Global ecommerce sales are expected to reach $4.2 trillion in 2021, as post-pandemic buying trends continue to strengthen the industry. Based on this eye-watering forecast, the value of ecommerce sales will actually surpass the Gross Domestic Product (GDP) of all but three countries this year — namely the United States, China and Japan.
In summary, international ecommerce is motoring. But that doesn’t mean the industry is capitalizing on every opportunity. Which brings us nicely onto the topic of cryptocurrency, another industry that has surged past the trillion mark in recent months. In fact, the global digital asset market hit an all-time peak of $2 trillion in April thanks to growing demand from institutional and retail investors.
So, how might these two sectors come together for mutual benefit? The answer is rather obvious. With more people than ever buying, selling and saving cryptocurrency, and record rates of online spending, it’s clear that allowing the use of digital assets in ecommerce could be a major boon for both industries.
This year, around 2.14 billion people will buy goods and services online, up from 1.66 billion in 2016. When considered against that figure, the number of digital wallet users — thought to be anywhere between 70 and 100 million — seems rather trifling. But there’s a good reason why companies like PayPal are rolling out support for assets such as bitcoin (BTC) and ether (ETH), and enabling them to be used as a funding source at 26 million merchants.
The Benefits of Accepting Crypto as Payment
Aside from potentially opening up their business to tens of millions of crypto users, what advantages do ecommerce companies gain from accepting payment in digital rather than fiat currency?
Well, for starters, international ecommerce giants can suddenly tap into a single unit of payment — a borderless asset that requires no forex conversions and allows parties to transact directly and trustlessly with one another.
The vendor can of course elect to accept the cryptocurrency and hold it as a store of value, a tactic favored by electric car-maker Tesla. Alternatively, they might utilize the services of a third-party payment processor who handles the conversion of crypto into a fiat. Another option would be to accept payment in a fiat-pegged stablecoin, a crypto-asset that is naturally immune to volatility.
Either way, the customer gets to settle up in cryptocurrency and the merchant receives payment in full.
Another obvious benefit for international ecommerce businesses is that they would not have to wait so long for payments to clear. While crypto confirmation times are often exaggerated, the truth is that funds invariably appear in one’s account within minutes rather than days.
The Drawbacks of Fiat Processing Systems
Fiat payments, on the other hand, rely on a convoluted processing system entailing intermediary transaction fees, authorization requests and exchange-rate charges. Typically, a payment made to an ecommerce store can take anywhere from 24 hours up to five business days to clear. While some bigger merchants can accept such a wait, smaller vendors may like the piece of mind of receiving payment on the same day.
There is also the small matter of involuntary churn, wherein customers attempt to pay for a product — but fail due to expired cards, insufficient funds, or outdated details. Blockchain wallets, on the other hand, do not expire — and the details remain constant. Providing there are funds in the wallet, payments will go through.
As well as eliminating the risk of involuntary churn, crypto payments are chargeback-proof. Chargebacks, wherein customers file complaints with their card-issuing bank regarding a suspicious charge on their statement, are a major problem for global vendors. In fact, this year alone cardholders will request an incredible 615 million chargebacks, a new all-time record.
Chargebacks can be a result of fraudulent activity (e.g. a fraudster using a stolen card to order goods), delivery problems, buyer’s remorse or credit card issues, such as a customer being double-charged by accident. Whatever the reason, chargebacks often take months to resolve and are a major nuisance for businesses.
Crypto Cuts the Red Tape
Regulations are part and parcel of doing business internationally, but red tape also affects merchants’ bottom line. By accepting crypto payments, ecommerce companies can effortlessly bypass regulatory restrictions that prevent them from selling to customers from certain countries.
Of course, many of the benefits cited above flow in the other direction too, with customers able to avoid exchange-rate fees and geo-restrictions and, potentially, receive their goods sooner.
Vendors may be happy to accept individual payments in crypto, but what about subscriptions? Cryptocurrency being a push technology, it generally requires users to manually transfer funds — something that disrupts the automated subscription model. Thankfully, a platform for single, recurring and on-demand payments exists in the form of 8Pay. With the 8Pay mobile app, customers can manage their coins and payment settings on the go. The platform can also be integrated into ecommerce platforms, connecting via API or 8Pay’s own JavaScript library.
Microsoft, Tesla, Twitch, Macy’s and Walmart are just some household names that have started to accept payment in bitcoin and other select cryptocurrencies. Undoubtedly, they have responded to growing demand from customers while taking account of the aforementioned benefits. Ecommerce businesses that continue to ignore crypto’s potential are increasingly risking obsolescence.
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