From a mysterious and untrusted phenomenon to a “fad,” to a far more accepted and trusted medium of exchange, cryptocurrencies are now “having their day.” These digital currencies and the blockchain technology that underpins them are quickly reaching the point at which regular consumers are looking to use them in their purchasing.
From Questionable to Reputable
When cryptocurrencies were first developed, they touted themselves as a means by which people could privately and securely exchange goods and services. Immediately, those involved in the sale and purchase of contraband (drugs, weapons, etc.) latched onto cryptos as a means to hide their activity. And still today, this is the case.
But cryptocurrency began to move into legitimate markets, offering consumers opportunities to buy and sell products and services, make contracts, and record and store documents in a secure, immutable environment. And that’s the beauty of cryptos as a medium of currency. Transactions are immutably recorded and stored so that there can never be any question of who paid for what when.
Clearly, if cryptocurrency becomes mainstream, here are the benefits for all involved.
- Customer Privacy
Security risks via traditional online transactions are real. Major breaches over the past several years have made this all too clear. In survey results, 49% of consumers state they do not fully trust online shopping; and 41% of those surveyed stated that they had requested a site remove their information from its database; and 77% of respondents stated that they had some security concerns when they engaged in online shopping.
The technology behind cryptos provides for greater security and privacy and some level of anonymity. Access to any of the recorded and stored data is restricted to the parties themselves, through key codes, but a recorded transaction cannot be altered.
- Value for the “Unbanked”
It is estimated that about 2+ billion people are not a part of any financial sector. They are called the “unbanked;” they have skipped traditional infrastructure and are on their smartphones, through which they are consumers. Without bank cards, though, they must use alternative methods of payments, and cryptocurrencies are ideal.
E-commerce businesses that make the move to accept cryptocurrency payments will open up a huge new customer base among these populations and emerging markets.
- Reduction of Chargebacks
A chargeback occurs when a customer disputes a charge and the retailer does not get paid. In some instances, the customer has already received the purchased item, and, even when the retailer protests, the recovery rate is about 50%. When this is a continual problem, retailers must raise prices to recover some of their losses.
Cryptocurrency payments hold the promise of reducing chargebacks significantly. Once payments are made, they cannot be reversed unless both parties agree and a new entry is made into the blockchain.
- Transaction Costs
Another huge advantage for the use of cryptocurrency is the low processing fees. Both consumers and businesses are subject to transaction fees, between 1 – 3% for domestic purchases and even more for global ones. The average cost of a bitcoin transaction, anywhere in the world, is about 1%.
Now the Challenges
Probably the biggest issue with cryptocurrencies is their market volatility. Price variances and fluctuations can happen almost on an hourly basis. When cryptos are used for payments, the result can be either a loss or a gain for an eCommerce retailer.
Much of the volatility is the result of speculators who practice “pump and dump” strategies and because the currencies are largely unregulated, this is not likely to stop anytime soon.
Retailers Already on Board
Despite the challenges, many major retailers have already decided the there is a solid benefit to accepting cryptos for payment. Overstock, Expedia, Subway, PayPal, Shopify, and Microsoft are just some of the big names doing so, and that number is growing regularly.
Cryptocurrencies are here to stay, and both consumers and e-commerce retailers can benefit from their use when purchases are made. It will take a while, of course, for cryptos to become mainstream in a wide consumer population, but that day is coming. Retailers need to be prepared.