How is blockchain driving change in e-commerce and payments?

According to the latest survey conducted by PMNTS and BitPay, 85% of businesses use crypto payments to find and acquire new customers. As an alternative payment system built on the blockchain ledger, cryptocurrency is the digital alternative to traditional fiat currencies, and the blockchain – the transparent, distributed ledger where all crypto transactions are recorded, offers e-commerce businesses many advantages, including lower costs and risks, higher speed, greater data security , and the opportunity to open up new markets and demographics.

Improved business processes

Using blockchain, businesses are redefining how online transactions are processed, through the use of tokens and smart contracts. It can automate tasks based on preset rules and logic, such as automatic payments or inventory management, allowing businesses to authenticate transactions quickly and with greater accuracy and efficiency, resulting in a more cost-effective process.

Lower costs and risk

According to the same report, the transaction fees associated with crypto payments are much lower – around 1%, compared to credit cards or payment apps that can charge anywhere from 3% to 5%, and this is possible because the direct transaction eliminates the middlemen who add the costs.

Also, cryptocurrency payments are chargeback-proof, which will be useful because chargebacks are painful. Once a crypto transaction occurs and payment is made, it is recorded on an immutable ledger and is permanent. This also helps prevent fraud in the e-commerce system process, as all transactions are legitimate and accountable.

Faster transactions and payment processing

More businesses are starting to embrace stablecoins as an official form of payment, due to the faster processing times and lower costs compared to traditional fiat settlement rails. This enables businesses to accept crypto and convert it to fiat currency quickly. Instead of waiting days or even weeks for foreign exchange payments to be settled, settlement happens within hours. While some may argue that scalability, accessibility and ease of use continue to pose challenges to the wide-scale adoption and implementation of crypto payments, it has inspired many legacy businesses to rethink their technology platforms and processes to incorporate this.

Opens new markets

Crypto payments help address the challenges of cross-border payments, as digital currencies are independent of any government or third party, making it easy for anyone to hold crypto and transact. It is particularly attractive for trading in markets where many consumers are “unbanked” and have less access to traditional banking methods, or where other popular payment methods are difficult to use. Accepting crypto payments will be beneficial in allowing these e-commerce companies to unlock revenue streams in new markets.

Greater data security

Due to the immutable, transparent and decentralized properties of blockchain, it is used to improve the interaction between technology and customer privacy, and to ensure data sharing. Customers can rest assured that their data is secure and cannot be viewed by anyone without permission or credentials.

Aside from crypto payments, blockchain also changes how people verify their identity, i.e. with decentralized identity or DID, potentially eliminating the use of passwords, reducing the ability for hackers to intercept, thus providing more security for the user’s account on e- trading platform.

Crypto payments: What should you watch out for?

Blockchain is a relatively new innovation, and with it comes the need to engage thoughtfully in the use of e-commerce and payments.

Consumer confidence. Crypto transactions have no protection or recourse, once the transaction is complete, it is done. Therefore, customers may require more trust in the e-commerce brand before using cryptocurrency as payment. However, we are seeing an evolution in the regulatory environment with the introduction of new laws and regulations to protect customers, which should help lower the barrier to crypto payments.

Consumer data. There are privacy issues and concerns raised among some consumers, who are concerned about what personal data is collected and how it can be used. In a growing space where many consumers are not knowledgeable about the technology and how it works, it can be difficult to build consumer confidence in using crypto payments. In order to achieve mass adoption of crypto, there may be a need to find a middle ground where stablecoins are regulated to the point that they operate in a legitimate manner.

Volatility. Cryptocurrency is subject to increased volatility, which can pose a risk to e-commerce brands that need liquidity and cash flow for day-to-day operations. Therefore, it is beneficial for companies to look for crypto payment service providers that help remove volatility risk by offering settlements in local fiat currencies that allow one to “cash out” at any time to avoid market fluctuations in crypto valuation.

What kind of crypto-tokens will be accepted as a medium of exchange?

To solve the problem of volatility, businesses can look to more stable cryptocurrencies as the de facto currency for crypto payments. Stablecoins are intended to address an efficient medium of exchange, providing the necessary transparency, liquidity and stability for sellers who can choose either to settle directly in stablecoins, where they can lock their value against the United States dollar (USD), or to go off the ramp. into fiat.

Cryptocurrency and blockchain as the new front line in e-commerce

Although the use of crypto for e-commerce purposes is becoming increasingly prominent, it is still very far from achieving mass adoption. For merchants looking to leverage the benefits and increase conversions of accepting crypto, they need to be laser-focused on choosing the right, compliant-centric global payment infrastructure that offers secure and fast alternative payments.

That said, as the nature of how money moves around the world is transformed, we can’t wait to see how blockchain and crypto will evolve to drive change in the global financial system, and how businesses will adapt. For e-commerce companies looking to take a forward-thinking approach to payment options, there can be many benefits to implementing cryptocurrency. And we believe it is only a matter of time before the demand for crypto and stablecoin-based payments reaches a tipping point.