Crypto has emerged as one of the most powerful buzzwords in e-commerce. Previously considered a niche investment option for the technologically inclined, the global cryptocurrency market is projected to reach a staggering $2.9 billion by 2030. This exponential growth indicates that digital currencies are steadily gaining traction and moving towards mainstream acceptance and utilisation.
With the increasing shift of everyday activities to the online sphere, e-commerce has become a key factor in shaping the perception of virtual currency as a valuable asset rather than a fleeting trend.
This article will explore whether there is interest for the e-commerce sector to accept crypto as payment, what benefits it offers, and what practical applications it has beyond crypto payments.
Does Cryptocurrency Have a Mass Market Appeal?
Measuring the size of the cryptocurrency market can be challenging due to the unpredictable nature of adoption. The Global Crypto Adoption Index reveals that Q2 of 2021 witnessed the highest level of adoption ever recorded. However, since then, the ownership level in the crypto market has experienced significant fluctuations, partly due to the volatile nature of the market and concerns regarding the overall economic well-being.
The 2023 Cryptocurrency Adoption and Consumer Sentiment Report discovered that ownership rates among U.S. adults declined from 33% to 30% during 2022. Nevertheless, there is a remarkable increase in consumer awareness regarding virtual currencies and the crypto sector, with 60% of the population considering themselves familiar with the concept.
This indicates a substantial potential for the upsurge of electronic currency usage, particularly as the technology becomes more widely available through website plugins and open API systems.
E-Commerce and Crypto — Symbiotic Relationship
Despite the increasing number of everyday crypto investors and the growing conversations surrounding the selling points of virtual currencies, the use of virtual money in e-commerce continues to be limited.
According to the Cryptocurrency Adoption and Consumer Sentiment Report, only 13% of crypto enthusiasts have invested in cryptocurrency specifically for online transactions. In comparison, 38% have done so out of interest in the underlying technology.
As e-commerce platforms strive to enhance the client experience by eliminating obstacles, the inefficiencies of slow and cumbersome payment systems are becoming more apparent to consumers.
As consumers demand smoother digital shopping, cryptocurrency is poised to emerge as a more appealing technology for streamlining crypto transactions. Coupled with diminishing trust in traditional banking institutions, this shift in consumer perception sets the stage for a potential transformation in how cryptocurrency is viewed and utilised.
What Are The Strengths of Accepting Cryptocurrency for E-Commerce Businesses?
Crypto payments can provide an advantage to e-commerce businesses over their peers who depend only on debit/credit cards or bank transfers. By embracing cryptocurrency payments, here are the significant benefits that can be obtained:
1. Cross-Border Transactions
The reasoning behind it is straightforward: by providing a wide range of payment methods, your e-commerce store can offer customers greater flexibility. However, it can be challenging to fully tap into the advantages of a global customer base when certain credit and debit card types are not accessible in all countries.
In contrast to many conventional financial options, cryptocurrency holds the upper hand as it is globally accessible, primarily due to the absence of crypto regulations. For brands contemplating venturing into cross-border commerce to accept crypto as payment or collaborate with international suppliers, digital assets should be given serious thought.
2. Lower Merchant Fees
Merchants often face the burden of high transaction fees when processing conventional payment methods like credit cards or contactless payments. These fees can significantly impact their profit margins.
On the other hand, by accepting cryptocurrency payments, merchants can avoid these fees, as cryptocurrencies do not charge for trading, no matter which payment gateway is used. This translates to lower customer prices, especially if the merchants pass on the savings from preventing merchant fees.
3. Security
Cryptocurrencies leverage a decentralised ledger system, making it highly challenging to undo or nullify a transaction once it has been executed. This feature provides a heightened level of security for both merchants and consumers, offering robust protection against fraudulent activities or theft, particularly in the backdrop of ever-growing online shopping and transaction volumes.
E-commerce fraud projections indicate a staggering $48 billion loss to e-commerce fraud by 2023. Utilising blockchain technology further fortifies the defence against chargebacks, as consumers cannot simply request the network to reverse transactions, thereby enhancing the overall security framework in the digital realm.
Use Cases of Cryptocurrency in E-Commerce
In e-commerce, crypto extends beyond its role as a digital currency and competes with various emerging digital payment solutions and card-linked programs. Its decentralised nature and versatility as an asset enable it to be utilised in numerous initiatives that elevate the brand experience and provide a distinct competitive advantage.
Loyalty Campaigns
Loyalty programs in the e-commerce space are abundant, but many need more perceived value to maintain active participation. Traditional methods such as flat discounts and birthday gifts have become commonplace and fail to differentiate one loyalty program from another.
By utilising blockchain technology, cryptos provide a secure and innovative way to offer rewards to customers. The decentralised nature of blockchain ensures that loyalty tokens or store credit cannot be tampered with or stolen, instilling trust among members. With brands constantly adjusting reward structures, crypto-based rewards guarantee that customers receive fair treatment and serve as a compelling reason to join loyalty programs.
Web 3.0 Initiatives
With incrementing brands venturing into the metaverse and virtual shopping, cryptocurrency emerges as a valuable asset in enticing shoppers to participate and make more purchases actively. Incorporating collectables and virtual currencies makes the metaverse interaction more immersive and tangible for consumers, allowing them to reap the benefits of engaging with this unique platform.
For example, today, many companies from different industries are interested in the metaverse and everything related to Web 3.0 and NFT technologies. Thus, it is possible to buy and trade tokens for companies' physical products using cryptocurrency assets, creating a closed loop for crypto enthusiasts.
Verifying Veracity
Cryptocurrencies offer precise data records, enabling diverse manufacturing and fulfilment operations applications. For instance, utilising tokens and serial numbers allows for tracking product manufacturing, granting customers unparalleled visibility into the supply chain.
In an era where counterfeit goods and unethical manufacturing practices are increasingly scrutinised, cryptocurrency protects against illicit activities. It showcases a company's commitment to transparency and integrity to its clientele.
Marketplace Growth
The emergence of crypto has caused significant disruption in the e-commerce sphere, establishing specialised marketplaces that exclusively deal in cryptocurrencies. Operating on peer-to-peer networks, these platforms provide merchants with enhanced safety precautions and reduced operational expenses compared to fiat currencies.
Due to the relatively limited competition compared to traditional marketplaces, they present an excellent opportunity for sellers and small businesses to broaden their market share and enquire with new customer bases by diversifying their selling channels.
The Bottom Line
Companies that accept crypto as payment have a unique opportunity to make the most of the distributed ledger technology and other crypto innovations. In addition to the above advantages, crypto payments and have a high potential for further development of the e-commerce sector.
