team 2 networks over the past year. For example, Lightning Network, the secondary team at the top of Bitcoin, has seen tremendous growth over the past year. The Bitcoin Lightning Network capacity grew above 4000 BTC, first breaking the 1000 BTC barrier in August 2020 and the 2000 BTC barrier in July 2021. The capacity has doubled in 18 months.

Andry Lebedev, co-founder of Web3 payment infrastructure company Swipelux, told Cointelegraph:

“Currently, there is a rerolling of transactions from L1 to L2 thanks to the introduction of zk rollups and optimistic rollups. Consequently, we see significant growth in transactions for protocols and stabilization of transactions for Ether and Bitcoin at 125,000 and 240,000 transactions per day.

He added that there has been an “upward trend in the structural change of cryptocurrency, which instead of value transfer becomes a form of payment in the new Web3.”

The popularity of cryptocurrencies depends on the general use of cryptocurrencies; the more people who are aware of and understand the nascent financial asset class, the more people will adopt it, as evidenced by several studies mentioned above. The volatility aspect of cryptocurrencies can be further reduced by converting them to stable currencies.