There is a lot of buzz surrounding cryptocurrencies but very little about how they are used in the real world. In-depth studies by top economists have shown that digital currencies provide advantages for both consumers and merchants. A growing number of firms employ digital assets for investment, operational, and transactional purposes. Let's dive into the trends and prognoses for the near future.
The Rise of Crypto
With the change of generations, digital decentralized money becomes a necessity while creating new opportunities for investment, operational, and transactional purposes. Crypto consumers worldwide have very different demographic features and socioeconomic backgrounds.
Yet, there is a rising trend for Gen Z crypto users. For instance, in 2021, Gen Z made up 54% of current and former cryptocurrency owners, and this tendency keeps growing. The demand for crypto payments was rapidly noticed and adopted by a vast number of firms for investment, operational, and transactional purposes. Today, lots of services allow customers to pay for goods and services with cryptocurrencies. The crypto payment providers enable businesses to accept cryptocurrencies as payment for their products and services. Giants like Amazon, Starbucks, Whole Foods, and Microsoft are also experimenting with digital assets. One of the successful companies that adopted crypto is a global electronics manufacturer, ABC Electronics. ABC Electronics has made significant strides towards enhancing its operations and customer experience. First of all, it introduced a payment system that accepts various cryptocurrencies.
Additionally, ABC Electronics implemented a blockchain-based system to ensure transparency and traceability within its supply chain. That allows tracking each component's journey, ensuring authenticity, reducing counterfeiting risks, and improving efficiency. In a bid to raise capital for innovative projects, ABC Electronics conducted an Initial Coin Offering (ICO) that enabled investors to purchase their proprietary tokens. This approach allowed them to access a global investor network and secure funds for research and development initiatives.
According to a recent Deloitte survey headlined "Merchants getting ready for crypto," 75% of retailers intend to accept cryptocurrency or stablecoin payments over the next two years. Deloitte surveyed over two thousand senior retail executives from several industry segments, such as cosmetics, electronics, fashion, transportation, food, and beverage. According to the survey results, retailers anticipate customer interest in digital currencies to grow in the coming years; 83% of them have already spent more than $1 million to enable digital payments, even though this is still a relatively new concept.
In another survey titled "Paying With Cryptocurrency," researchers discovered that 85% of firms with annual revenue of $1 billion are using crypto payments to attract and gain new clients. In contrast, 82% of the retailers who participated in the poll said that crypto's removal of intermediaries was the primary reason for them to embrace it as a payment option. Results also indicated that 77% of businesses are interested in adopting cryptocurrency because of the significantly cheaper transaction costs.
According to the research, the costs for processing crypto transactions are approximately 1%. Credit card companies typically charge somewhere between 1.5% and 3.5%, which makes this a significant saving over alternative forms of payment. Furthermore, the adoption of cryptocurrencies isn't just limited to large-scale businesses. Small businesses in nine nations across the globe aim to take digital currencies as payment in 2022, with 13% of customers in those countries expecting retailers to begin accepting crypto payments this year and beyond, according to a Visa Inc. survey.
The survey of 2,250 small company owners from nine countries, including the United States, Brazil, Singapore, and Canada, indicates that cryptocurrencies may be on the cusp of becoming a mainstream payment method.
Why do businesses adopt cryptocurrencies?
After skyrocketing in 2021, crypto payments might become a powerful differentiator in this competitive market. Crypto adaptation is bringing lots of prospects in winning over tech-savvy customers, allowing them to pay with a digital wallet. Time is money. In a fast-paced environment, people want things to be done quickly. Crypto saves time for transactions while enabling quick access to real-time reliable data about the customers and the supply chain. Cryptocurrencies reduce transaction costs — of course, the costs may vary depending on whether you are putting money directly into your wallet or addressing a third-party provider like Coinbase, it will be cheaper than PayPal’s or credit card issuers’ fees.
Another benefit applies to business owners and operations managers. Using cryptocurrencies enhances the safety. This provides retailers with more protection against eCommerce fraud — unlike with intermediary participation, it is impossible to withdraw the transaction after the consumer has completed it. B2B businesses can significantly win by executing contracts electronically. An ever-increasing level of expectation is placed on contemporary corporate buyers, whose average age is dropping year after year.
Introducing crypto now may help spur internal awareness in your company about this technology. It also may help position the company in this emerging space for a future that could include central bank digital currencies (CBDCs). The higher awareness of the crypto industry and blockchain technology can also introduce new investment and liquidity options through traditional investments that have been tokenized.
The advantages of crypto in the retail
Decentralization is one of the most attractive aspects of cryptocurrencies. Cryptocurrencies have no third-party banking authorities holding up the transfer of funds and charging transaction fees. Cryptocurrency transactions can potentially be more secure than credit or debit card transactions. When a customer pays with cryptocurrency, their data isn’t stored in a centralized hub, states the U.S. Chamber of Commerce. Crypto also allows e-commerce companies to grow their businesses by opening up new, untapped markets. They contend that you can drive growth more effectively by identifying and dominating new markets in blue oceans, avoiding markets that have turned scarlet red by the sharks in a feeding frenzy.
Attempted fraudulent transactions rose 35% in the early days of the pandemic, according to The U.S. Chamber of Commerce. The target? Small business credit and debit transactions. While traditional transactions are vulnerable to fraud, crypto transactions are less so. Cryptocurrencies are more secure than other payment methods because the data is stored in a merchant’s crypto wallet instead of online servers at third-party institutions. These encryption techniques are based on complex algorithms that prevent anyone from tampering with a transaction. Each transaction is verified and recorded on the blockchain, which is a decentralized public ledger that is maintained by a network of computers all over the world. The blockchain utilizes cryptography to secure the transactions as they are added to the ledger, preventing fraudulent activities and ensuring that data remains tamper-proof. A private key is required to access the funds in a crypto wallet to complete a transaction, adding an extra layer of security to the process. Overall, the combination of advanced encryption techniques and the decentralized nature of the blockchain makes cryptocurrencies a highly secure payment method.
The prospect
An overwhelming majority of merchants that currently accept cryptocurrency as a payment instrument have already seen a positive impact on their business’ customer metrics, such as customer base growth and brand perception, and they expect this to continue next year. Merchants broadly agree that organizations accepting digital currencies have a competitive advantage. The digitalization and the acceptance of digital currencies have a competitive advantage. Many merchants are now motivated by the prospect of enabling immediate access to funds, taking advantage of blockchain-based innovations in decentralized digital finance, and allowing in-house management of the revenue cycle/treasury/finance department. Indeed, the biggest benefits seem to appear when organizations have integrated digital currencies into their finance function, for example, revenue cycle and treasury.
While many brands and retailers are embracing new payment platforms to accommodate their customers, the extent to which crypto payment in itself drives new business is not entirely clear. However, as cryptocurrency increasingly creeps into mainstream buying habits, it’s a likely no-brainer to get the brand on board with as many electronic payment platforms as possible — including those offering crypto payment options.