The e-commerce environment has experienced tremendous growth over the past decade, revolutionizing people’s shopping habits and changing the way businesses operate and engage with their customers. As a dynamic and forward-thinking sector, e-commerce has always been open to embracing cutting-edge solutions and technologies to further its evolution, and crypto seems to be the next big thing in online shopping. In recent years, an increasing number of online retailers have started integrating crypto into their payment systems, prompted by the growing popularity and demand for digital assets.
According to the latest statistics, over 15,000 businesses worldwide accept Bitcoin, with almost 2,300 of these companies being located in the U.S. So, it’s pretty obvious that the flagship cryptocurrency is at the forefront of the phenomenon. Moreover, a Deloitte study reveals that nearly 75% of retailers intend to follow the same path in the next two years. But is it a good idea for e-commerce companies to start accepting cryptocurrency payments given the constant fluctuations in Bitcoin price and the general instability of the crypto market?
Although digital currencies have grown leaps and bounds since they entered the financial sphere almost 14 years ago, and many believe they represent the future of finance, these widely discussed assets remain a novel financial tool and as with all things that are new and still going through their growing pains, they carry a considerable level of risk.
So, if you’re a senior who would like to learn more about the fascinating world of crypto and you want to keep your finger on the pulse of the market, it’s worth learning about the implications of incorporating crypto payments into e-commerce, taking both advantages and disadvantages into consideration.
Crypto as a payment method
As a digital or virtual form of money secured by cryptography, crypto assets have become an extremely popular investment option, offering diversification from traditional financial assets like stocks and bonds. Both individual and institutional investors have taken a great interest in cryptocurrencies, with Bitcoin being the most compelling investment option for many.
However, their evolution was rather surprising not only due to their rapid growth but also because they were primarily intended to serve as an alternative payment method that could rival fiat money. Somewhere along the road, this underlying purpose has taken the back seat, being overshadowed by crypto trading and investing. The excess volatility exhibited by all crypto assets and the implicit prospect of producing higher profits caused people to shift their attention to investment possibilities and be less interested in crypto payments.
And yet, crypto’s potential as a form of payment has not been entirely forgotten. The fact that Bitcoin has been adopted as a legal tender in El Salvador and the Central African Republic proves there’s still hope for crypto to be placed on equal footing with conventional money one day.
Moreover, the list of businesses and organizations jumping on the crypto bandwagon continues to increase, with major companies like Microsoft, PayPal, AT&T, Burger King, Starbucks, and Gucci, joining the movement. While the enterprises that accept crypto payments at the moment represent just a tiny fraction of the total e-commerce market, it’s obvious that the trend is picking up pace and the demand for crypto payments is increasing steadily.
The pros
The wind is clearly blowing in favor of greater crypto adoption in the e-commerce sphere, but what are the benefits that crypto payments can provide for online companies and consumers?
The first thing that differentiates crypto from conventional currencies and serves as its key selling point is decentralization. Unlike fiat money, crypto is not controlled by the government and central banks but is based on blockchain technology which removes the middlemen and enables direct transactions between users.
This provides a number of advantages for both businesses and customers. With intermediaries out of the picture, transactions are processed faster and the fees are greatly reduced. For businesses, this translates into streamlined cash flow and eliminates the need for third-party payment processors along with the fees they charge, while for clients it ensures faster delivery times and the opportunity to cut back expenses.
Due to the cryptographic protocols incorporated in the structure of digital currencies, it’s nearly impossible to alter and counterfeit transactions or steal crypto, which leads to enhanced security levels and reduces the risk of fraudulent chargebacks for companies.
Integrating crypto into e-commerce platforms expands customers’ payment options and gives them the possibility to choose their preferred payment method, ensuring a more pleasant shopping experience. Furthermore, with over 420 million crypto users across the globe, accepting crypto as a form of payment can help e-commerce companies gain new customers and widen their target market.
The cons
While crypto payments are clearly gaining ground in the e-commerce market due to their numerous benefits, there are also several drawbacks standing in the way of widespread crypto adoption in this burgeoning sector.
Volatility is often cited as the biggest obstacle in this respect. With the price of digital assets being subjected to massive fluctuations, online retailers can experience major losses if the value of the asset they’re accepting as a form of payment drops unexpectedly.
Another aspect that poses challenges is the poor usability of payment interfaces. In general, the apps and tools that enable crypto payments don’t seem to be designed with users’ needs in mind and that is extremely off-putting for consumers.
Then there’s also the incompatibility with traditional financial systems which dominate the e-commerce space. This makes it difficult for online retailers to convert crypto into fiat and vice versa.
And on top of it all sits the lack of regulatory clarity, adding another layer of complexity to crypto adoption. The regulatory landscape for crypto is still extremely fragmented and difficult to navigate for merchants and many of them choose to take the safer and simpler route of sticking to traditional finance.
Bottom line
For better or for worse, cryptocurrencies are here to stay, so chances are that their role as a form of payment in the e-commerce sector is likely to increase in the years to come. However, digital currencies still have a long way to go and many challenges to face in order to become a mainstream payment method, so e-commerce retailers can take their time and weigh both the pros and the cons before making a decision in this respect.