Paying in crypto is supposed to lower the fees people pay when they purchase things by cutting out the middlemen like banks, credit card firms and other payments processors.
Along with privacy, that was the point of Bitcoin, described as a “purely peer-to-peer version of electronic cash” that allows payments “without going through financial institutions,” according to its pseudonymous creator, Satoshi Nakamoto.
See more: Who Is Bitcoin Creator ‘Satoshi Nakamoto,’ and Why Does He Still Matter?
But that leaves a very basic question: Who benefits the most from crypto payments?
There’s a strong argument that it’s the merchant accepting it much more than the crypto owner buying with it. No debit card and credit card processing fees, no extra costs when rewards cards are used, no trying to convince consumers to hit debit instead of credit, no trying to get customers to accept surcharges — all that crypto payments have, if accepted directly, is the blockchain transaction fee. Which is paid by the sender not the recipient of a cryptocurrency transaction.
See here: The Data Point: 44% of Consumers Say They Would Switch Merchants Over Card Surcharges
Even when run through a crypto-only payments processor that takes the digital assets from the consumer and pays the merchant in fiat currency, the cost of accepting cryptocurrency is generally lower and comes without the need to take the volatility and security risks that come with using your own digital wallet.
Read also: Crypto Basics Series: What’s a Crypto Wallet and How You Can Avoid Losing a Quarter Billion Dollars?
Then there are chargebacks. Or rather the lack of them. Cryptocurrency payments are, by their nature, irreversible. The only way to get a crypto payment back is to have the recipient initiate a second transaction. With crypto payments, customers can ask for refunds, but they can’t demand chargebacks — an argument merchants considering accepting crypto tend to be very interested in.
Which is to say, the card system today subsidizes the cardholder heavily at the expense of merchants. And in many ways, accepting crypto at checkout can reduce or eliminate those subsidies with relying on legislation, like the bipartisan bill introduced by senators Dick Durbin (D-Illinois) and Roger Marshall (R-Kansas) on July 28 that would give merchants the ability to process Visa and Mastercard over different networks.
Read more: Sen. Durbin Wants Another Bite at Card Interchange Fees
The Hard Core
While the tumbling price of cryptocurrencies — Bitcoin has been down 65% to 70% since its November all-time high — has probably diminished crypto owners’ willingness to spend something at $22,000 when they bought it at $44,000.
But people are still very much interested in spending a growing number of cryptocurrencies, including ether, stablecoins like USDC, and even dogecoin, Stephen Pair, president of crypto payments technology firm BitPay, told PYMNTS’ Karen Webster in May.
Read also: More Consumers Buying Crypto and Want More Ways to Spend It
That said, it is worth looking at who the crypto spender is.
PYMNTS’ April study, “The U.S. Crypto Consumer: Cryptocurrency Use In Online and In-Store Purchases” found that 23% of Americans have or had owned crypto in the 12 months preceding it — almost 60 million, up from about 41.5 million the year before.
See also: PYMNTS Data Show Jump in Crypto Ownership, Willingness to Spend It
More than a quarter of high-income consumers said they are “very” or “extremely” likely to switch merchants in favor of one accepting cryptocurrency.
One increasingly common way of spending crypto is with Visa- or Mastercard- branded crypto debit cards, many issued through exchanges and connected to clients’ digital wallets, that let users spend crypto at the point of sale without the merchant even knowing about it, as all they see is a debit card paying them cash.
What comes across very clearly is that crypto spenders are the hardcore crypto users — the people who see bitcoin and other digital assets not as investments but as the future of payments — the next generation of currency.
That makes the target crypto customer someone focused as much on the ideology of crypto — the back half of the first line in Nakamoto’s Bitcoin Whitepaper about peer-to-peer electronic payments, which reads, “without going through a financial institution.”
And for that privilege of breaking free from financial institutions, they’re willing to give up a great many advantages that cards today provide them with.
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