How does blockchain drive change in e-commerce and payments? (Raymond Hsu)

According to the latest
survey conducted by PMNTS and BitPay, 85% of businesses are adopting crypto payments to find and gain new customers. As an alternative payment system built on the blockchain ledger, cryptocurrency is the digital alternative to traditional fiat currencies,
and the blockchain – the transparent, distributed ledger where all crypto transactions are recorded, offers e-commerce businesses many benefits including lower costs and risks, higher speed, greater data security, and the opportunity to open up new markets
and demographics.

Improved business processes

Using blockchain, businesses are redefining how online transactions are processed, through the use of tokens and smart contracts. It can automate tasks based on preset rules and logic, such as automatic payments or inventory management, enabling businesses
to authenticate transactions quickly and with greater accuracy and efficiency, resulting in a more cost-effective process.

Lower costs and risks

According to the same
report, the transaction fees associated with crypto payments are much lower – around 1%, compared with credit cards or payment apps that could charge anywhere from 3%-5%, and this is possible because the direct transaction eliminates the middlemen who add
to the costs.

Also, cryptocurrency payments are chargeback-proof, which will be helpful because chargebacks are painful. Once a crypto transaction happens and payment is made, it is recorded on an immutable ledger and is permanent. This also helps to prevent fraud in
the e-commerce system process, as all transactions are legitimate and accountable.

Faster transactions and payment processing

More businesses are starting to embrace stablecoins as an official mode of payment, due to the faster processing times and lower costs compared to traditional fiat settlement rails. This enables businesses to accept crypto and convert it to fiat currency
quickly. Instead of waiting days or even weeks for FX payments to settle, settlement takes place within hours. Though some may debate that scalability, accessibility, and ease of operation continue to pose challenges to wider-scale adoption and implementation
of crypto payments, it has inspired many legacy businesses to re-evaluate their technology platforms and processes to incorporate this.

Opens up new markets

Crypto payments help to address the challenges of cross-border payments, as digital currencies are independent of any state or third party, which makes it easy for anyone to hold crypto and transact. It is especially attractive for commerce in markets where
many consumers are “unbanked” and have less access to traditional bank methods, or where other popular payment methods are difficult to use. Accepting crypto payments will be beneficial in allowing these e-commerce companies to unlock revenue streams in new
markets.

Greater data security

Due to the immutable, transparent, and decentralized properties of blockchain, it is being used to enhance the interaction between technology and customer privacy, and to secure data sharing. Customers can be confident their data is safe and cannot be seen
by anyone without permission or credentials.

Other than crypto payments, blockchain is also changing how people
verify their identity, i.e. with decentralized identity or DID, potentially eliminating the use of passwords, which reduces the opportunity for hackers to intercept, hence providing more security for the user’s account on the e-commerce platform.

Crypto payments: What to watch out for?

Blockchain is a relatively new innovation, and with it comes the need to engage thoughtfully in the application of e-commerce and payments. 

Consumer trust. Crypto transactions have no protections or recourse, once the transaction is done, it’s done. Hence, customers may require more trust in the e-commerce brand before using cryptocurrency as a payment. However, we are seeing
an evolution in the regulatory environment with the introduction of new laws and regulations to protect customers, which should help lower the barrier to crypto payments. 

Consumer data. There are privacy questions and concerns raised among some consumers, who are concerned with what personal data is being collected and how it may be used. In an emerging space where many consumers are not knowledgeable about
the technology and how it works, it may be difficult to build consumer confidence in using crypto payments. To achieve mass adoption of crypto, there may be a need to find a middle ground where stablecoins are regulated to the point that they operate in a
legitimate manner. 

Volatility. Cryptocurrency is susceptible to increased volatility, which could pose a risk to e-commerce brands that need liquidity and cash flow for day-to-day operations. Hence, it is beneficial for companies to look for crypto payment
service providers that help remove volatility risk by providing settlement in local fiat currencies that allow one to “cash out” at any point to avoid market fluctuations in crypto valuation.

What kind of crypto tokens would be accepted as a means of exchange?

To address the issue of volatility, businesses could look to more stable cryptocurrencies as the de facto currency for crypto payments. Stablecoins are meant to address an effective means of exchange, providing the necessary transparency, liquidity and stability
for merchants who may choose either to settle directly in stablecoins, where they can lock the value against the US Dollar (USD), or to off-ramp into fiat.

Cryptocurrency and blockchain as the new frontier in e-commerce

Although using crypto for e-commerce purposes is increasingly prominent, it is still very far from achieving mass adoption. For merchants who wish to make use of the advantages and increase conversions by accepting crypto, they will need to be laser-focused
on choosing the right, compliant-centric global payments infrastructure that offers secure and fast alternative payments.

That said, as the nature of how money moves around the world is being transformed, we can’t wait to see how blockchain and crypto will evolve to drive change in the global financial system, and how businesses will adapt. For e-commerce companies looking
to take a forward-looking approach to payment options, there can be many benefits to implementing cryptocurrency. And we believe it’s only a matter of time before the demand for crypto and stablecoin-based payments reaches a tipping point.