PayPal’s Scale Drives Crypto’s Utility

In spurring new consumer behavior, scale matters. That’s especially true with cryptocurrencies, where making the leap from speculation to actual transactions (you know, the kind tied to goods and services) may be more marathon than sprint.

After all, merchants have to be willing to accept bitcoin (and other digital coins); payment providers have to be on board to help those merchants with acceptance and conversion into fiat (on the merchant side of the payment) as payments are settled. For the consumers themselves, fostering crypto use within a payments/checkout flow that is already a familiar (at this point, almost intuitive) one can be a tailwind, too.

The news Tuesday (March 30) that PayPal will enable U.S. consumers to checkout and pay at millions of merchants can be construed as the next stage in a process that began late last year.

As reported, those users can opt to use their digital wallets to pay with bitcoin, bitcoin cash or Litecoin for goods and services at checkout.

Through the service, known as Checkout with Crypto, holders will convert their cryptos into fiat in order to complete transactions, and PayPal has said the availability will stretch across all of its 29 million merchants, globally, over the next several months.

PayPal has said no fees will be levied as consumers opt to use crypto at checkout (noting instead that a “cryptocurrency conversion spread will be built into the conversion from crypto to USD” or to other currencies at the standard conversion rates set by the company), and has stated that only one crypto can be used per purchase.

Boosting The Range Of Payment Choices 

In its release Tuesday, PayPal detailed some of the mechanics of Checkout with Crypto: At checkout, if a customer has sufficient balance of cryptocurrency to cover a transaction, crypto will automatically display as a payment method for that purchase (alongside other payment choices). Upon choosing the crypto they want to use to make the transaction, the crypto is converted into fiat by PayPal; the customer gets a record of the crypto sale itself, in addition to a record of the purchased item.

PayPal said in its release that the checkout feature offers “enhanced utility” for crypto holders.

And it is utility that seems to be the operative word here. To get that utility, scale is critical.

PayPal had already fired a shot across the proverbial crypto bow late last year, when the payments giant said that it would enable consumers to buy and sell (through partnership with Paxos Trust) the cryptos across their accounts.

As to the scale: PayPal has said, per its latest earnings report, that it had 377 million active accounts, and 29 million merchants in place.  By serving up cryptos along with other currency options, it might be the case that users can increase their familiarity and comfort level in using cryptos as part of everyday commerce.  But there’s a kicker here too: PayPal holders have to load the cryptos into their PayPal wallets first (as detailed in that October announcement), thus further cementing the PayPal ecosystem.


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