After a couple of years in which corporate crypto strategies were driven more by hype and fear of missing out than focused strategies designed to take advantage of the opportunities that crypto brings to the world of payments, the change is finally coming.
2022 is going to be the year that merchants and billers “really need to meet the consumers where they are,” predicted Jim Lester, the new chief operating officer of crypto-focused payments processor BitPay.
Speaking to PYMNTS’ Karen Webster, he added, “If that’s a credit card, great. If it’s debit card, great. But if it’s crypto, that needs to be part of the equation.”
And increasingly, he said, crypto does need to be part of the equation.
“The industry is still evolving and is still relatively young, ,” said Lester. “But there is enough traction out there in the market.”
That’s something that Lester saw changing as senior vice president of product management, strategy and marketing at banking industry FinTech and financial services company Fiserv’s electronic billing and payments division.
Large retailers, services companies, and other merchants are beginning to put real pressure on the large payments processors to make cryptocurrency a medium of transaction they support. The reason is fairly straightforward: Those businesses are hearing requests from their customers.
“The users of buy now, pay later, certainly of crypto, and really, digital payments and wallets in general, are millennials, Generation Z and younger,” he said. “There really is a broad shift in consumer behavior heading in that direction.”
Pointing to his 17-year-old daughter, Lester added that he wonders if she will even have a bank account or just use a digital wallet to manage her finances and the payments she makes.
And, beyond wanting to give their clients what they want to engage them, crypto transactions that are not processed through card issuers come with much lower fees, he added.
Go to the Customer
BitPay CEO Stephen Pair said that BitPay’s goal is to create a platform where consumers can easily use the crypto they already have to pay their bills – and spend it with merchants.
A big part of that, for BitPay, means supporting a large and growing number of blockchains and associated cryptocurrencies in its wallet, including 95 apps for payment — with plans to expand into non-crypto payments as well.
“If there’s an app and it stores money for people, we want to enable that for payments on our platform as well,” Pair said, noting that BitPay’s app has a Mastercard debit card attached.
That, in turn, means giving merchants an easy way to accommodate the customer who has wealth in a crypto format and wants to buy things.
“Making that easy, making it manageable on the merchant side, is what we do and what we’ve done for 10-plus years,” Pair remarked.
Self-Interest or Entropy
On the banking and legacy payment processing side, Lester said he believes more banks and financial institutions will begin working with companies like BitPay, and not just because it is simpler than building and integrating a digital ledger-based wallet into their systems.
Banks, he said, have the further challenge of losing customer deposits from the now-mainstream crypto customer moving out of the bank to FinTechs.
Working with a crypto payments processor like BitPay, their customers can participate in the cryptocurrency and blockchain ecosystem, but through a bank channel, he said. For customers, that makes it easier to move funds from digital wallets to traditional DDA checking and savings accounts.
For the bank, he pointed out, it means that those customers’ accounts are still in the bank.
That’s particularly important, Pair added, because the growing move toward mobile phone-based payments apps and digital wallets undercut one of the main reason people moved money into banks in the first place: Making electronic payments.
“Attracting crypto customers and their deposits is basically an investment in the lending portfolio of the bank,” he added.
It’s also a way to avoid getting trapped in what Lester called “the entropy of the system of legacy companies that can’t innovate as fast as they can.” Too often, largely risk-averse, regulated banks don’t move quickly enough to take advantage of new payments trends, whether it is buy now, pay later or crypto. He said that partnering with client crypto platforms can help banks lead, not lag.