Why traditional payment companies and e-commerce platforms are integrating crypto

Currently, traditional methods, such as cash, bank transfers and payment cards, dominate the payment landscape; however, crypto payments are gaining significant traction.

Why payment companies are integrating crypto

According to Visa, Cryptocurrency transactions worth $2.5 billon went through the Visa network in Q1 2022, up from $1 billion in Q1 2021.

Cryptocurrency allows faster borderless payments by eliminating intermediaries, such as correspondent banks and clearing houses, and the complexities of traditional payments – according to a report by Blockdata.

Traditional payment companies have been reluctant to adopt. However, recent developments and increased demand from consumers and businesses have encouraged major payment and e-commerce companies, including Mastercard, Visa and Shopify, to adopt it.

Predominantly, its high volatility is why businesses have been reluctant to adopt it; however, with service providers offering instant settlements into fiat currency and the emergence of stablecoins, interest in offering crypto payment options has been increasing.

Globally, more than 15,000 businesses in industries such as gambling, tourism, food, and retail are accepting cryptocurrency.

According to research by Deloitte from December 2021, nearly 75% of retailers intend to accept crypto payments by the end of 2023.

To cater to the varying needs of enthusiasts, traditional payment and e-commerce companies offer several crypto-based products, mainly in collaboration with crypto-native service providers such as brokerage firms, custodians, and payment providers. Some of these products are:

Trading and fund transfer services: With growing consumer interest in digital assets, traditional payment companies such as PayPal and Revolut offer cryptocurrency trading services and allow peer-to-peer transfers through their platforms.

PayPal has partnered with blockchain infrastructure provider Paxos and Revolut with Apex Crypto. Similarly, US-based financial services and payments company Block (previously known as Square) also offers a Bitcoin trading service via its Cash App platform.

Payment cards: Visa and Mastercard both offer crypto-linked cards provided by partner exchanges and wallet providers that holders can use to convert to fiat and make payments.

Cryptocurrency platforms that offer crypto-linked Visa cards include Coinbase, Bitpanda, and Wirex, while BitPay and Nexo offers Mastercard. Some cards allow cardholders to earn crypto rewards.

Merchant payment services: Traditional payment companies are enabling their merchants to receive payments in cryptocurrencies.

For instance, PayPal offers a service to checkout with crypto, allowing its users to make purchases at partner online merchant stores using their crypto balance.

The cryptocurrencies it supports include Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. On a similar note, payment services provider Worldline offers the WL Crypto Payments solution in collaboration withBitcoin Suisse, a Swiss crypto financial services provider.

It enables its offline and online merchants to accept payments in Bitcoin, Bitcoin Lightning, and Ethereum.

E-commerce service providers such as Shopify, WooCommerce, and BigCommerce are collaborating with service providers to enable merchants to accept payments in crypto.

Shopify, through its partnerships with Crypto.com, Coinbase Commerce, BitPay, DePay, OpenNode, and Strike, allows its merchants to accept payments in cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, Bitcoin Lightning, Polygon, and Binance Smart Chain.

Payment companies also offer settlements in stablecoins to avoid the complexities of converting digital assets to fiat.

Both Visa and payment services provider Worldpay from FIS (the latter in partnership with Circle) have enabled businesses to receive settlements in USD Coin (stablecoin).

The benefits

Traditional payment and e-commerce companies have an advantage over crypto-native providers, as they have a large user base, robust systems, and are regulated, making them a safer option for customers.

According to Paying With Cryptocurrency, in June 2022, just 23% of businesses reported accepting crypto payments via crypto-native wallets, with most transactions via wallets from traditional payment companies. Offering crypto payment services could give traditional payment companies a competitive edge.

With rising interest in digital assets and both merchants and consumers seeing crypto as a viable, more efficient payment option, it is unsurprising to see traditional payment and e-commerce platforms adopting crypto payments.

Cryptocurrency could create an advanced global payments ecosystem, and Cryptocurrency payments present significant business opportunities for traditional payment and e-commerce service providers.

The future evolution of stablecoins will further increase the speed of payments and lower transaction costs, which is crucial for continued Cryptocurrency adoption.

Cryptocurrency payments will open up new ways for businesses to serve customers.

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