The Future of Cryptocurrency in eCommerce
For a few years now, cryptocurrency has been gaining in popularity, with global crypto adoption jumping over 880% in 2021. In fact, a Mastercard survey from 2021 has shown that 40% of consumers plan to use cryptocurrencies throughout 2022. As a result, digital wallets are becoming increasingly common as consumers seek ways to handle their money more safely and efficiently.
However, despite the rising popularity of digital currency, eCommerce businesses are still hesitant to bring it on board. Understandably, as digital currency can feel less tangible and real, some worry about its legitimacy. But cryptocurrency can actually be safer and more convenient form of payment that can improve the checkout experience for consumers.
This article will look at what exactly cryptocurrency is, how it can improve and change the future of eCommerce, and ways that businesses can start using it.
How Cryptocurrency Works
Cryptocurrency is a string of encrypted data that represents a unit of currency. Bitcoins, for example, are essentially digital coins that have monetary value and can be used to pay for things on the internet. The difference between paying for something digitally using a credit card versus using cryptocurrency is that the latter isn’t controlled by banks or the government. Encryption and the blockchain technology that crypto exists upon also make this form of digital currency incredibly secure, resulting in transactions free of third-party interference, but with the same trust and protections that only a clearing house has been traditionally thought able to provide.
Blockchain technology is used to encrypt, control, and validate cryptocurrency, meaning it is typically safer than using fiat. Transactions are verified by users on a decentralized and protected network to ensure safety and anonymity. However, the digital ledgers of transactions are posted publicly and verified by multiple nodes to ensure the currency is not counterfeited or duplicated in any sort of suspect way.
The Benefits of Using Cryptocurrency in eCommerce
When cryptocurrency like Bitcoin, Ethereum, or Cardano is used by participating institutions, it is automatically converted into currency for merchants using a payment processor/gateway like BitPay, Binance Pay, and Coinbase Commerce, making it incredibly efficient and seamless for retailers and consumers. As such, cryptocurrency is likely the future of eCommerce transactions as the two are complementary. They both exist within the digital realm and are appealing to digitally-savvy users.
Utilizing cryptocurrency can be highly beneficial for consumers and businesses in many ways, including:
Fast and Convenient Transactions
Traditional transactions can take longer because you have to wait for the bank to approve and process them. However, you have instant access to all funds with cryptocurrency, and transactions are processed near-immediately. Banks take time to process and verify transactions to reduce incidences of fraud—but multiple nodes on the blockchain can do this job just as accurately, not to mention quicker, than banks. This benefits your business as it gives you instant access to profits. For consumers, it’s also nice because they don’t have to wait to see the transaction hit their bank account.
Attracting New Consumers
The broader your range of accepted payment methods, the broader your consumer base will be, and digital payment methods should be front and center. In 2021, 82% of Americans used digital payments, up from 78% in 2020 and 72% in 2015, according to McKinsey. Though cryptocurrency is likely a ways off from being the primary form of currency, many tech-savvy consumers already prefer it to traditional money. Thus, introducing cryptocurrency into your eCommerce business will open your doors to more customers worldwide that are buying into cryptocurrency.
Lower Transaction Fees
Transaction fees are often considered a necessary evil in the retail industry. Depending on the system you use, your brand can pay a certain percentage of fees for each transaction. To compensate, brands will then price their products or services higher.
However, cryptocurrency has minimal to no fees, depending on whether you accept it to a personal digital wallet or through a third-party provider. There is often a network fee, and you do have to be particular about your payment processor, as they may charge their own fees. Nevertheless, over time, this can save brands a lot of money, which they can put back into their business in other ways or reduce their prices to make them fairer and more affordable for consumers.
As things increasingly go digital, data security is also becoming a more common concern for consumers and businesses. If your system gets hacked, for example, a customer’s private information and finances can be at risk if they use a credit card. Additionally, customers can get away with fraudulent charges and returns more easily with credit cards, which can negatively impact your profits.
With cryptocurrency, as opposed to credit cards, transactions are more secure. If there is a data breach, consumer information is safer, and you as a business are less susceptible to fraud as cryptocurrency cannot be moved with simple knowledge of a credit card number, for example. In fact, you can put two-factor security on crypto accounts specifically for this reason.
Points of Caution Before Accepting Crypto
However, keep in mind that, as with any new tech, it’s essential to be aware of the good and the bad. Currently, eCommerce brands should be mindful of things like limited consumer buy-in—as cryptocurrency is still a niche market—and price volatility. Digital currencies notoriously fluctuate in value, so it’s essential to use a processor that backs it with fiat—meaning they honor the price you charge even if the value changes mid-transaction. There are always risks to taking on something new, and it will be up to you to determine what decisions are best for your business and brand.
How to Implement Cryptocurrency into Your eCommerce Business
As cryptocurrency is not yet widely used by eCommerce businesses, there are limited ways you can choose to accept these types of payments. However, as digital currency becomes more prevalent, eCommerce tech will likely advance and evolve to accept cryptocurrency in numerous ways. So it’s important to keep an eye out for tech trends involving cryptocurrency to ensure you are staying ahead of the market and keeping up with demands.
In the meantime, you can accept cryptocurrency in one of two ways: through a third-party processor or your personal digital wallet.
- Third-party Processor: There are some processors out there that already offer eCommerce integrations. Through this method, the processor will handle the entire transaction process for you, just as credit card processors do.
- Personal Wallet: Virtual or digital wallets are software-based systems that securely store your private financial information, such as credit cards and now cryptocurrency. If you don’t have one already, you can easily download and set one up on your phone, tablet, or computer. Hardware wallets are also available, which are like digital safes that store cryptocurrency on and hard drive.
As the digital world and cryptocurrencies are constantly changing and evolving, staying on top of the latest news and trends is key. There are many third-party processors, digital wallets, and digital currencies already out there, so you’ll need to do your research to determine which ones are right for you and your business. But as things advance, there may be processors and cryptocurrencies that are designed specifically for use in the eCommerce industry. Still, cryptocurrency will only continue to gain in popularity and can benefit your business in many ways, so long as you are smart about using it.