You know, we talk a lot about the broad market movements of crypto, such as Bitcoin adoption in foreign countries and what the banking collapse means for cryptocurrency, but sometimes it’s nice to take a look at crypto itself and what new innovations are going on. It might seem like crypto has been around for a long time now, but it really is still in its infancy. Imagine the dollar before spring-loaded drawers in cash registers or vending machines that can automatically determine the denomination of a bill or coin. Currency doesn’t exist in a vacuum, so society tends to adapt toward its use in interesting ways, many of which we now take for granted when it comes to our fiat money.
Of course, usage drives the demand for innovation, and innovation makes a currency easier to use which leads to greater demand and wider adoption. Is crypto coming up on this cycle now?
One of the early complaints of cryptocurrency was “How do I even use this stuff?” For the non-techie types, it was certainly a struggle back in the 2010s but today with easy-to-use mobile wallets and QR codes, it’s become a lot simpler.
Even credit cards have been moving toward mobile wallets, making a cellphone the key to traditional finance transactions for everything from buying a Big Mac to checking out a rental car at an automatic kiosk. So today is there even really a difference in using a credit card to make a payment versus using cryptocurrency?
Well, sure, there are some obvious ones. The biggest hurdle for cryptocurrency compared to credit cards is the wide-spread acceptance at retailers. Sometimes it feels like you’ve got a Discover card when you’re trying to pay with crypto, nervously glancing over the various payment logos plastered on the storefront window to see if your preferred (or only?) payment method is listed.
I’m sure several of you have seen various cryptocurrency stickers right alongside the logos of Visa, Mastercard, Google Pay and Apple Pay. Certainly during crypto booms, retailers are happy to display a “We Accept Bitcoin” sign out front, hoping to reach a new demographic of customers.
A lot of big names like Coinbase and PayPal have been making it easier for merchants to accept cryptocurrency for payments. Even Square, one of the most common Point-of-Sale (POS) systems in retail changed their name to “Block, Inc” at the end of 2021, an obvious reference to the blockchain, signifying their commitment to cryptocurrency.
So there’s no doubt that retail acceptance of crypto will expand quickly. Whether customers choose to pay in crypto or not, the ability will come pre-packaged in many POS systems, and compared to credit cards, the transaction fees are usually lower (especially when you avoid a POS middle-man all together and use wallet-to-wallet payments).
Sellers also appreciate cryptocurrency payments for a variety of reasons. One of the biggest reasons is no chargebacks, which are often a nightmare for small businesses. Chargebacks not only take the money paid for a product or service away, but often carry huge additional charges for the merchant too. Funds are also available right away, unlike with checks and many credit card POS systems. Most third-parties hold the funds on the merchant’s behalf and transfer them on a set cadence, which could be daily but could even be as long as monthly. And the bank transfer itself might add a few extra business days on top of that. But crypto goes into your wallet right away.
Another big area growing for crypto adoption is country-to-country remittances. If you’ve ever had to send money out of the country, you know what a hassle that can be. Every country has their own payment processors, and not all of them accept transactions from every other country. The fees can also be so high that it hardly seems worth it.
SWIFT is the international banking cooperative that makes a lot of these kinds of transfers even possible. It’s basically an agreement of terms and standardized processes for sending money from one bank to another. So if you’re trying to send money from the US to your uncle in Brazil, you’re going to need a way to get it from your US-based bank into their Brazil-based bank, and that’s where SWIFT will come in. However, there are many disadvantages to this system which cryptocurrency easily overcomes.
With cryptocurrency, sending money internationally means fees often lower than 2%, compared to 10% or more which is the typical case with traditional finance methods. Not only does using cryptocurrency save people money, but it’s also much, much quicker.
Overall, the cryptocurrency payment ecosystem is expected to cross $2 billion this year! This growth will likely spur the traditional finance system too, which can lead to great things for consumers, such as possibly pushing down transaction fees across the board. At the end of the day, it won’t be an either or situation. The rise of crypto won’t mean the death of credit cards, but instead it’ll mean more choice for everyone allowing merchants and shoppers to choose whatever payment system works best for them and their financial needs.