By Nicolas Beique
Bitcoin and cryptocurrencies have been a hot topic lately. Often heralded as being the currency of the future, everyone from digital enthusiasts to casual investors describe cryptocurrencies as disrupters to the traditional banking system and that they will provide consumers with a radically new marketplace for transactions.
But this hype has not translated to a significant shift in how consumers want to pay for goods and services. Nor has it resulted in an increase in merchants, whether e-commerce and/or bricks-and-mortar, who are concerned about their ability to accept cryptocurrencies to keep customers happy.
Consumers and merchants not convinced
As a payment provider that works with and responds to the market needs of thousands of merchants across North America, this indicates two things to us. First, that merchants are not yet convinced that cryptocurrencies have been adopted on a wide enough scale to warrant the investment in being able to accept them. Second, that consumers do not yet have an expectation that they should be able to complete everyday transactions using cryptocurrencies.
Cryptocurrencies will probably have an impact on payment processing at some point in the future, but right now we can confidently say there is not enough demand to warrant taking on the added complexity and risk of accepting them. At this time, the inquiries we do receive regarding cryptocurrencies are Bitcoin exchanges that are looking for traditional payment processing for credit cards, so their customers can purchase cryptocurrency using Visa or MasterCard.
The adoption of cryptocurrencies will also be stalled until the federal government develops guidance regulations for digital currencies. Currently Canada does not recognize cryptocurrencies as legal tender and it does not expect to have regulations in place until after the next federal election.
Why not crypto?
So why aren’t merchants asking for the ability to accept cryptocurrencies? Crypto seems to have a lot going for it: it’s a trendy currency, people are investing in it and professionals in the payment industry agree that crypto will disrupt the payment industry eventually.
Ultimately, aside from the lack of market demand which we’ve already discussed, there are just too many unknown variables related to accepting crypto that merchants currently do not feel comfortable taking on the risks associated with them.
Volatility. Currently, the crypto marketplace is quite volatile, which makes it difficult to establish a proper valuation for the currency in exchange for the goods that customers may want to purchase. The market also has the tendency to fluctuate between exaggerated highs and lows, sometimes within the same day. This becomes problematic for a merchant because if they were to accept one price in the morning using, say, Bitcoin, and the currency were to drop in value dramatically before the end of the day, the merchant may not feel that they received a fair price for the goods that they sold.
Long processing times. Unlike credit card transactions, which are confirmed almost instantly, processing transactions using cryptocurrencies takes time. Transaction times will vary depending on the currency used and the network that it is being processed on. Currently, settlement times take at a minimum several minutes, and in some cases up to 30 minutes or more if there is a high volume of Bitcoin transactions on the network.
It will take time for cryptocurrencies to improve their efficiency in this area to the point where they are comparable with Visa and MasterCard. Once you comprehend waiting 10 minutes for a simple transaction to process at a drive-thru, the problems become evident.
Security. Each payment type has different risks that merchants need to be aware of, which also applies to cryptocurrencies. There have been multiple news stories of cryptocurrencies being hacked because they are traded on an unregulated marketplace with few options for recourse. Those who are familiar with the cryptocurrency space may accept these risks and are more likely to know which steps to take to help protect themselves. However, merchants who are less familiar, or who haven’t dealt with cryptocurrencies before, may be less comfortable with taking on those risks.
Instability. Because cryptocurrencies are so new, the market has yet to establish which one will ultimately win over the marketplace. The changing popularity of the different coins, and the potential addition of new ones, add to the market fluctuations and volatility. Consumers and merchants alike also have little recourse if they encounter issues with their transactions. Cryptocurrencies will still need some time to become more mature, and as a result, more stable before they become mainstream.
For now, the traditional payment methods of credit cards, debit cards and even mobile wallets remain the primary ways consumers purchase goods and services from merchants. If and when the market begins to demand the acceptance of cryptocurrencies on a widespread scale, then merchants and their payment processors will respond accordingly. Until then, keep an eye on the market to see where it might be headed, but rest assured that despite all the hype, you’re not missing out on sales because you don’t currently accept cryptocurrencies.
Nicolas Beique is founder and CEO, Helcim (www.helcim.com). He is leading his team to deliver the next evolution of what merchants should expect from their payment processor. Helcim is a payment processing company that lets businesses accept credit cards and run their entire merchant operations from a cloud-based, all-in-one merchant platform.