Although cryptocurrencies are already a key element in finance, companies are in no rush to accept them as a means of payment. but why?
Alexander Mamasidikov, founder of the mobile joint digital bank MinePlex
Although cryptocurrencies have become an important element in the financial sector, with a market cap of $2.15 trillion, companies are in no rush to use them as a means of payment for products and services. It is important to understand the reasons behind this phenomenon and explore possible solutions to correct the shortcomings of cryptocurrencies in business adoption.
Companies prefer cryptocurrencies for investment
In terms of adoption, we’ve seen increased activity between companies in recent months. Private companies and public companies like Microsoft, Block, and Tesla have been pouring money into Bitcoin since 2020. While looking for alternative investments, institutional indices have amassed more than 7% of the total BTC supply.
However, the adoption of digital assets for payments has been much slower than expected. Despite some high-profile moves by companies such as Starbucks or KFC, and a survey by Visa showing that 24 percent of SMEs plan to introduce crypto transactions, only a handful have dared to implement the feature for their business customers.
In fact, only 4% of merchants surveyed by Crypto.com and WorldPay are actively accepting cryptocurrencies, although 60% are interested in implementing digital asset payments in the near future. Meanwhile, data from Statista shows that as of March 2021, fewer than 6,000 of the 32.5 million businesses in the U.S. (1.85%) have cryptocurrency ATMs or offer coin payments in their online stores.
Crypto Payments Bring More Risk
When it comes to payments, companies prefer to tread carefully, and they have good reasons to support their stance on the matter.
First, cryptocurrencies are volatile assets, especially when compared to major fiat currencies such as the U.S. dollar, euro, and British pound. Even BTC, ETH, and other major coins with high market caps and trading volumes are subject to significant price swings.
As a small business owner, you are not willing to risk accepting payments from clients for unreliable assets. A sudden change in the middle price of a trade is enough to reduce your profit or even cause a loss on the order.
Also, unlike integrating popular digital payment methods like PayPal or credit and debit card transactions, most businesses have no experience with cryptocurrencies. They don’t know how to accept them, store them securely, or exchange them for flat currency for bank account withdrawals.
For these reasons, companies must invest significant resources in hiring outside professionals or consulting firms to train employees so they can learn the basics of using crypto payments.
How to address existing challenges
Fortunately, businesses have ways to effectively address the challenges we explored above so that they can adopt cryptocurrency payments seamlessly.
In terms of volatility, merchants can choose to only accept cryptocurrencies in staples like USDT, USDC or DAI. Because these assets are pegged to the value of the U.S. dollar and other stable fiat currencies, they are protected from excessive price volatility.
Unfortunately, recent events related to the TerraUSD crash, Tostis 0.50%
This has led some market participants to generally question the credibility of stablecoins. It is important to note, however, that UST differs from Tether and USDC in that it is a decentralized (also known as algorithmic) stable. It is not backed by an actual dollar reserve, but relies on smart contracts and market activity to keep its price constant. Centralized stablecoins backed by flat assets should not face such risks.
Even better, using a dedicated crypto payment processor that automatically converts digital assets into fiat currency (or siblings) immediately after a customer transaction allows businesses to accept payments in volatile cryptocurrencies (e.g., BTC, ETH), while avoiding all risk of volatility.
For competitive fees, the processing company will also take care of the technical aspects of the integration, making the entire crypto payment adoption process easier for merchants.
For advocates of the cryptocurrency industry, it is critical to increase consumer and company awareness and understanding of digital assets through effective educational campaigns. To make things easier, we should also tell merchants what devices use digital assets and how they implement them.
But wait, why is my company accepting cryptocurrencies?
As a relatively new asset class that uses a very different technology (blockchain) than other tools, cryptocurrencies can be complicated at first.
However, if businesses can solve their most important challenges, the integration of digital asset payment methods will bring them huge benefits.
Since cryptocurrency transactions are done on a peer-to-peer basis, there is no need for an intermediary to send and receive coins. Therefore, even if you use the services of a crypto payment processor, you will pay much lower fees than traditional methods such as credit cards.
Additionally, while cryptocurrencies are not yet suitable (and likely never will) fully replace fiat currencies, your business will find them a great complementary payment method that you can use to provide your customers with more ways to pay for your product.. This is also a great opportunity to attract crypto enthusiasts and tech-savvy people to your store.
Digital assets can also be an excellent option for serving clients in developing countries. Although recent digital transformations have had a significant positive impact on emerging economies, they still face high rates of unbanked accounts and limited options for cashless payment methods.
As an alternative solution, citizens of developing countries can utilize cryptocurrencies to access digital payments, while the cost of traditional solutions (e.g. bank transfers, remittance services, debit cards) often involves high fees in local currency.
Furthermore, cryptocurrencies are truly global, with continuously functioning networks and instant transactions without additional cross-border settlement fees. The latter may be useful for companies operating in many countries.
Business: Demand for cryptocurrencies
With cheap, fast, and intermediary-free transactions, cryptocurrencies can be a great tool for companies to expand their platforms with more payment methods, attract more customers, and better serve international audiences.
To reap these benefits, however, companies must contend with multiple challenges, such as increased volatility and complexity, and a lack of insight.
Partnering with a dedicated crypto payment processor and integrating stablecoins are some possible solutions to the above problems.
At the same time, the crypto industry needs to make educating consumers and businesses a priority to speed up adoption and make the process as seamless as possible.