Why This “Winter” Won’t Stop The Growing Use Of Crypto E-Commerce

From plane tickets, wages and school fees to Subway sandwiches and Elon Musk’s perfume – these days you can use crypto to cover most of your daily expenses. Microsoft, Google, Starbucks and a number of other major brands support crypto as a payment method. This list is expanding every day: it seems that the current crypto winter and black swan events like the recent FTX collapse have not been able to stop the use of digital asset payments.

While BitPay reported a 15% year-over-year (YoY) increase in monthly transactions in September, Visa’s crypto-linked card usage increased from $1 billion to $2.5 billion in payments between the company’s fiscal Q1 2021 and Q1 2022.

At the same time, our data showed that an increase in transaction volume increased by more than 100% between Q3 2021 and Q3 2022, with a 94% growth in the number of transactions.

However, crypto adoption in e-commerce is happening at a slower pace. Considering the huge potential of crypto, will the trend of using crypto payments continue in the e-commerce industry?

Should crypto payments be used in e-commerce?

First, while e-commerce has a continuously growing share of all retail sales, many major market players have overestimated the pandemic-driven increase in this field. Meta’s Mark Zuckerberg is among them. He laid off 11,000 employees in part because of the tech giant’s false expectations that the pace of the digital shopping boom would not slow after the end of the quarantine.

According to the Statista Digital Market Outlook, e-commerce revenue should fall for the first time ever, with analysts expecting a 2.5% year-over-year decline in 2022. Similar to global e-com revenue, online grocery sales fell in the U.S. by 3.7% between October 2021 and October 2022.

Retailers need to come up with new strategies to attract customers. And it seems that the use of crypto payments could be one of the ways that could give a much-needed boost to the e-commerce market.

Many advantages of crypto

Compared to traditional payment methods such as bank transfers and card payments, cryptocurrencies offer a wide range of advantages. Merchants can reduce costs while processing digital asset transactions with a payment partner at around 1% per transaction (compared to 2.87% to 4.35% charged by conventional processors). And transactions arrive almost instantly to merchants’ accounts.

Furthermore, transactions with digital assets are secured with public key encryption and are performed by a decentralized network of validators via immutable blockchains. While analysts consider the latter computer systems highly secure, another advantage is that merchants face no risk of chargebacks with crypto payments.

On a side note, online retailers consider chargebacks and friendly fraud as one of their most critical challenges, which accounted for 5.9% ($25.3 billion) of US retail sales in 2020.

Since crypto-payments are truly global without geographic restrictions and surcharges for cross-border transactions, merchants can leverage them to scale their business and access more opportunities for international expansion.

Amazon looks to be doubling down on crypto

If we look at e-commerce giants like Amazon, we can see a strong interest in crypto that started many years ago. Of course, this is also a big deal for the digital asset market. For example, last year Bitcoin surged 14% after a new job posting signaled Amazon’s intention to dive deeper into the cryptocurrency industry.

In addition, the e-commerce giant is participating in the ECB’s digital euro trial. Together, these signal a continued strong interest in digital assets in the company.

Considering its 13% share of global e-commerce GMV, online stores are likely to follow in Amazon’s footsteps in this field. However, they need to accelerate crypto adoption to keep up with the pace of this trend.

The perfect moment for crypto adoption

While crypto prices are very volatile at the moment, many individuals and industry projects see this as an opportunity for investment and preparation for an incoming bull run.

In addition to investors and crypto firms, online marketplaces and e-commerce brands should also think long-term and embrace the trend early. Like all industries, the cryptocurrency market always goes through cycles.

As each new cycle brings its own trends – such as NFTs, DeFi, Play-to-Earn games and others – e-commerce companies will have more opportunities to exploit.

However, the pace of crypto adoption in e-commerce may actually be slow. Online retailers may ask themselves: Why should I integrate cryptocurrency payments if most of my customers use credit cards?

But this is a big misunderstanding. The number of crypto holders is increasing rapidly, and those who refuse to adopt this innovation are missing out on a ridiculous opportunity. At the same time, you can leverage cryptocurrency payments to offer more ways for your customers to pay.

Crypto not too volatile

And here’s another misconception: Crypto is too volatile to be useful for day-to-day payments. On the one hand, it is true enough that holders of “standard” cryptocurrencies such as Bitcoin, Ether and Dogecoin face increased volatility risk. However, BitPay’s statistics show that Bitcoin accounts for 52% of the sales volume and 60% of the payment volume, respectively. Current crypto users are not afraid of price changes and some even take advantage of it during trading.

And if one still wants to hedge risk, they can use digital assets linked to the value of major fiat currencies such as USD and EUR.

Moreover, merchants can use the services of dedicated cryptocurrency payment processors to eliminate all risks of price volatility. These solutions freeze the exchange rate for several seconds at the time of the customer’s payment and use it to instantly convert the customer’s crypto to fiat currencies right after each sale. As a result, the processor assumes all volatility-related risks from sellers.

Big brands will accelerate adoption

From fast and affordable fees to secure transactions and lack of chargebacks, crypto payments offer a number of advantages for merchants. And as the major market players show an increasing interest in them, online retailers need to adopt digital asset payment methods to keep up with the pace.

Eventually, the majority of major brands will adopt crypto payments. As they demonstrate best practice to other market players, this will be the point where mass adoption will take off, giving e-commerce the much-needed boost for its international expansion.

Dmitry Ivanov is the CMO of the crypto payments ecosystem Coins Paid.