How to make payments using cryptocurrencies
Cryptocurrencies have been prevalent in finance for years, but are yet to establish themselves as a mainstream payment method. Is that about to change?
The growth of cryptocurrencies has been one of the prevailing themes in finance for over decade, dating back to the release of Satoshi Nakamoto’s 2008 paper mooting the first direct peer-to-peer payment system.
But despite the headlines and supporters that Bitcoin and other cryptocurrencies have garnered, one of the major criticisms that has been levelled at them is that they are not currencies in the truest sense, because they are of little practical use beyond being a store of wealth and an asset to trade. For cryptocurrencies to develop into a credible alternative to fiat currencies they need to make the leap from simply having value to being a widely accepted payment method, both online and on the high street.
The appetite for crypto payments
Despite some initial concerns (25% of merchants we asked for our 2017 Lost in Transaction research said that they did not trust cryptocurrencies), it appears that we have reached a tipping point when it comes to the appetite for using cryptocurrencies as a payment source. Businesses that are aware of the pressing need to stay relevant as the payments ecosystem fragments by accepting more payment methods at the checkout are increasingly open to the idea of accepting cryptocurrencies, in line with the increased consumer appetite for making crypto payments.
In Lost in Transaction 2018: The future of payments for SMBs we asked small-to-medium-sized businesses in the US, UK, Canada, Germany, and Austria about accepting cryptocurrencies through their online checkout. 6% of online businesses currently accept cryptocurrencies (rising to 9% in the US), but a further 15% have ambitions to accept them in the next two years. This 250% predicted increase in acceptance rates was the highest of any new payment method, ahead of subscription payments (156%), loyalty cards (127%), and via mobile apps (116%).
But willingness to embrace cryptocurrencies as a payment method and having the capability to do so are not the same thing; if cryptocurrencies are on the verge of breaking through as a mainstream alternative payment option as our data suggests then businesses must strategise how to build cryptocurrency acceptance into their checkout in an efficient manner, and without compromising their existing payments infrastructure or restricting the spectrum of other payment methods that they are able to accept.
This journey begins with partnering with the appropriate payments service provider that offers a merchant account service that includes cryptocurrencies within its available payment methods. With the right payments service provider merchants can accept multiple alternative payment methods through a single, simple integration; including cryptocurrencies such as Bitcoin into the mix of payments is the most effective way of including Bitcoin payments into the checkout.
How to accept cryptocurrencies online efficiently
The Skrill Quick Checkout is one such integration that offers merchants this function. By integrating Skrill Quick Checkout an online business is able to plug hundreds payment methods into its checkout simultaneously that can be selected and deselected via its merchant account tools; and included in these options is ability to accept cryptocurrencies.
So through this integration and the selection of cryptocurrencies online merchants can quickly onboard currencies such as Bitcoin into their accepted payments methods, in a manner that doesn’t compromise its acceptance of traditional payment methods or other alternative methods.
Prepaid cards: a direct route from a crypto account to the high street
From the consumer perspective, using cryptocurrencies to make payments isn’t dependent on the merchant being able to accept it. Instead, their focus is on being able to take the wealth they hold in their crypto wallet and give it a practical use by being spendable in the real world.
One method for doing so is to give crypto wallet holders the option of linking their account to a prepaid card. Similar to a prepaid card that is linked to a digital wallet, this enables cryptocurrency account holders to make purchases using the contents of their account immediately without having to actively convert their finances into another currency, which may be a lengthy and expensive process.
Earlier this month we announced a card issuing partnership with Coinbase that enables Coinbase account holders in the UK to do just that. The Coinbase Debit Card instantly converts finances into fiat currency when used and has all the in-store functionality of a traditional bank card, meaning that consumers can make contactless or EMV (Chip & Pin) verified payments with all merchants that accept VISA debit card payments as well as making cash withdrawals from their Coinbase accounts from an ATM. Consumers can also make payments at any online checkout that accepts traditional credit and debit cards.
The Coinbase Debit Card, which will be available to account holders in the rest of Europe in due course, is also linked to a mobile app that enables consumers to not only select which cryptocurrency they wish to spend, but also provides users with spending summaries, receipts, and notifications to better inform them about their purchasing habits and budgeting.
The benefit of the prepaid card model is that the business doesn’t need to factor cryptocurrency into their checkout in any way; because the funds are seamlessly converted into fiat currency before the transaction is completed no new integration beyond accepting VISA card payments is required; making this solution scalable and of maximum benefit to consumers.
Through inventive alternative payments installations such as Skrill Quick Checkout and the Coinbase Debit Card, industry leading payments services providers such as Paysafe are evolving cryptocurrencies from being purely a trading commodity or store of wealth and bringing them into the real world. Whilst we may still be some way off seeing cryptocurrencies ubiquitously advertised as accepted in-store or online, functionalities enabling Bitcoin purchases are coming to the fore.
Undoubtedly these payments innovations, that are being driven by consumers’ and business’ growing appetite to transact using cryptocurrencies, will continue to evolve and gain popularity as they filter into public consciousness and using cryptocurrencies to make payments becomes more common.
Some of the challenges with Bitcoin specifically, most notably its volatility, may hamper its adoption, which is why we believe that stablecoins may provide the eventual solution to widespread cryptocurrency payments usage, in tandem with integrated online checkouts and prepaid cards.