#Payments15 Nov

Crypto at the Point of Sale: Will We Ever Pay with Crypto?

Alisa Tkach

Use digital money to pay for real things.

Use digital money to pay for real things.

In 2018, Starbucks announced its partnership with Bakkt, a digital asset exchange. Both companies had a noble intention of making Bitcoin mainstream. A few years later, the world’s most famous coffeehouse chain allowed its users to pay in its stores with crypto using the Bakkt wallet app. At the same time, a few other crypto companies quietly cooperated with Starbucks for the exact same reason: give their users an opportunity to pay for goods, coffee, in particular, using digital assets.

As groundbreaking as it is, the initiative didn’t magically change the current state of cryptocurrency affairs, and adoption failed to happen overnight. 

So what did go wrong? Is there a chance for crypto to become widespread and replace cash or, at least, take a large share of its transactions?

Issues of Offline Crypto Payments

Considering that only over 21.2 million adults own cryptocurrency in the US, it is only fair that they might be interested in using their digital money to pay for things. However, there are a few obstacles along the way. 

Lack of Motivation

To this day, an average cryptocurrency owner considers their coins an investment, an asset to hold on to for an extended period of time in hopes to collect hefty profits. Even if the coin price suddenly drops, people tend to ignore it or rush to panic sell it. Either way, the last thing that would be on the investor’s mind is to pay for their next cup of coffee with their trusted asset. 

Cryptocurrency is still relatively young and, thus, surrounded by myths and misconceptions. While most people do not quite understand what it is or how it works, crypto enthusiasts won’t part with their precious coins to buy their next meal or a phone – they’ve got fiat for these purposes. Chances that people immediately change their mindset, even if all the major stores would start accepting crypto, are slim. 

Confusing Tech

Coming back to the Starbucks case, it’s worth reviewing how the customers pay for their beverages. First, they need to download the specific app, be it Bakkt, Spedn, or another wallet supported by the chain, and transfer some of their digital assets over there. 

Then, the app would generate a one-time QR-code to be scanned by a store assistant and charge the customer’s account. Afterwards, the custodial – Bakkt, Spend, or else – settles the payment with the store according to their initial agreement. 

The problem with this payment model is that it’s nowhere near straightforward. Not only do you need to download a specific app, but you also switch your assets between various platforms, withdrawing money from trading accounts, non-custodial wallets, or others. 

Lack of Opportunities

Have you ever come across a store with a ‘Bitcoin accepted here’ sign? Unless you live in one of the few crypto hotspots, the possibility of walking into a random shop and paying with your coins is unrealistic. 

However, large crypto businesses, like Gemini and Flexa, are onboarding new high-scale partners to enable crypto payments. Barnes & Noble, Baskin Robbins, Bed Bath & Beyond, GameStop, Whole Foods Market, and many other chains have joined the movement exclusively through third-party technology. 

Although it is a huge step forward, the use of innovative payments is still uncommon. Even the fact it will relieve them from much-dreaded chargebacks and lower processing fees is not convincing enough yet. Besides, many jurisdictions do not allow accepting cryptocurrrency as a payment method nationwide. 

What’s Next?

On the positive side, there is an easy and legal way to pay in crypto anywhere in the world. Visa and MasterCard are running crypto card programmes allowing wallets and exchanges to issue their own branded cards linked to end-users’ digital wallets. In fact, Mercuryo is about to launch its own crypto card for European customers soon.

Crypto cards resemble regular debit cards with the exception that they are connected with one’s cryptocurrency wallet. However, every time you use the card to pay for goods or services, your coins are being automatically exchanged for fiat money by your wallet provider. The merchant will receive USD, EUR, or other local currency instead of dealing with crypto custody. 

It is possible that once a proper regulatory framework is developed, merchants and banks will be keener on partnering with cryptocurrency and fintech projects, allowing them to modify their outdated payment systems. The volatility concern can be eliminated using a solid stablecoin that will let neither merchants nor buyers lose money when paying with unpredictable assets. 

Numerous fintech and crypto projects worldwide are working on integrating cryptocurrency technology into our lives one way or another. For example, gig platforms can benefit from using digital currencies as a quicker and cheaper way to pay wages, which means that more people will own cryptocurrency. Of course, they could exchange it for fiat money, but that won’t be necessary if their favorite sales points accept crypto.

At the end of the day, if both merchants and end-users get a cheaper, easier, and legal way to do business, it’s only natural they give it a go.

The Bottom Line

Each year the cryptocurrency tech is getting more advanced. New institutional and retail investors are entering the market, and the fundamental misconception about digital assets are slowly fading away. Even today, paying with crypto is not impossible. 

The chances are that in the near future, once a proper regulatory model is introduced worldwide, we’ll be able to use digital currencies to pay for goods offline. Crypto payments might not replace cash or credit cards just yet, but they will become common. 

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