Why Merchants Can No Longer Ignore the Rise of Crypto Payments

Cryptocurrencies are a popular topic that is regularly discussed, but rarely understood. The highly publicized rise in the price of Bitcoin in late November 2021 sparked a wave of public interest in decentralized finance, with businesses, consumers and investors seeking new opportunities across the crypto ecosystem. However, the sudden willingness to embrace cryptocurrencies was immediately damaged after the volatile price collapse of all the major coins, ushering in the beginning of a crypto winter.

While the market has bottomed and there has been a very gradual rise in price, the prices of major and alt coins are nowhere near the valuation once achieved. As such, there exists a level of distrust in the future of cryptocurrencies, and questions about whether this form of technology has any further role to play.

In reality, the potential of cryptocurrencies is far from realized. This is due to a knowledge gap that exists between Web3 experts who understand the practicalities of developing technologies such as blockchain and decentralized finance, and those in the private sector who are simply unaware of these possibilities beyond buying and selling coins.

An exciting area perfectly positioned to be revolutionized by cryptocurrencies is the payments sector. Working closely with merchants engaged in emerging markets, the team at Transact365 has witnessed a shift in how crypto payments and Web3 technology are already changing how merchants communicate with their consumers. This is particularly prevalent in places like India and LATAM, where mobile adoption rates are increasing rapidly.

It is estimated that the global cryptocurrency payment apps market size could reach over USD 2 billion by 2023, sustaining a CAGR of around 16.6% from 2022 to 2023. There are a few factors driving this growth, ranging from the adoption of blockchain technologies to a growing acceptance of cryptocurrencies as an alternative to fiat currencies in new jurisdictions, including LATAM and Southeast Asia.

As a decentralized form of finance, cryptocurrencies are being embraced by consumers in emerging markets as they help overcome many of the challenges they often face when working 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 that consumers in these countries will hold cryptocurrencies alongside fiat in traditional savings accounts.

Changing perspective, there are many benefits of crypto payments for retailers and merchants. The costs associated with facilitating cross-border transactions are significantly lower, as is the speed at which transactions can be completed at the point of sale. Privacy and security can also help merchants address fraud issues, with blockchain technology removing the process of chargebacks entirely, ultimately protecting the consumer and merchant.

Big retailers are taking note of this adoption trend, and are integrating new payment systems to ensure their customers can make payments in different cryptocurrencies. Research by BitPay has revealed that over 100,000 merchants currently accept cryptocurrency payments, including well-known brands such as Gucci, Mastercard, Amazon and Lush.

While large brands have the resources needed to integrate non-fiat options into their payment systems, this can be a more challenging process for smaller and medium-sized merchants. Part of this is due to the reluctance of mainstream banks and financial institutions to consider new innovations, and a lack of understanding from vendors about how to 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 clients miss out on opportunities. For merchants looking to access consumers in emerging markets, the lack of crypto options could amount to millions of dollars in lost revenue. Rather than being held back by payment providers’ unwillingness to facilitate crypto payments, merchants are turning to a new generation of rapidly scaling fintech companies that can provide 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 in an emerging market must ensure that their payment options include cryptocurrencies preferred in a particular jurisdiction. Payment service providers can provide that information and integrate into a merchant’s existing payment infrastructure.

Clearly, we are only just beginning to truly realize the full potential of cryptocurrencies. As traditional barriers to cross-border transactions break down through web3 technologies such as crypto and blockchain, the payments sector is positioned to lead this innovation in the immediate and long term. As such, retailers and merchants need to ensure they are taking advantage of new payment technologies now; if that is not possible, there is a risk that they may be left behind.