Cryptocurrencies like Bitcoin have been around for over a decade now, but they have only recently started gaining mainstream attention and adoption. While cryptocurrencies started out as a niche interest, they are now poised to disrupt major industries - including eCommerce payments.
The Rise of Cryptocurrencies
Cryptocurrencies are digital assets that can be used as a medium of exchange. They use cryptography to secure transactions and control the creation of new coins. The best known cryptocurrency is Bitcoin, which was launched in 2009. Bitcoin showed the world the possibility of a decentralized digital currency.
Since the launch of Bitcoin, hundreds of new cryptocurrencies have entered the market. They are commonly referred to as "altcoins". Some of the major altcoins include:
· Ethereum (ETH): Like Bitcoin, Ethereum is a cryptocurrency token. But Ethereum also has a platform to build and deploy decentralized apps.
· Litecoin (LTC): A lightweight cryptocurrency token for digital payments with faster transaction speeds than Bitcoin.
· Ripple (XRP): A cryptocurrency optimized for fast, cross-border bank transactions. XRP can efficiently handle 1,500 transactions per second.
The total market cap of all cryptocurrencies combined recently crossed $2 trillion USD. While cryptocurrencies are still volatile, they are emerging as a legitimate new asset class and payments rail.
Why Cryptocurrencies Matter for eCommerce
Cryptocurrency ownership and interest is growing steadily. A recent survey showed 1 in 10 Americans currently own cryptocurrency, and especially younger generations are interested in crypto payments. Millennial and Gen Z consumers appreciate innovative new technologies, and crypto aligns well with their values around decentralization and financial freedom. Merchants who accept crypto will be poised to tap into this growing demographic.
Cryptocurrencies could have a huge impact on eCommerce for a few key reasons:
· Lower transaction fees: Credit card payments often have 2-3% transaction fees. Cryptocurrency transactions typically have fees under 1% and some are free. This can significantly lower costs for merchants.
· Faster settlement: Cryptocurrency transactions can settle in seconds or minutes instead of days. This allows merchants to get paid faster and can improve customer experience.
· Global reach: Cryptocurrencies can be used globally with no borders or currency exchange friction. This allows merchants to easily tap into new markets and geographic areas where traditional payment methods struggle.
· Fraud reduction: Cryptocurrency transactions are irreversible and fraud-resistant. This can help reduce chargebacks and fraud costs for merchants.
· Seamless experience: New payment gateway solutions are making it easy to accept cryptocurrencies with a seamless checkout experience. Customers can pay with crypto without even knowing the merchant accepts crypto.
· Cross-border payments are easier: Sending traditional payments across borders can be slow, expensive, and cumbersome. Cryptocurrencies have no borders or country-specific banking rules. This makes cross-border eCommerce and payments much simpler using cryptocurrency. Merchants can more easily expand into new global markets and serve international customers.
· Chargeback fraud risk is lower: Credit card payments can be prone to chargeback fraud, where customers falsely dispute charges to recoup funds. Cryptocurrency payments are push transactions and irreversible, so the risk of chargeback fraud is near zero. This can reduce costs for merchants, especially those selling digital goods and services.
· An exciting new market is emerging: The intersection of crypto and eCommerce is an exciting new market with lots of opportunities for innovation. New startups are emerging to serve crypto-native businesses and customers. Creative solutions around lending, payments, rewards programs, and more are appearing. Merchants who tap into crypto can find opportunities to reach new audiences and take part in this emerging crypto economy.
Environmental impact concerns
However, cryptocurrencies have also received criticism regarding their environmental impact. Mining some cryptocurrencies requires a lot of energy usage. While new crypto innovations are focused on reducing environmental impact, it remains a concern. Some customers and businesses may prefer greener payment alternatives to standard cryptocurrency payments. Merchants will need to weigh these environmental concerns as crypto payments become more mainstream.
Volatility creates uncertainty
The value of major cryptocurrencies can rise and fall greatly over short periods of time. This volatility creates uncertainty about the final value of payments that merchants will receive. Most payment gateways instantly convert crypto payments into cash to avoid this risk. However, broad market drops in crypto value could still impact revenue if customers spend less. Merchants will need to understand and manage this uncertainty.
How Merchants Can Accept Cryptocurrency Payments
Enabling cryptocurrency payments no longer requires a deep technical integration. Many third-party services offer easy ways for merchants to start accepting crypto:
· Payment gateways: Services like BitPay, Coinbase Commerce, and CoinPayments handle the technical integration and instantly convert crypto payments into cash for merchants. They offer crypto payment buttons, checkout options, and shopping cart integrations.
· Plug-ins: For Shopify merchants and other eCommerce platforms, services like CoinPayments and GoCoin offer easy plug-ins and apps to enable crypto payments.
· Invoices and payment links: Services such as Coinbase Commerce and BitPay offer options to create crypto invoices and payment links to request funds from customers. This allows crypto payments without any merchant integration.
· POS solutions: For physical stores, services such as Pundi X and Ultra POS provide cryptocurrency point-of-sale solutions to easily accept crypto at checkout.
· Wallets: Some cryptocurrency wallets like Trust Wallet now offer "Pay with Trust Wallet" buttons that allow crypto owners to pay at partner merchant websites with a single click. Merchants simply need to sign up to accept such wallet payments.
Cryptocurrency payments show a lot of promise for eCommerce innovation, but they also come with risks and downsides compared to traditional payment methods. The future of online payments will likely include a blend of both cryptocurrency and fiat currency options. Merchants can benefit by accepting crypto payments, but they must go in with realistic expectations about the pros and cons. Cryptocurrency is a disruptive new technology, and the impacts on eCommerce are only beginning to emerge.
