While using crypto to make payments isn’t exactly common yet, there are signs that consumers’ desire to pay with digital assets is still strong despite the downturn of the crypto winter. Most notably, more merchants are starting to accept it, and more FinTechs are starting to support it.
And it’s not just merchants. Traditional banks and financial institutions are starting to engage as well. Just this month, BNY Mellon, America’s oldest bank, announced that it had received regulatory approval to offer clients crypto custody — the first major mainstream bank to do so. And on Oct. 17, Mastercard rolled out Crypto Source, a white-label cryptocurrency trading service aimed at mainstream banks.
None of that would be happening if people didn’t want to buy, sell and spend crypto.
In this article, part of PYMNTS’ Executive Insight series, we’ll explore what the next three years have in store for crypto payments.
“The macro trends that we anticipate over the next three years are really more and more consumers and companies becoming crypto native or crypto first,” Stephen Pair, CEO of crypto payments technology firm BitPay, told PYMNTS Editor in Chief Matt Nesto.
That means “being much more open and willing to handle crypto directly and not rely on other companies or service providers to handle the crypto or store the crypto for them,” he said.
“I think they’re going to experience the same thing that we’ve experienced as a company, which is, it’s a lot easier to interact with a blockchain than it is to conduct payments through legacy providers,” Pair said. “The days of uploading NACHA files, I think, are rapidly becoming behind us. And having to do wire transfers and that sort of thing where there’s a lot of manual intervention required.”
More generally, he predicted that businesses are going to get more interested in learning how to set up digital wallets to manage digital assets and conduct payments.
“It’s not to say in the next three years, all companies are going to do that,” Pair said. “But I think we’re going to see increasing interest in that. More and more companies on our platform want to do that.”
Another big trend he’s seeing is both retail users and companies choosing to make or accept payment in dollar-pegged stablecoins.
“That solves some of the problems with handling volatile cryptocurrencies directly,” Pair noted. And it’s not just an American trend — BitPay recently added a euro-pegged stablecoin to its offerings, he said.
Make It Easy
Over the last few years, a big priority of BitPay has been to integrate its services into major eCommerce platforms like Shopify, Pair said. The goal is to make it as easy as possible for merchants using those platforms to add crypto to their payment options.
At some, like Shopify, turning on crypto payments can take as little as a few hours, he said, although it depends on the level of integration required by a specific eCommerce site.
Beyond enabling payments, another service BitPay is focusing on is education, Pair said. Helping “those companies really raise awareness about their products and services among the crypto community” is vital to helping “those companies market and sell their products and services to crypto users,” he said. “It’s a big area of investment for us in the next few years.”
From a business perspective, Pair noted, there’s not a lot of investment needed to “dip their toe” in the crypto water before deciding whether to hold crypto rather than having it automatically exchanged for dollars or another fiat currency at the time of sale — which is what most merchants working with firms like his that take crypto do.
“Perhaps they own crypto themselves or they want to be more crypto native and have some of their assets stored in crypto and use that for conducting payments, initiating payments,” he said. “We can start with a very novice company and help them grow as their interest level develops over time.”
Give and Take
Another reason some companies — particularly tech firms — are looking at crypto payments is for payroll, Pair said.
“There’s a lot of interest among employees to get a portion of their paycheck in crypto,” he said, noting that adding a small, regular amount of bitcoin or other cryptocurrencies to their holdings is “a great way for people to actually start accumulating cryptocurrency, start getting exposure.”
By and large, Pair told PYMNTS, the biggest obstacle to companies embracing crypto payroll deductions is “recognizing that there is an interest among their employees and that it’s a great benefit to offer their employees.”
From the employer’s perspective, “it can be as simple as sending dollars to BitPay with instructions on which employees get paid,” he added. “We handle the employee signing up and linking their wallet to be able to receive the cryptocurrency. We make it very turnkey for the company.”
Rules and Regulations
Another stumbling block for merchants looking to get paid in crypto is compliance with banking anti-money-laundering (AML) rules and ensuring that they are meeting tax and legal requirements. That latter one can be a high hurdle, as in many cases, regulations are unclear or simply unwritten.
By handling things like know-your-customer (KYC) data collection needs and the monitoring and flagging of suspicious transactions, third-party services like Pair’s can take one of the potentially most time-consuming and pitfall-laden parts of crypto payments out of merchants’ hands, he said.
On the security side, Pair said that crypto can be safer as the phishing campaigns that seek out personal information that can be used to bypass password requirements simply don’t apply.
And despite bitcoin’s rather overstated reputation for anonymity, “all transactions on blockchains are public and leave a permanent trail,” he noted. “So illicit activity in association with cryptocurrencies is not as anonymous as cash, as physical dollars.”
But at the same time, he adds, pseudonymous crypto transactions are “probably a little more privacy protecting than bank accounts, which allow anyone with access to see what you’re spending money on.”