Bitcoin may get a lot of attention, but it is only part of the broader digital currency equation.
In the drive to bring crypto into consumers’ wallets and, in turn, into the merchants’ tills, broadening acceptance while also increasing ease of use in spending will be critical.
To that end, BitPay CEO Stephen Pair, Fancy CEO Greg Spillane and Jomashop Vice President Alex Sternberg said in the latest On the Agenda that moving from hype to everyday commerce will unlock trillions of dollars of spending power.
It’s been a heady ride for cryptos, to put it mildly, as they have swung wildly in price — thanks in no small part to a stream of tweets and emojis from Elon Musk about bitcoin or Dogecoin.
Cryptos have so captured the public imagination that, as PYMNTS has found, only 8 percent of the population has not heard of bitcoin or its peers.
Spillane remarked that “there’s so much buzz. There are so many different types of coins, and every single day, it seems like there’s new hype and buzz around another coin that comes out.”
Beyond speculation lies the prospect of actually spending cryptos, in a way that brings the digital offerings into mainstream use cases.
The desire is there, and the inching toward the mainstream is there, too. As PYMNTS research has shown, 16 percent of the U.S. population — about 30 million consumers — owns cryptocurrency, and about 24 million consumers plan on acquiring cryptos in the future.
A significant number of consumers — 45 million of them, or 18 percent of the population — have used bitcoin and its brethren to make purchases. Said Pair of those numbers: They’re not all that surprising, and the intent to buy and use crypto cuts across young and old consumers, as well as industries ranging from traditional retail to auto dealerships.
“For the past couple of years, we’ve been really talking about the numbers of crypto users being in the tens of millions, and for the merchants that use our platform, our focus on is helping them reach that that new demographic of user and raising awareness of their products and services with these new consumers,” said Pair.
Consumers Eager To Spend
The panelists remarked that individuals want to find a way to spend “dry money” — a euphemism for the savings and cash they’ve accumulated in the pandemic — in new, digital ways, especially as the value of their crypto holdings grows. They want to spend their capital gains, said Pair.
That brings us to an age where, for instance, Dogecoin can make the leap from joke coin to spendable, alternative payment method (Pair said that Doge, in recent months, has gone from 2 percent of transactions on the platform to about 12 percent in a matter of just weeks). And that’s why, as PYMNTS has found, 64 percent of customers say they have bought cryptos with the intention of being able to spend them.
Jomashop’s Sternberg said that consumers have been increasingly interested in leveraging their crypto into everyday spend, with money stored in digital wallets, moving beyond P2P activity. Purchases on Jomashop run the gamut, from $100 sunglasses to watches that retail for thousands of dollars, dovetailing with PYMNTS’ data that show a range of purchases clustering at the sub-$100 level.
Fancy’s Spillane noted that the largest purchase to date made with crypto has been for a $27,000 Hermes bag – though the average order size has been around $100. Volumes have been on a tear, as average order volumes of items purchased with crypto have increased fivefold.
“So there’s tons of money out there,” he said. “By providing easy and frictionless options for people to go ahead and transact to make purchases from $50 to $50,000, it’s been great — and I think retailers are missing out if they’re not capturing that.”
Merchants would do well to consider accepting crypto, said the panel, as 51 percent of crypto owners would be more likely to shop with a retailer that accepted it.
Acceptance can be seen as a form of competitive advantage, at least for now, said Sternberg. “But at the end of the day, as cryptos become more mainstream, they’ll just be another form of alternative payment that will be like a credit card,” he told Webster. “It’s going to become something like an Apple Pay transaction.”
The Anti-Fraud Incentive
Spillane said that roughly 30 percent of his own firm’s customer base is international, with consumers in more than 140 countries. An increasing percentage of purchases are being made with cryptos, which is an incentive for merchants to accept them.
But there’s another incentive that will broaden acceptance, he said: Cryptos have strong anti-fraud characteristics in place, particularly with cross-border transactions, which have been marked by relatively high fraud rates. (Pair said that only a few years ago, as many as one in 50 card transactions done internationally were fraudulent, a number that has increased as so much of commerce has shifted online.)
Pair also noted that crypto payments are akin to cash or wire transactions. They are immutable (moving as they do over blockchains), eliminating the specter of chargebacks (or friendly fraud), which lowers the cost of business for merchants.
Those benefits, contended Pair, are driving crypto-at-checkout to become the leading form of alternative payments across some verticals, moving swiftly from low-single-digit percentages to 10 percent of checkout volumes or more in a short span of time.
The lure of crypto is also becoming apparent in B2B, said Pair, where companies have found it attractive to be paid in digital currencies rather than going the invoice/check or card route, where transactions take days or months to settle.
“In parts of the world where the banking system is more well-developed, they don’t realize there are parts of the world where there just aren’t great payment options,” Pair said.
Traditional payments are slow, expensive or both. Against that backdrop, stablecoins are proving to be a strong choice for firms that don’t want the swings of bitcoin and other cryptos to have an impact on their balance sheets.
“We really want the buyers to be able to pay in whatever currency they want to pay in, and for the recipients to be able to get settled in whatever currency they prefer,” said Pair of those B2B transactions.
Eliminating The Friction
In consumer-led commerce, there is still friction inherent in the process, of course, where in most cases, there’s been the need to put fiat in a digital wallet. Buy cryptos on an exchange, and get that crypto converted into fiat at the merchant as transactions are completed.
Pair noted that there have always been crypto users that want to use crypto, “and nothing but crypto. They want to live their entire lives with it,” he said — and in some cases, they might even consider getting their salaries paid in crypto if that were an option. Those users seek out merchants who will accept cryptos as direct payments — and if they can’t do it directly, they will link debit cards (a Mastercard debit card, for example) to wallets and wallets to platforms, and go that route.
As with any online transaction, friction can be the deciding factor in embracing, or discarding, crypto as a payment modality. In other words, where they buy matters.
As Pair said: Where they make that first purchase could mean the difference between them continuing to make that purchase repeatedly — or not. “If they have a great experience with that first payment, then they’re more likely to do it again,” he remarked.
Jomashop’s Sternberg said the mechanics of the payments are getting simpler, as consumers are able to pull up digital wallets, plug in different cryptos and check out with a few clicks, a process that is attractive to both the consumer and the merchant. The fewer steps in the checkout process, he said, the more transactions will occur.
Looking out into the future, Fancy’s Spillane said crypto will become a “de facto” payment choice. “There is a lot of money out there that these younger consumers have” locked up in crypto, he noted, “and they’re looking for ways to spend in almost a turnkey kind of fashion. That’s exciting.”