Crypto Payments Still Rewarding for Some Users, Even as Headwinds Swirl

When SHOP.COM started taking crypto at checkout a year ago, the firm was pretty confident that existing customers would get onboard with the new way to pay.

After all, they had been hearing from customers for some time that they wanted the shopping comparison marketplace to accept cryptocurrencies “because they believed in it, as an ecosystem for the next form of currency,” President and COO Steve Ashley told PYMNTS Karen Webster recently.

Much the same thing applied to new customers, said Ashley, who added that the company’s executives have been crypto holders for years. “It just made sense to reach out to the communities because this could bring a new demographic of users to SHOP.COM.”

What they didn’t expect, he said, was the international appeal of paying in crypto.

“In the U.K. and some of our other markets, we’re starting to see the majority of our payments through BitPay,” he said, referring to his company’s crypto payments technology firm. It’s slower in Asia Pacific, but even in that region adoption is growing, Ashley said.

Customer adoption of crypto was even less of a surprise for licensed collectables site Panini America, CFO Bob Hull told Webster in a panel call. Even though it only added crypto payment capability on July 5, the company had already been selling non-fungible tokens (NFTs) for quite a while, making it “a natural progression,” he said.

“We have a lot of tech-savvy customers on the NFT side,” Hull said. “They were very loudly asking for crypto acceptance for a very, very long time.”

It’s been seamless with thousands of transactions per day, he said. Phase two, he added, will enable crypto payments for its physical trading cards.

Which is a good pivot point for Shop.com too, Ashley said, as the success of crypto payments has it considering getting into NFTs itself.

Those experiences are fairly typical, said BitPay CEO Stephen Pair, whose company processes crypto payments for both firms, although he added that SHOP.COM seeing international customers’ crypto use “get to the levels where it’s almost on par with traditional credit cards is very exciting.”

But, he added, given the friction points in international payments, it’s hardly shocking.

Headwinds

That said, the crypto payments space has been affected by the crashing crypto market, with bitcoin down some 70% from its all-time high in November.

While there hasn’t been much of an impact on people wanting to pay in an ecosystem they see as the next financial system, there are some people in a “little bit of a hold-type pattern,” Ashley said. “If they bought in at $40,000 or $50,000, they’re a little reluctant to give it up for anything from that standpoint.” Bitcoin was a bit more than $23,000 on Aug. 1.

Certainly, bitcoin owners “don’t necessarily want to use it to buy things,” right now, Pair said. But BitPay supports 13 cryptocurrencies, including dollar-pegged stablcoins, with four or five more on the way.

“Overall, I would say transaction volumes are down with the lower price, but we do see a higher mix of stablecoins being used instead of bitcoin,” Pair said. “It just depends on what people value. What they want to keep the most.”

Hull added that NFT buyers can consider collectables as an investment vehicle that could offset some of crypto’s volatility.

Make It Simple

Another big headwind, Ashley said, was getting people — particularly in the older demographics — to see how simple paying with crypto actually is.

“There’s just a fear of the unknown when it comes to crypto, and you’ve got to eliminate that,” he added.

From the customers’ perspective, that also means taking a great deal of effort to accept as many digital wallets as possible,” Pair said, noting that BitPay is compatible with more than 100, and they undergo extensive and ongoing testing to ensure compatibility — and help wallet users understand the specific procedures for their wallet.

Speaking from a merchant’s perspective, Hull said, “I almost feel it’s easier than fiat currency and the typical merchant account experience that we have. It takes a bit to set up … [but] BitPay has made it incredibly easy. You know what the fees are from. From a CFO point of view, I like that because I know it’s going to be 1%. I know what my costs are going to be for every transaction.”

He added, “You don’t have the volatility on the merchant account with the percentage, the per-card transaction fees.”

And, you don’t have chargebacks. “That’s really important,” Hull said. “If I could push everybody to crypto today … that is really big.”

The ease-of-use factor applies to choosing a crypto processor, Ashley said, noting, “We wanted to work with someone who was blockchain first,” as opposed to bigger providers like PayPal or Square.

“Longevity in the space” was an important factor, Hull said of 11-year-old BitPay, adding that “the adaptability that BitPay has shown to accept more cryptocurrencies as time has gone on” was another factor.

Taxing Tailwinds

One development that all three see as a positive sign: Congress is looking into exempting small crypto purchases from capital gains taxes, with $200 or $50 among the numbers under discussion.

Calling it a step in the right direction, Pair said he hoped it would be higher than $50 — others in the industry have said the same about $200 — but it is a friction point.

The problem is that cryptocurrency sales attract capital gains tax in the U.S. Worse than the actual tax liability is the complexity, as it means calculating the gain (or loss) on each sale — which includes using that crypto to buy something.

While there are some wallets that are working on automatically calculating capital gains and losses, it is one of the reasons BitPay added stablecoins, Pair said, as people who convert some of their holdings to stablecoins only have to calculate that one time. Doing those calculations automatically is something BitPay is working on, he added, calling it “very, very doable.”

It’s a problem for Panini’s small-dollar card transactions, which can be seen this way, Hull said: Buy a pack of NFT cards on the digital store, and then list some or all on its secondary marketplace, where the average transaction is $25 to $30.

“Thinking about having to calculate capital gains on that, that’s a nightmare,” he said. “It would be very, very beneficial to us, especially on the secondary market, and probably would even drive business to greater heights if we could get some type of a limitation from Congress.”

Getting above that $50 amount mentioned on one recent bill — the ones mentioning $200 are on more widely supported legislation — would be a big deal to SHOP.COM, Ashley said.

That’s because with free shipping at $99, the crypto spend is usually in the $100 to $115 range.

Crypto Rewards

Another program that Ashley has high hopes for, he said was SHOP.COM’s newly-launched crypto rewards program, which added bitcoin rewards through BitPay instead of the dollar-based cash-back program that is such a prominent part of its site.

“We’re trying to establish even more of a relationship when it comes to this crypto user,” he said.

“We have a ton of interest in rewards programs and things of that nature — people earning crypto as an alternative to cashback,” Pair said. “It’s not just getting dollars back into your account. It’s getting this new type of digital asset that can appreciate in value. People are really interested in participating in that. And, once they start to accumulate bitcoin or other cryptocurrencies, they become invested in that — and they want to use it more.”

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