Did you know that the worldwide remittance market is expected to be worth $930 billion within the next four years? Despite this, there are a number of challenges that the payment industry needs to overcome.
From long transaction times to expensive fees, there are a number of pressing challenges that stand in the way when it comes to the growth of the industry. For example, we are seeing time really become of the essence when it comes to money, with people and industries unable to wait for a day or two before they receive funds.
This is just one of the ways that cryptocurrency is proving to be a viable and exciting alternative for businesses. With that being said, in this blog post, we are going to take a look at cryptocurrency and how it is changing the way payments are made and handled.
How is cryptocurrency changing the payments market?
Mankind has been making payments for services and goods for as long as we can remember. However, as time has gone on, the different payment methods that have been used have evolved. From barter to Bitcoin, there has been a drastic evolution in the world of payments.
Now that we see more and more people using their cash to buy Ethereum, Bitcoin, and other popular cryptocurrencies, it probably is of no surprise that we have started to see the ripple effect of this in the payment industry.
Cryptocurrencies will synergize with current payment portals and apps, and as time goes on, they will become normalized as a payment method that provides inexpensive and quick payments.
We have seen that investors in America are opening up to cryptocurrencies. In fact, during the first half of 2021, 48 percent of Americans purchased cryptocurrency. This is the first step that is required. However, for crypto to really be viewed as a mainstream type of payment, support from customers and merchants is required.
We are starting to see the start of this. It has been suggested in reports that more than $12 billion worth of payments have been made over Bitcoin. At the moment, the average for Ethereum is around 1.5 million each day, yet this seems to be growing and growing.
What are the benefits of using cryptocurrency to make business payments?
To understand why the tide is changing, we need to look at the benefits that cryptocurrency can bring when compared with conventional payments. Here are some to consider:
Higher levels of security
There is only one place to begin, and this is with security. After all, we live in a day and age whereby cybercrimes seem to be a daily occurrence. Because of this, consumers are rightly worried about trusting online platforms with their money.
As Bitcoin and other cryptocurrencies live on a decentralized digital ledger called the blockchain, these worries can be eliminated.
All transactions are stored on the blockchain on a permanent basis, which means they cannot be modified or deleted. This will considerably lower the chances of fraud. You can also typically leverage a range of different security features, depending on the payment processor you select, such as KYC and blockchain monitoring.
Ultimately, though, the blockchain is more secure for payment transfers. Any sensitive data will be encrypted when completing a transaction.
You won’t have any chargebacks to worry about
Another benefit is the fact that paying with cryptocurrencies means there are no chargebacks to worry about, which costs companies time and money.
For those who are unaware, a chargeback refers to a situation whereby the money is credited back to the account of the payment cardholder because they have disputed the transaction. So, the money that the individual has paid for your good or service is then refunded back to them because they say the account was fraudulently charged.
While you can fight against these chargebacks if they are unjust, it still takes time and money, which no one wants to spend on something like this.
This is another issue that can be solved if you decide to offer business payments in cryptocurrency. This is because you cannot modify or undo a crypto transaction, as you can with a credit card transaction. The reason for this is that cryptocurrencies are on a decentralized public ledger.
For businesses, this means you can accept digital payments without any fuss or hassle. You do not have to go through the effort of protesting chargebacks, which can take a big weight off your shoulders, leaving you with more money in the bank and more time to spend on activities that really matter.
Fees are lower
Throughout the 90s, cash was the main form of payment used for transactions. We then slowly made the move to credit and debit cards. The reason for this is that they were convenient. We could make payments without needing to carry around cash. However, this convenience came with fees.
Not only does the customer need to pay fees, but merchants will also face fees whenever they receive a card payment. For international transactions, these fees are even higher. When you consider bank charges, wire fees, and the exchange rate spread, there is a considerable cost associated with global payments.
It can be frustrating to see just how much money is lost when you make an international payment, whether it is the customer’s burden or the business’s cost (or both get stung!).
This is something you do not have to worry about with cryptocurrency because an intermediary is not required. There is no one who is going to be taking a sizable cut out of the remitted amount for processing the transaction. In some instances, cryptocurrency transactions are completely free.
Paying with cryptocurrencies is also pretty easy, and it is only going to get easier as time goes on. For example, if you are going to use Ether to pay for a purchase, all you need are two things; the ETH itself and the wallet address for the receiver. So, you still get all of the convenience that made debit and credit cards so popular to begin with, yet you do not have the huge fees to pay.
What cryptocurrency can do for businesses
We have taken a look at three of the compelling reasons why crypto payments are making such an appeal. So, now, let’s take a look at how cryptocurrency can move businesses forward and what we can expect in the future.
- A lot of businesses are discovering that important clients and vendors want to engage with them by using cryptocurrency. As a consequence, your company may need to be positioned to receive and disburse crypto to make sure that your exchanges with key stakeholders are as smooth as possible.
- Cryptocurrency also furnishes some options that are simply not possible with fiat currency. For instance, programmable money can enable accurate and real-time revenue sharing while improving transparency to aid with back-office reconciliation.
- Cryptocurrency could act as a fresh avenue in terms of enhancing more conventional Treasury activities, including managing the opportunities and risks of engaging in digital investments, helping to strengthen control over the capital of the enterprise, and enabling secure, real-time, and simple money transfers.
- Cryptocurrencies could act as an effective alternative to cash or a balancing asset, with cash potentially depreciating over time because of inflation. Cryptocurrency is also an investable asset, and some, with Bitcoin being a prime example, have performed incredibly well over the past five years.
- Cryptocurrency could provide access to new liquidity pools and capital via conventional investments that have been tokenized and new asset classes.
- If you introduce cryptocurrency in your business now, this could help to spur awareness amongst your employees with regard to this new technology. This is important because we can see that cryptocurrencies are going to play a vital role in the future, so it certainly helps to be prepared now.
- Cryptocurrency could grant access to different demographic groups. Users tend to represent a more cutting-edge clientele that values transaction transparency. It was recently concluded in one study that up to 40 percent of customers who pay using crypto are new company customers, and their purchase amounts are twice those of credit card users.
Final words on using cryptocurrency to make business payments
As you can see, times are certainly changing when it comes to using cryptocurrency to make business payments. This is something that people are becoming more and more open to. And, as time goes on, and more merchants accept these payments and more customers pay in this way, the ball is going to keep rolling and rolling.
With no chargebacks and lower fees, it is not hard to see why an alternative like this makes such an appeal to people all around the world.