Cryptocurrencies, such as Bitcoin, have the potential to revolutionize retail payments. Adoption is on the rise and consumers show an increased appetite to find places to spend their Bitcoin or other cryptocurrencies. Yet, it seems that enthusiasts and critics alike are always debating the likelihood of consumers fully adopting the virtual currency.
Regardless of individual opinions, the rise in popularity of cryptocurrencies cannot be ignored. There are many billion dollar businesses that accept Bitcoin as a form of payment. The trend began in 2014 when Overstock.com announced that it would accept Bitcoin payments. Several other large online retailers followed suit, with more widely recognizable brands adding their name on a growing early adopters list. Today, consumers can use Bitcoin for a wide range of products, from buying a cup of coffee, to booking a vacation or even buying a car or real estate online. There are even sites that are designed to receive exclusively Bitcoin payments.
Bitcoin ATMs are also spreading quite fast since the end of 2015 and beginning of 2016. Because of their functionality, bitcoin users can easily insert physical cash in exchange for bitcoins, which can then be used to shop online.
Bitcoin and Retailers
Bitcoins are taking over the cryptocurrency marketplace. To date, they are the largest and most well-known digital currency. Many large retailers, including Amazon, Dell, Expedia, Microsoft, Subway and Target, have adapted to bitcoin technology to appeal to a larger audience. With the extreme adaption of this technology, it would be detrimental to merchants to note accept this new form of payment.
There are certain advantages for merchants of adopting virtual currency as one of their accepted methods of payment. Accepting virtual currency improves the retailer’s profit margins by eliminating processing fees associated with other types of payment. By offering another payment channel, they are broadening their potential customer acquisition. Some early statistics also indicate that virtual currency shoppers are more loyal to merchants that accept virtual currency.
So What’s Next?
While the signs are promising, virtual currency has a long way to go before achieving a wide user-adoption similar to other traditional methods of payment. The technology behind virtual currency, the Blockchain, is relatively new, only a few years old. Even though it is a revolutionary type of technology, consumers are not familiar with it outside of mainstream media coverage and what they read about on social platforms. The clear majority of coverage on the subject comes either from those who do not understand it and are quick to demonize it, or from those that understand it too well but are too technical to explain it in plain language.
These adoption obstacles are not unique to virtual currency. They have been associated, over the years, with the introduction of any new technology at a wide scale. Similar challenges can easily be applied to mobile payments or even on-line payments in the early days of the Internet commerce.
Let’s Talk About Consumer Adoption
Aiming only to increase the number of merchants that accept virtual currency is only half of the equation for wide consumer adoption. Achieving greater consumer adoption equates making consumers feel safe using virtual currency in their everyday lives. All this will come with time and a little bit of consumer education. Cost savings may ultimately be the most compelling benefit for virtual currency consumers.
The savings on the merchant side are clear considering the fees incurred by using existing payment methods. An increasing number of merchants pass some of the cost savings on to consumers, in the form of discounts and incentives. As these cost savings continue, consumers will soon realize that virtual currency enables lower prices for goods and services.
Privacy is another benefit for consumers. During a virtual currency transaction, the consumer only shares a public key, a sequence of letters and numbers unique to the consumer, and the amount of the payment with the merchant. There is no personal information shared that potentially could make the consumer susceptible to identity theft.
Virtual currency and its underlying technology, the Blockchain, is the next step in the evolution of the payment system. It unlocks great potential for consumers and retailers. As with any new technology, it takes time to mature and become widely adopted. But it is rapidly reaching its tipping point.
It is expected that in the next couple of years’ virtual currency will become more and more accessible, making it easier to integrate with existing payment systems and becoming the preferred method of payment amongst consumers. Someday soon, bitcoin will be the new form of currency.
Irene Katzela is the chief executive officer of Chain of Points, creators of the Blockchain-based platform that incentivizes participation in loyalty programs.