Retail payments appear to work pretty well, at least from the consumer’s perspective. You can walk into almost any store and easily pay with multiple methods, drawing on a variety of accounts. From the merchant’s perspective, however, the current structure of retail payments is a necessary evil that must be endured in order to do business. Obviously, merchants need to be able to receive money for the goods and services they sell. The problem is that credit card payments — used in the overwhelming majority of retail transactions — put merchants at a disadvantage in the current payment system.
The cost of retail fraud is at an all-time high and continues to climb year over year. This leads to billions in lost revenue for merchants, not to mention a pervasive anxiety about whether the ever-expanding number of payment options is actually secure. This is all on top of third-party transaction fees, compliance concerns, and checkout technologies that seem to change every few years.
If cryptocurrency were to obtain widespread adoption, it could resolve the fraud issue thanks to the security of blockchain, which provides an immutable record of all transactions in a shared ledger and is available for public scrutiny. The use of blockchain in recording transactions makes it extremely difficult to perpetrate fraud but extremely easy to detect its ill effects. Cryptocurrency, therefore, does provide a viable alternative to the current payment system. But in spite of its potential to alleviate major woes, crypto in retail remains rare. From where merchants stand, there’s good reason for that. But once those issues are resolved, crypto could be the answer to retailers’ prayers.
How Could Crypto Benefit Retailers?
We’re a long way from widespread use of cryptocurrency, but looking ahead to the unique opportunities afforded by crypto payments illustrates how accepting crypto could benefit merchants.
The splashiest figure is the market cap — almost $230 billion. That is a huge pool of money that is largely segregated from retail. Accepting crypto payments could give retailers a significant revenue opportunity.
Crypto also has the potential to unify a payment landscape that currently is overcluttered with options. Consumers have a wealth of choices, yet payment is still complicated by conflicting currencies, technologies, and merchant standards. Crypto could unify multiple payment options under the same umbrella, making shopping easier for consumers and retailers alike.
For merchants, the most compelling reason to accept crypto is that it could solve the security problems that plague the entire digital economy. Retail fraud is rampant in the e-commerce space; its devastating costs represent a genuine existential risk to the industry. Current defenses have proved inadequate, but crypto — via blockchain — could largely eliminate payment scams and schemes. It could ultimately be retail’s best defense against organized retail crime.
When Will Crypto Infiltrate Retail?
To be sure, it doesn’t make sense for merchants to accept cryptocurrency in the current market. Switching to an alternate network like cryptocurrency will have to be less onerous in order for merchants to be able to make the change — even if they do hate the current payment systems. That said, cryptocurrency and blockchain could very well offer massive improvements on our current payment technologies. What is less certain is when the tipping point will come.
Fewer than 10 percent of American adults own cryptocurrency, which means that even widespread curiosity about crypto hasn’t sparked customer buy-in. There are also so many coins on the market that creating a standardized payment system is difficult. For those reasons, it’s prudent for merchants (and their investors) to wait to adopt crypto, at least for now. In the meantime, crypto will have to demonstrate the following traits to signal that it’s ready for merchant adoption:
- Widespread: Cryptocurrency must be sought out in order to be obtained, which is why so few people own it. As accessibility and liquidity improves, more people will own crypto and will be interested in earning it through work or receiving it as a reward. When that day comes, there will be many consumers eager to spend their crypto, and a retail payment option will appear.
- Stable: Cryptocurrency has value, but it’s in constant flux. In order for a primary market to appear, allowing retailers to receive crypto for things like goods, utilities, and real estate, a stable cryptocurrency must first come to light.
- Comprehensible: We easily understand the value of $1 or $100, but we don’t yet relate the value of cryptocurrency to itself, which is still a source of consumer confusion. It’s hard to relate spending “X” amount of crypto without first converting it to U.S. dollars to get our bearings. New currencies will need to be similarly comprehensible before retailers will be able to label every product in the store with a price in crypto.
- Finalized: Cryptocurrency is a hypercompetitive market. Once the number of initial coin offerings drops off and dominant coins emerge, it will be easier for retailers to standardize crypto payments. Consumers will lead the charge, and they will gravitate toward the coins and payment options that make crypto as accessible as possible.
Introducing a new payment technology and currency will not offer a panacea, but over time crypto can have a deep impact on retail. If consumers want to pay with crypto and merchants can accept it without jumping through hoops, we could finally see a payment system that is both seamless and secure. Who wouldn’t want to shop in a store like that?
Jared McClure is the co-founder and COO of CrayPay, a free app that drives mobile payment adoption by offering to instantly pay a portion of every purchase made. Jared embodies years of experience in new business development and successful strategic implementation. During his 18-year career, Jared has provided leadership, vision, and management to ensure proper operational controls. His entrepreneurial background is manifested in his oversight of the company’s technological development, brand partnership strategy, and customer service. Prior to CrayPay, Jared was the co-founder and president of Transfer for Less, an online service for digitizing assets.