Visa Cryptocurrency Partners

Crypto creeps into the checkout line

Crypto creeps into the checkout line
Written by publishing team

With major banks and card companies starting to offer a range of cryptocurrency products and services, the question remains whether consumers will adopt cryptocurrency as a means of payment.

Companies are making it easier than ever to pay consumers with cryptocurrency at points of sale. Until recently, paying with cryptocurrency was a complex endeavor that involved permanent delays waiting for transactions to be cleared on the blockchain, if retailers were willing to accept them. The volatility of digital assets has been difficult to manage for retailers and consumers alike.

But over the past year, an increasing number of major payment providers and card networks have made it easier for retailers to accept cryptocurrency. As a result, companies are increasingly adding cryptocurrencies as payment options and are betting on the growth of consumer uptake. The ever-rising value of cryptocurrency—more than $2 trillion worldwide, or roughly the value of green coins in circulation—makes it worth their while to encourage consumers to spend from their ever-rising digital wallets.

Two main factors are underpinning companies’ bets on cryptocurrency payments: a growing number of consumers who hold cryptocurrency – unlike five years ago – and technology that has made it easier than ever to transact with cryptocurrency. The companies said that with more and more customers owning crypto assets, easy crypto payments is the natural next step.

“There was a kind of mismatch between the real-time world of cryptocurrency, and the traditional kind of bank transfer world,” said Randy Kern, chief technology officer at card issuer and processor Marqeta. “[Now] We are able to provide a smoother experience. “

growing acceptance

In recent months, major payments companies have expanded the ability of merchants to accept cryptocurrency.

Purchasing, New York-based MasterCard has launched a partnership with digital asset exchange Bakkt to allow partner merchants, banks and fintech companies to accept payments in crypto. The link also allows the delivery of crypto rewards to consumers. Mastercard’s partnership with Bakkt allows merchants and other partners to accept crypto while Bakkt performs custodial services. Additionally, this month, Mastercard hired other partners to create crypto-linked credit, debit and prepaid cards in the Asia Pacific region that can be used to convert crypto into fiat currency for spending.

Also in October, payments software company ACI Worldwide announced a partnership with RocketFuel Blockchain to allow the acceptance of more than 50 cryptocurrencies with a single click at customer e-commerce checkout, with no fees.

Marqeta last month launched Visa crypto debit cards from Bakkt, Coinbase and Fold. Marqeta technology allows crypto transactions to be performed at speeds similar to those of cash transactions.

Visa, which said it partners with 50 crypto platforms on card software, announced in July that more than $1 billion was spent on crypto-related Visa cards in the first half of 2021.

Coy Sheffield, Head of Cryptography at Visa, said that “Visa credentials – whether physical or virtual” – have become the mechanism of choice for the growing number of consumers with crypto when they really want to access this value in spending.

Payments companies and merchants who spoke with Payments Dive said that adding cryptocurrency as a payments tool is a response to consumer demand, and an opportunity to increase basket sizes. Crypto payments software from third-party companies allows for the rapid conversion of crypto payments into fiat currency, allowing merchants to make or receive payments without holding digital assets.

The availability of crypto transactions increases average order value and can help merchants take advantage of new customer bases, said Merrick Theobald, vice president of marketing for crypto payment processor BitPay. BitPay charges a flat fee of 1% of transactions for back-end paper transfers and completes cryptocurrency payment transactions.

“Sometimes the concern about Bitcoin is volatility, but that is also why the merchant would want to partner with BitPay, because we manage volatility – they have nothing to do with volatility – if they charge $100, they get $100 minus our 1 percent fee. %”.

For Atlanta-based BitPay, which said it supports dozens of cryptocurrencies globally, its 1% fee is lower than those charged by major card networks, which can charge more than 2% per transaction. Additionally, Theobald said that adding crypto payments is a way merchants can attract buyers who usually make larger purchases.

According to a study commissioned by Forrester Research last year by BitPay, the average order value for crypto users is $450, compared to $200 for non-crypto users. In addition, 40% of customers who paid with BitPay were new customers, which indicates a significant opportunity to expand customer reach, Forrester reported.

Besides the growing acceptance of crypto transactions at checkout, payments companies say the technology allows transactions to be settled faster, in a timeframe similar to regular card transactions. Compared to settlement times for cryptocurrency payments processed on the blockchain without an intermediary, working through Marqeta cuts processing time from days to minutes.

Instead of a multi-day process, now from your wallet and the linked card issued by Marqeta, you can – in real time – break down this three-day multi-step process and turn it into something that gets done entirely behind the scenes. With your cards, you can make a purchase in the real world. Which, from the dealer’s perspective, looks like a traditional fiat purchase.”

Visa, the largest card company, and the No. 2 Mastercard is promoting crypto payments that offer no more friction than a traditional card transaction.

“There are very few merchants that have been enabled to accept Bitcoin directly via the Bitcoin blockchain because it is difficult for them to do so – it requires new infrastructure, and they have to upgrade their POS terminals,” Sheffield said. “It can take up to 10 minutes to confirm a transaction, and then there are the volatility that traders have to figure out.”

By contrast, Visa allows cryptocurrency to be accepted at 70 million merchants, whereby the crypto balance is automatically converted to fiat on the back end, Sheffield said.

Will consumers participate?

Despite the growing number of options for consumers to pay with crypto, it’s too early to assess the level of crypto use at checkout, although practitioners agree that adoption isn’t huge at this point.

Sheffield acknowledged that Visa’s $1 billion payment volume from crypto-linked cards represents a small percentage of Visa’s trillions of dollars in payment volume. (Last year, Visa payments and cash volume totaled $11.3 trillion.)

Online retailer Overstock had a huge hit in 2014, when it became one of the first major retailers to accept Bitcoin. However, CEO Jonathan Johnson told Payments Dive that bitcoin sales amount to less than a quarter of 1% of sales.

Analysts say that just operating crypto payments is not likely to convince large segments of consumers to use it as a default payment method.

About the author

publishing team