If there are any buzzwords set to shape 2021, cryptocurrency is surely at the top of the list.
Once a fringe asset only cultivated by the tech-savvy, the global market is set to reach $57 million by 2025 – a sign that cryptocurrencies are poised to become a major disruptor in the world of ecommerce.
As cryptocurrency becomes more widely understood by the average consumer, merchants are going to face bigger expectations around their use and adoption. Whiplash is here to shed some light on this often a confusing topic – and explain why merchants should be paying attention to cryptocurrency.
Cryptocurrencies are based on a decentralized digital ledger system that’s used to make secure, encrypted payments between individuals or businesses. It utilizes blockchain technology to record transactions and verify the ownership of currency in real-time. This prevents ‘coins’ or tokens from being duplicated or stolen.
Unlike traditional payment systems, where transactions and data are controlled by only one entity such as a bank, cryptocurrencies are held in a peer-to-peer network. This ties together thousands of users – all of which have a role in verifying and encrypting new transactions. This makes payments highly secure and almost impossible to hack without alerting everyone in the network.
The rationale here is simple; the more payment options your ecommerce store offers, the wider the appeal you’re likely to have. Certain credit/debit card types are not available in all countries, which makes it more challenging for you to reap the benefits of a diverse customer base. Cryptocurrency has the advantage of being available globally and not controlled by any state or country, which makes it a particularly stable option.
Traditional payment methods such as banking and credit cards usually involve high transaction fees and commission, which is a big disadvantage to your business. While cryptocurrencies still involve third-parties, you have much more control as a merchant over what you’re willing to pay.
Payment processing times can vary significantly between banks and credit card companies, which has the potential to cause issues with your cash flow. Cryptocurrency transactions are processed instantly, giving you instant access to revenue from sales.
Because all cryptocurrencies use a decentralized ledger system, it’s virtually impossible to reverse or cancel a transaction once it’s been made. This gives merchants much greater protection against fraud or theft.
Despite the recent surge of interest in cryptocurrency, its use by small to medium-sized ecommerce merchants hasn’t been explored in serious depth. But as we grow more accustomed to the convenience and seamless nature of digital shopping, cryptocurrency is only set to become more attractive.
Online shopping isn’t bound by any restrictions on time or space, allowing consumers to shop exactly when and how they choose. With ecommerce platforms hard at work removing friction from the customer experience, slow or clunky payment systems are only going to become more evident to consumers.
Furthermore, the COVID-19 pandemic has bought more shoppers online than ever before – but has also deepened concerns about security. In a survey by Paysafe, 60% of SMBs say that their customers are more worried than ever about falling victim to fraud or scams during this time. Paired with extremely low levels of trust in banking institutions, this sets the scene for a major shift in how cryptocurrency is perceived by consumers.
In fact, according to a February 2021 survey by Piplsay research, 57% of US-based consumers say that major brands should begin accepting cryptocurrency as a form of payment. With major platforms such as Shopify now allowing merchants to accept payments through their online stores, this is a major sign that cryptocurrency is becoming a viable alternative to traditional methods in the eyes of consumers.
Loyalty initiatives are nothing new in ecommerce, but many retailers have struggled to maintain active participation in their programs. Because it’s based on the blockchain system, cryptocurrency is a fantastic way to offer customers store credit. The secure digital ledger organizes your records for you, meaning that loyalty tokens cannot be lost or stolen. Furthermore, the open system helps to promote trust in retailers because they cannot adjust the value of a token when redeeming rewards.
Because cryptocurrencies provide highly accurate data records, it offers merchants several uses beyond payment systems. For example, coins or tokens can be used to track the manufacturing of the products or garments they stock in their online stores, giving consumers an unprecedented level of transparency into your supply chain. This creates a better customer experience, and in turn, more loyal customers.
The cryptocurrency has lead to a big shake-up in the ecommerce sector, with cryptocurrency-only marketplaces such as OpenBazaar gaining increasing popularity. Because these operate off peer-to-peer networks, they offer merchants both security and lower operating costs. With much lower competition than other marketplaces, it’s a great option for those looking to diversify their selling channels.
A hard fork from the existing Bitcoin system, Bitcoin Cash was launched in 2017 to increase the size of blocks in the blockchain. This allows it to handle higher numbers of transactions per second, making it more viable to exchange for commodities. The goal was to create an alternative to digital wallets like PayPal by pushing Bitcoin to act more as a currency rather than an asset.
In addition to being a decentralized payment system, Ethereum offers alternative uses such as smart contracts and codes which can be built using the blockchain system, ensuring that private information is held securely and avoids the use of third parties. In short, its applications are only limited by the skills and innovation of the developer.
The WAVES blockchain system allows businesses to create and issue custom crypto tokens that can be exchanged with each other or other WAVES tokens, as well fiat currencies like USD and EUR. This makes WAVES tokens ideal for running a loyalty program or launching a crowdfunding campaign by providing more straightforward exchanges of value.
Widespread acceptance and usage of cryptocurrencies are still a long way away, but merchants should keep a close eye on developments in this space. Amid the seismic changes bought about by the coronavirus pandemic, consumers are viewing cryptocurrency as a practical solution to the issues they see in traditional commerce – which means major opportunities for the early adopters.