In light of the global shift from cash to digital transactions, the world’s largest cryptocurrency Bitcoin was the first digital currency introduced in 2009, intending to become the future of money.
As with any revolutionary technology, people were uncertain whether or not to adopt it. In time, though, Bitcoin became the most prevalent and well-known kind of digital currency. It paved the way for creating more than 20,000 other cryptos, which are today accepted by many large companies as a form of payment.
The trend of allowing online shoppers to purchase goods with cryptocurrencies (crypto) is not exclusive to a particular industry or region. A growing number of businesses worldwide are utilising Bitcoin and other digital cryptos for various investing, operational, and transactional objectives.
Numerous industry conglomerates, including Starbucks, Gucci, the NBA, Coca-Cola, Microsoft, Mastercard, and Visa, are becoming crypto-compatible. Their decision demonstrates their faith in cryptocurrency's long-term viability as a global medium of exchange.
It is now setting the tone and behaviour to be adopted by other businesses. And it's only a matter of time before this completely trickles down to a broader range of small and medium-sized enterprises (SMEs).
Prevailing uncertainty and scepticism
Despite the growth in crypto adoption by companies as one of the ways of payment, there remains uncertainty and scepticism over why businesses are opting for such a decision. I aim to discuss some of the incentives and disincentives companies consider when opting for cryptos as a payment option for customers.
Due to the crypto industry's growth, it is no longer surprising that accepting cryptos in digital currency is becoming increasingly demanding. Visa assessed the demand for crypto as a payment option in January 2022 with a survey targeting nine countries: Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, the UAE, and the US.
The survey revealed that 13 per cent of customers in these countries anticipate that retail stores will begin accepting crypto payments this year and beyond. Further, another survey by Visa specifically for the Southeast Asian region revealed that approximately 64 per cent of consumers expressed an interest in utilising crypto as a payment method.
As demand and expectations for payment with the crypto increase, efforts to cater to this demand also need to increase. Businesses must position themselves to accept and disburse crypto to enable a seamless exchange with essential stakeholders.
Crypto adoption at an all-time high
In fact, given the pace of crypto adoption that has hit an all-time high and the global crypto-holding population that expanded by around 190 per cent between 2018 and 2020 and by over 178 per cent in 2021 alone, catering to this demand will allow businesses to tap into a rapidly expanding customer base.
Furthermore, there is an upward trend in the number of companies offering crypto payment options, indicating the existence of a market that further companies may access.
In 2011, the US-based business Bees Brothers decided to accept Bitcoins, marking the beginning of the trend of accepting crypto as payment. A few years later, Overstock.com, a prominent online shop, also began taking digital money as a form of payment.
Further, according to statistics released by Statista in March 2021, the number of companies in 147 countries that either have a cryptocurrency ATM or accept cryptocurrency as a form of in-store payment grew from a handful to 21,980 companies.
In addition to the current tendency, companies' future plans and trends also favour crypto payments. For example, the above-mentioned Visa survey also revealed that 24 per cent of SMEs in the nine countries mentioned above intend to accept crypto payments, demonstrating their attitude toward customers and market preferences.
Can opting to miss out prove costly?
Therefore, businesses not accepting this option may miss out on opportunities that could otherwise be seized. Moreover, given how cryptocurrencies operate and the absence of a central intermediary, crypto transaction fees are far lower than credit card swipe fees.
For example, credit card processing providers charge businesses, particularly small businesses, about 25 cents plus 2 per cent to 4 per cent of the entire transaction amount for each credit card swipe. In contrast, the fees associated with crypto transactions could be as low as 1 per cent or less of the transaction's value.
In addition to the transaction fee, crypto can help avoid international currency payment fees because they are not tied to a specific territory. In addition, it eliminates the need for time-consuming third-party verification, reducing the time required to receive money.
Lastly, as with any disruptive technology, crypto offers access to and interaction with new capital and liquidity pools via tokenised traditional investment sources. This will push companies and businesses to develop innovative offerings related to digital assets and attract investors willing to invest in the stocks of companies that offer cryptocurrency-related services, thus gaining exposure to bitcoin and other cryptos without actually holding them.
Weigh the drawbacks of accepting crypto payments
While the potential of gaining access to new consumer and liquidity pools and reduced transaction fees sounds enticing, businesses must weigh the drawbacks of accepting cryptocurrency payments before embracing it.
Among these drawbacks are the technical and talent barriers inherent to this form of payment. Establishing a digital wallet on a digital currency exchange is one of the essential requirements for accepting cryptocurrency as payment.
Even if it sounds like one of the areas that can be readily ticked off a list, small businesses unfamiliar with this technology may find it technically prohibitive. Additionally, acquiring qualified talent that can assist in developing innovative crypto-based products and services is a challenge.
If the company decides to hire in-house teams, finding and recruiting the necessary talent will be expensive. In addition, the most significant risk associated with digital currency is price volatility, which makes its value exceedingly unpredictable.
For example, in 2009, Bitcoin was initially valued in pennies, but by February 2021, it was worth more than $65,000 (Dh238,746) a coin, and as of August 3, 2022, it is worth approximately $23,223 (Dh85,298). This makes it imperative that businesses convert the cryptos to fiat currency as soon as they receive them. Companies will need to choose a merchant service provider to protect themselves from this volatility by promptly converting digital currency to its monetary value.
Not resistant to cybersecurity threats, criminality
Lastly, even if they eliminate cyber risks such as stolen credit card details, cryptos are still not 100 per cent safe from cybersecurity threats and criminality.
For example, in 2020, cryptojacking grew by 28 per cent and generated $82 million (Dh301 million) in losses worldwide. In 2021, global crypto thefts resulted in a $681 million (Dh2.50 billion) loss, with 76 per cent of significant attacks involving Decentralised Finance (DeFi).
There is currently no method to prevent cybercriminals from gaining access to users' wallets, and there is no insurance for cryptos, making this a crucial consideration for businesses. However, several crypto companies are looking to rectify this by developing wallet security solutions, which can be seen as a positive.
_resources1_16a30b358e0_small.jpg)
