Bridging fiat and crypto, payments and purchases

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Last week Binance announced that it acquired Swipe, a multi-currency digital wallet and Visa debit card platform. Swipe lets users pay for products using their cryptocurrency with online merchants and in stores around the world. Binance and Swipe plan to work together to “further mainstream adoption of cryptocurrencies by bridging the gap between fiat and digital assets, notably payments and purchases in cryptocurrency through traditional financial systems.” In 2020, the number of online buyers is expected to be 2.05 billion, 26.28% of the 7.8 billion people in the world. One out of every four people is an online shopper. People in the crypto market often speculate what it will take for crypto achieve mass adoption. Using crypto for payments is certainly at the top of the list. When you can pay for your vacation using crypto or split the bill at dinner? These conversations are usually lopsided focused on the benefit for consumers, but it takes two tango. We don’t just need to educate more consumers on the value of financial empowerment crypto can give them, but also merchants about the value of accepting cryptocurrency payments.

Ilias Louis Hatzis is the Founder and CEO at Mercato Blockchain AG.

Today, cryptocurrencies are mostly used for speculation. Most people will buy Bitcoin and hold it with the expectation that its value will go up. Crypto is still not really used as a true currency.

For cryptocurrency to make that next leap forward it needs to used as a true currency, for the purchase of goods and services.

In 2017 alone, e-commerce was responsible for around $2.3 trillion in sales. The market is expected to hit $4.9 trillion by 2021. That represents an expected growth of 175% over the next 3 years alone.

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In the post Covid-19 world, there has been an even larger shift from offline to online, and in the types of products consumers are buying. As quarantines were lifted around the world, many consumers are reluctant to return to the old shopping ways for fear of getting sick.

In a Bloomberg article, commerce fueled by cryptocurrencies grew in 2019.  The average amount of crypto used in commerce each day rose from $3 million in January to $5.5 million in July 2019. That’s a huge boost. Chainalysis collected data that showed a 65% increase in volume between January and July 2019.

While the digital marketplace is growing, even further growth calls for different payment methods. Cryptocurrency can be leveraged to make online payments more secure. Cryptocurrency provides anonymity and relies on no intermediary. The transaction is done directly between the customer and the merchant.

This is where cryptocurrency is different from digital currency. When you make an online payment using Paypal, you need to have a bank account that’s connected to the Paypal account. This means that you would still need the bank’s approval to make online transactions. Cryptocurrencies do not require the authorization of any bank institution.

Some have been tackling the problem with payment rails like Visa and Mastercard, that enable the use of cryptocurrency for everyday payments. Cryptocurrency debit cards are convenient and greatly expand consumers’ spending radius.

Currently, they offer most viable way to use a crypto in the real world, without the need for merchants to change a thing. When a user wants to make a purchase using their debit card, their crypto debit card provider exchanges the corresponding crypto amount into fiat, to pay the merchant. This lets users to efficiently make purchases with their crypto and frees the merchant from the burden of having to find an off-ramp.

But being depended on third parties like Visa and Mastercard can pose risks. The down side is that they are ultimately subject to regulations that can interfere with the card’s operation. This has been the case with the several cryptocurrency debit card companies that have opened and closed throughout the years. Cards like Swipe or Binance’s planed debit card can temporarily help bridge the adoption gap, but ultimately keep the user in a constant state of uncertainty, when the card may stop working and they cannot spend their money. While some of these card services only shut down temporarily, this is a major roadblock for mass adoption.

Stablecoins are the next big thing that could propel crypto in the commerce realm. They are certainly better than a crypto debit card. They allow payments to occur directly between buyers and sellers, circumventing the existing system, reducing costs for both merchants and consumers. They offer merchants something a lot easier to understand and certainly less volatile. When you look at Square’s staggering success in attracting small businesses with lower fees, you can expect stablecoins to be widely adopted for commerce and attain an even wider reach.

There are still major barriers that cryptocurrencies must overcome, no matter which way you look at it. The use of cryptocurrency to pay for goods and services is limited to certain niches. There are some major retailers like Starbucks and that accept crypto, but they’re outliers.

For now, the vast majority of merchants is skeptical. Crypto is is still something unknown, something they still haven’t learn to trust yet. When you only have 50 million people in crypto globally, merchants have very little incentive to deploy crypto payments, unless they are in a business that is covering a similar demographic as crypto.

I don’t know how many businesses will accept crypto payments, but crypto will ultimately become the backbone of e-commerce, just like TCP/IP became the backbone of the Internet. Low transaction fees and almost instant payments, make buying online easier and guarantee its eventual adoption.

The future of cryptocurrency lies in online platforms designed to make trade easier for both buyers and sellers. The future belongs to the businesses that can stay ahead of the curve.

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