Should You Be Accepting Cryptocurrency?

Though perhaps not an immediate roadmap item for many merchant payment teams, cryptocurrency has continued to generate significant buzz as a payments disruptor to watch. While pundits gab about Bitcoin fluctuations, crypto ATMs, or the latest whims of crypto posterchild Elon Musk, it can be difficult to parse through the noise to determine which currencies are most mature and why, or which platforms carry practical applicability to those retailers working in physical goods.

As new currencies continue to emerge in the market, the questions that must always steer consumer engagement and technology roadmaps are: what is the impact on consumers who wish to transact for physical goods? What segment of the population are you missing if you don’t move to implement? And does this segment impact bottom line?

In this article, the CAPRAplus team will examine several cases of practical crypto applications in the marketplace, along with lessons learned to carry forward.

Real-world Implementations of Crypto

Though some of the most well-known crypto implementations may have acted under threat of obsolescence (see Radioshack, AMC), perhaps the most well-known implementation hails from long-time e-Commerce leader Overstock. As a major investor in blockchain technology, and as the current majority owner of trading platform tZero, Overstock was one of the first major retailers to accept a variety of cryptocurrencies, including Bitcoin, Dash, Ethereum, Litecoin, and more.

Though less zealous than Overstock about cryptocurrency’s theoretical applications, Sheetz announced that it would accept Bitcoin as a move to empower its consumers with expanded payment options. Through its relationship with the Flexa payments network, Sheetz has enabled its consumers to fuel their cars or make c-store purchases via a variety of digital currencies.

While big-name retailers such as Starbucks, Whole Foods, and Home Depot have all made moves into Bitcoin acceptance, the variety of responses to digital currency hype, along with the questions that this hype has raised, has led the industry to realize several beneficial learnings regarding the practical application of crypto.

Applying Lessons Learned

Despite evolutions in the digital currency space, even those retailers who have adopted Bitcoin acceptance continue to buy and settle in the currency that they want to use (i.e., US dollars). This positioning of cryptocurrency inherently highlights the distinction between currencies and assets. Jim DuBoyce, Managing Director of W. Capra’s Payments Practice, chimes in: “While some may view cryptocurrency as an asset, the leveraging of crypto as a transactional currency doesn’t guarantee the merchant any funds. Following this logic, digital currency has effectively introduced a new age of dynamic currency conversion to early adopters in retail. In essence, crypto has a long way to go until it is truly transactional.”

For merchants considering implementing crypto acceptance, the above considerations should help to contextualize the challenges of implementation. “To successfully implement digital currency acceptance goes beyond considerations of how a merchant pilots, tests, or operationalizes a new payment method,” offers Clint Cady, partner at W. Capra. “When considering how to enable acceptance, merchants must factor virtual vs. face-to-face implementations, consumer experience expectations regarding processing time and communication of pricing, and how to account for the new overhead introduced.”

When a merchant successfully implements a means to process via blockchain, they unlock acceptance for numerous digital currencies. However, this acceptance poses a net-new consideration set to the consumer, as the average buyer likely isn’t close enough to the market value of a given currency to make real-time purchasing decisions in a retail environment. Mike Streams, another partner at W. Capra, elaborates: “For convenience and energy retailers, there’s an added layer of complexity to turn crypto on at the pump. As fuel prices fluctuate against the US dollar market value, it will become increasingly complicated for retailers to effectively keep pricing in place against the greater volatility of Bitcoin.”

While there are services available that can manage the risks and challenges of implementing cryptocurrency on a merchant’s behalf, the first step toward any implementation decisions will be to ensure that crypto acceptance will unlock incremental revenue. For further discussion on how to model the value of payment acceptance, or how to build an effective payment acceptance and implementation strategy, contact [email protected].

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