The inevitably increasing use of cryptocurrency, even if not to supplant fiat currency, can help hurdle old e-commerce obstacles. Payment transactions in traditional forms, like credit, debit, or other payment platforms that use fiat currency require intermediary companies to transfer payment between two parties.
Payments are taken from the purchaser’s account and processed through the intermediary system, a process that requires merchants to pay a small percentage of the purchase for processing the transaction. Moreover, local regulations might create hurdles for e-commerce businesses to overcome in receiving and processing payments, especially when dealing with exchange currencies.
Blockchain’s cross-border power, however, cuts out the intermediary and solves the problem of rendering the traditional processing system redundant, and processes the payment on a chain with no middleman intervention. Not only do the intermediary transactional fees dissipate with crypto payments on blockchain, but so do any exchange-rate-fee charges, too, for purchases made across borders, reducing issues related to local regulations for international consumer payments.
Hurdling potential obstacles for international e-commerce payment processing through the utilization of cryptocurrency payments opens the door for even more growth than we’ve witnessed thus far. Many companies in the blockchain space have already produced effective and secure blockchain technologies for transferring money across borders in a way that’s compliant with KYC and AML regulations, like Everest. These kinds of tech developments will supply the underlying system on which an international cryptocurrency payments system would run.
E-commerce may be successful with the current fiat-based payments system in place, but virtual currencies can add a new dynamic to the fold. With increased convenience for consumers, an increase in cryptocurrency ownership, perpetually improving blockchain technology, and the reduced cost of circumventing intermediaries, virtual currencies can open a new door for e-commerce to extend its growth to its fullest potential.
A greater number of merchants are moving to the e-commerce sector as consumers demand more convenience.
The COVID-19 pandemic has expedited e-commerce growth, according to an IBM U.S. Retail Index report released in late August, indicating that expansion couldl be accelerated by nearly five years.
During 2020 alone, the report suggests department stores will decline by 60% －in line with the anticipated consumer direction. Global retail e-commerce growth soared 160% from 2014 to 2019, according to Statista data. The same data showed that by 2023, the total global retail e-commerce sales will be valued at $6.5 trillion, if not more.
As these trends continue, so does another development take hold: Shopping on our smartphones. A 2019 PayPal survey found that 80% of consumers around the world have shopped on their smartphone, while Statista data predicts 72% of e-commerce sales will take place on a mobile device by 2021. With the smartphone trend and accelerated e-commerce growth, payment options become diversified out of necessity, both in cost for transaction and payment security.
Shoppers are typically using credit cards and apps like PayPal to pay for the items they buy, which typically demand higher exchange rates than the actual going rate. They sometimes may also charge a transaction fee for purchasing an item “internationally,” which typically amounts to about 2%.
When shoppers make these purchases, they also want to have a guarantee of transaction security, especially in the smartphone shopping era. The PayPal survey found 51% of respondents didn’t feel safe making payments on their phones to buy items.
Allthough e-commerce retailers may find payment solutions that restore consumer confidence, existing financial instruments or currencies may be viable alternatives for ecommerce retailers, like cryptocurrencies.
Cryptocurrencies provide greater security to users because of their near immutable nature and a lower cost to the consumer and merchant. Other benefits include full transaction traceability, full ownership of assets without intermediary institutions, privacy, and integrity of payments. Consumers around the world are picking up on these benefits and gradually more are joining the fray.
Blockchain wallet ownership, according to Statista, rose more than 425% between Q3 2016 and Q1 2020, and an E.U. report from 2018 claimed 50 million virtual currencies users were spending €3.4 trillion in the market. Other reports indicate that virtual currency will only increase. Foresight Business predicts the North American virtual currency market alone will reach $1.8 billion by 2027 from $250 million in 2019.
Other regions will follow suit like South America, the Middle East, and elsewhere as local currencies and financial crises drive users to seek other financial assets. Credit card companies have picked up on this trend, with Mastercard’s July announcement that it’s inviting development of crypto card payment options as part of its “Accelerate” fintech program.