Blockchain is inspiring innovation and an evolution in business
The e-commerce industry is constantly evolving, with legacy business models needing to keep up with technological advancements or they are going to find it hard to succeed, especially in the long-term.
And blockchain is changing the face of business these days. With new blockchain solutions being developed to drive innovation and disrupt the traditional business models, there is potential for the technology to revolutionize the industry and help businesses flourish. Using blockchain, e-commerce stores can deliver a more secure and efficient way to conduct transactions, ultimately benefiting customers as well.
E-commerce and payments are evolving, with blockchain driving the change
Should businesses start looking into crypto payments?
What are the benefits brought by blockchain technology in this space?
Any risks that they should watch out for?
What type of crypto tokens should be the means of exchange?
Navigating the complexities of cryptocurrency and blockchain in e-commerce
Due to the current bear market, crypto continues to divide opinions. And there is reason to be skeptical, given the bad news and media surrounding cryptocurrencies these days. However, one thing is certain - whether it is just hype or not - brands, marketplaces, and payment service providers are increasingly accepting cryptocurrency as a form of payment. Understanding the implications of this technology can help e-commerce brands unlock valuable opportunities.
How does blockchain drive change in e-commerce & payments?
As an alternative payment system built on the blockchain ledger, cryptocurrency is the digital alternative to traditional fiat currencies (or cash as we know it), 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
The transaction fees associated with crypto payments are lower (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 (with decentralized identity - 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 on the application to 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 with 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 who need liquidity and the 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 offer 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.
At Cabital, we aim to build compliant payments infrastructure and solutions for businesses who want to convert fiat to crypto, or to accept crypto. By bridging the fiat and crypto worlds, we are working towards making crypto more accessible to everyone, while ensuring the user experience is simple, sensible and secure. For now, we have Cabital Connect, our fiat on-and-off ramp solution, and we’re working on new solutions even for other businesses who are looking to offer crypto as a form of payment, helping more merchants evolve to fit a constantly changing environment.
Reach out to us here to learn how Cabital can help your e-commerce business drive conversions while delivering an excellent customer experience.
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