Crypto adoption is growing across the globe. But there are a few things companies and governments should consider before venturing into this new territory.
One way to get started is by introducing crypto as a payment option without taking it onto the company’s balance sheet. This approach may be the easiest and fastest way to start.
1. Banks
Banks that are embracing digital currency and the technology behind it are doing so for a variety of reasons. Among them is the desire to streamline and upgrade financial services.
Cryptocurrencies and their blockchain networks offer several benefits to banks, including the ability to reduce transaction costs, eliminate manual back-end processes and provide real-time payments data. They also help improve customer service, increase client relationships, and enable new services like payment on delivery of goods or automatic insurance claim payouts.
However, the risks associated with cryptocurrencies are a concern for many institutions. Banks could mitigate these risks by implementing digital wallet security features, for example.
Similarly, they can use public blockchains, such as stablecoins, to perform transactions faster and at lower cost than they can today.
As digital currencies continue to grow in popularity, banks are stepping up their efforts to embrace the potential of this technology. The most effective way for them to do this is to stay on top of regulatory changes and explore technologies that can deliver the DeFi solutions they need.
2. Payment Processors
One of the key roles in e-commerce is that of the payment processor. They are responsible for navigating the interface between the merchant’s bank and the customer’s credit card company.
The processor validates the security of a customer’s card and facilitates the transfer of funds. They do this by contacting the card issuer, the financial institution associated with a customer’s credit card, to confirm the transaction and ensure that funds are transferred to the merchant account.
Choosing the right payment processor is a big decision for sellers. It impacts their overall user experience and could have a direct impact on conversions.
Processors need strong know your customer (KYC) processes for vetting merchants, and they must build multi-factor authentication for consumers to prevent fraudulent transactions. Convenience drives some consumers to store their payment credentials with merchants, but security concerns give others pause.
3. Retailers
Consumers are increasingly using cryptocurrencies to buy goods from a wide range of retailers, ranging from coffee shops to Lamborghinis. A recent survey of 2,000 US retail executives by Deloitte found that retailers expect digital currency payments to be a widespread trend within five years.
Retailers are looking to adopt digital currency for a variety of reasons. They see it as a means of delivering a superior customer experience, increasing their customer base and enhancing brand image.
Furthermore, they also see value in enabling immediate access to funds and taking advantage of blockchain-based innovations in decentralized digital finance. These factors help them derive a competitive edge.
While a number of large retailers are already embracing crypto, many smaller merchants are still in the process of getting on board. However, the sooner that they do, the more likely they are to reap the benefits of this emerging trend.
4. Governments
Digital currencies are a new way for people to make transactions with money. The most well-known form is Bitcoin, which uses distributed-ledger technology, meaning that multiple devices all over the world are constantly verifying a transaction’s accuracy and integrity.
While digital currency may increase the speed of domestic and international payments, they also have significant challenges. For example, volatility and cyber-theft could make them too volatile to be trusted as a medium of exchange or store of value.
There are also major issues for public law. For example, should new arrangements be treated as electronic money, bank deposits, securities, commodities, or something else?
While digital currencies can help improve access to financial services for the poor and rural, it is important to ensure that they do not increase corruption. For example, usurious ‘payday’ lending exploits low-income households that do not have access to bank accounts. In some cases, such loans can be used to finance illicit activities, such as terrorism and drug trafficking.
