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Real-world crypto adoption is booming, according to a slew of recent announcements. Earlier this month, Crypto.com made their Pay Checkout plugin available for WooCommerce merchants, which it claims make up about 30 percent of the world’s online stores.
Payments and privacy coin Dash recently announced partnerships with a number of payment providers that reach millions including Overstock.com. Some of France's largest retailers meanwhile, are planning to accept Bitcoin come 2020; you can buy bitcoin from 7-Eleven in the Philippines, and an Icelandic firm just settled a payment from IKEA using the Ethereum blockchain. It’s even possible to use cryptocurrencies to buy food at refugee camps.
So, is this finally crypto’s big break? Nearly.
Crypto retail is still in its early stages
According to an April 2019 research paper by Nicole Jonker of the De Nederlandsche Bank in Amsterdam, we shouldn’t get ahead of ourselves anytime soon. “Acceptance of crypto-payments [by online retailers] is modest,” she wrote. Just two percent of a random selection of 768 retailers in the Netherlands accepted payments in crypto.
Jonker’s study analyzed survey responses from retailers in the Netherlands, and found that most retailers simply don’t feel like there’s enough demand for crypto to make an effort to apply it to their systems. After all, who really needs to buy their groceries in Bitcoin? Jonker is doubtful this will change any time soon. “The potential of cryptos to drastically change the existing retail payment ecosystem by making financial institutions superfluous or even disrupt the monetary system seems small,” she wrote.
Is Libra the key to adoption by retailers?
“But there is substantial interest among online retailers to adopt them,” and “acceptance may rise once certain (perceived) barriers are lowered,” concludes Jonker’s report. Since Jonker’s study, one major news hook might help boost retail interest in crypto—Libra, the Facebook-led crypto network that promises to bring crypto mainstream.
According to Eric Anziani, COO of Crypto.com, Libra has played a huge role in increasing consumer adoption: “It was a high-profile announcement that, along with [a] partnership with retailers like Lyft and Uber, drew the attention of retailers who were “not sure” previously,” he says. “While Libra has faced significant concerns from regulators, it has helped draw more attention to crypto as a viable payments alternative for consumers and e-commerce merchants.”
And according to both Anziani and Stéphane Djiane, the CEO of Global P.O.S., a point-of-sale systems provider for retailers, millennials are pushing sellers to adopt crypto. “There are now roughly 65 million crypto wallets and Millennials have expressed an appetite for alternative banking. Thus, retailers are likely facing a pull factor from customers,” says Anziani.
Crypto adoption is still controlled by payment providers
For Jonker however, he concluded that most power lies with the payment service providers; the companies and organizations that sort out payment systems for retailers. It’s these companies, wrote Jonker, who mitigate risks like the volatility in exchange rates, or by reducing fees by handling crypto payments on behalf of retailers.
Why? “Digital currencies solve many fundamental issues for retailers, which typically operate on razor-thin margins,” said Ryan Taylor, CEO of Dash Core Group, which creates Dash, a digital currency optimized for payments through instant settlement and fees that undercut credit cards companies. According to Taylor, the benefit of crypto is that retailers can also access new customers, eliminate chargebacks, enable cross-border transactions from anywhere in the world, and help their customers avoid cross-border fees that drive away potential sales.
Another advantage of these payments companies is that they create the tech, too. A potential roadblock for brick-and-mortar retail stores is that old cash-tills with beep boop scanners might not be able to accept cryptocurrencies. So did Hugo Briand, of the digital consulting company Ekino, before he masterminded the project for Global P.O.S, the company that’s helping French retailers like Decathlon set themselves up to receive crypto payments early next year. To get around ancient tech, Briand and his team built a mobile crypto-wallet that generates a QR code that lets even the most rudimentary of scanners accept crypto.
Briand’s system also makes everything quicker. One of the biggest pain points for crypto-retail partnerships is the speed; it takes an age for most Bitcoin transactions to go through, and shoppers don’t want to wait. With Briand’s system, however, it isn’t necessary to confirm transactions on the blockchain straight away. It takes under five seconds for transactions to go through, and Briand hopes to hit one second in the near future. And, despite the aging technology, Briand said his solution is secure. The wallet is actually a multi-sig address; when you make a payment, the application sends a signal to the Global P.O.S API, who holds the other key. This, says Briand, prevents double-spending.
Customers will foot the crypto adoption bill
But customers excited to try Briand’s system might be disappointed by one major caveat; it’ll be customers, not retailers, who’ll pay a premium for using the new tech. Not much—just a couple of percent per transaction—but it’ll make transactions more expensive than paying with a credit card or cash. Briand said the fees are for retailers to exchange from Bitcoin to Euros. Those fees will go away if retailers decide to accept payments in crypto, but that’s not likely to happen any time soon.
Not so for Ryan Taylor’s Dash: “Dash fees are de minimus, and average just 1/20th of a U.S. cent. In most cases, the fees are paid by the sender but can optionally be deducted from the transaction amount. Other than micro-transaction machine-to-machine use cases, the fees are too trivial to warrant consideration.”
Gentlemen, start your shopping trollies.