Alexander Mamasidikov, co-founder of mobile digital bank MinePlex
Despite the fact that cryptocurrencies have become a prominent element in finance with $2.15 trillion market capitalization, businesses are in no hurry to introduce them as a means of payment for products and services. It’s important to understand the reasons behind this phenomenon and explore the possible solutions to fix crypto's shortcomings in terms of enterprise adoption.
Businesses Prefer Crypto for Investments
In terms of crypto adoption, we have seen surging activity among businesses in the last few months. Since 2020, private companies, publicly traded firms like MicroStrategy, Block, and Tesla, have been pouring tremendous money into Bitcoin. As they searched for alternative investments, institutional players accumulated over 7% of the total BTC supply.
However, digital asset adoption for payments has been going much slower than expected. Despite some high-profile moves from the likes of Starbucks or KFC, as well as a Visa survey suggesting 24% of SMBs were planning to introduce crypto transactions, only a very small minority of enterprises were bold enough to roll out this feature to their customers.
In fact, only 4% of the merchants surveyed by Crypto.com and WorldPay are actively accepting crypto, even though 60% of the respondents are interested in rolling out digital asset payments in the near future. At the same time, Statista's data revealed that only a little less than 6,000 companies (1.85%) out of the total 32.5 million in the US had a cryptocurrency ATM or offered in-store coin payments in March 2021.
Crypto Payments Come With More Risks
When it comes to payments, businesses prefer to tread carefully. And they have valid reasons behind their stance on this matter.
First, cryptocurrencies are volatile assets, especially when compared to major fiat currencies like the USD, EUR, and GBP. Even BTC, ETH, and other top coins with high market capitalizations and trading volumes are subject to significant price fluctuations.
As a small business owner, you won't be willing to take the risk of accepting payments from your customers in an unreliable asset. A sudden change in price in the middle of the transaction is enough to eat into your profits or even generate losses on an order.
Furthermore, unlike integrating a popular digital payment method like PayPal or credit and debit card transactions, most enterprises have no experience with crypto. They don't know how to accept them, store them safely, or exchange them to fiat currency for bank account withdrawals.
For these reasons, companies have to dedicate significant resources to hiring external professionals or consultant firms to train their staff so they can learn the basics of working with crypto payments.
How To Handle The Existing Challenges
Fortunately, there are ways for businesses to effectively tackle the challenges we have explored above so they can seamlessly adopt cryptocurrency payments.
In terms of volatility, merchants could choose to accept crypto exclusively in stablecoins like USDT, USDC, or DAI. As these assets are tied to the value of the USD and other stable fiat currencies, they are protected against excessive price fluctuations.
Unfortunately, the recent situation related to the collapse of TerraUSD (CRYPTO: UST) has some market participants questioning the trustworthiness of stablecoins in general. But it is important to keep in mind that UST is different from the likes of Tether and USDC in that it is a decentralised stablecoin (also called algorithmic). It is not backed by the actual US dollar reserves and instead relies on smart contracts and market activity to maintain its pegged price. A centralized stablecoin, backed by fiat assets, should not face such risks.
What's even better, using a dedicated crypto payment processor that automatically converts digital assets into fiat currency (or stablecoins) right after a customer's transaction can allow businesses to accept payments in non-stable cryptocurrencies (e.g., BTC, ETH) while avoiding all risks of volatility.
In exchange for a competitive fee, the processor firm will also handle the technical side of the integration, making the whole process of adopting crypto payments much easier for merchants.
For crypto industry players, it's crucial to increase consumer and business awareness and knowledge about crypto via effective education campaigns. To make things easier, we should also let merchants know about the widgets that work with digital assets as well as how they could implement them.
But Wait, Why Should My Business Accept Crypto?
As a relatively new asset class utilizing a very different technology (the blockchain) than other instruments, crypto can be complex at first.
However, if businesses can solve the most important challenges, integrating digital asset payment methods will provide them great benefits.
Since cryptocurrency transactions are conducted in a peer-to-peer manner, no intermediaries are necessary to send and receive coins. For that reason, you will pay much lower fees than for traditional methods (e.g., credit cards), even if you utilize the services of a crypto payment processor.
Furthermore, while crypto is not yet suitable (and possibly never will be) to completely replace fiat, your firm will find it as an excellent complementary payment method that you can use to offer more ways for your customers to pay for your products. It's also a great chance to attract cryptocurrency enthusiasts and tech-savvy people to your store.
Crypto can also be a great choice for serving customers in developing nations. While the recent digital transformation had significant positive impacts on emerging economies, they still struggle with high rates of unbanked populations and limited options for cashless payment methods.
As an alternative solution, citizens of developing nations can leverage cryptocurrencies to access digital payments at a fraction of the costs of traditional solutions (e.g., bank transfers, remittance services, debit cards) that often involve high fees for local currencies.
Moreover, cryptocurrencies are truly global, featuring continuously operating networks and instantaneous transactions with no additional charges for cross-border settlement. The latter could come in handy for businesses operating in numerous nations.
Businesses: The Need for Crypto
With inexpensive, fast, and intermediary-free transactions, crypto can become an excellent tool for businesses to expand their platforms with more payment methods, attract more customers, and better serve the needs of an international audience.
However, to enjoy these benefits, businesses have to solve multiple challenges, such as increased volatility and complexity as well as the lack of knowledge.
Collaborating with a dedicated crypto payment processor and integrating stablecoins are some of the possible solutions to the above issues.
Meanwhile, the crypto industry has to make the education of consumers and businesses a priority to speed up adoption and make the process as seamless as possible.
