Cryptocurrency as a Payment Option: How Marketplaces Benefit from Enabling Cryptocurrencies with Sanja Kon of Utrust
The reports are in: the coronavirus represents the biggest disruption to consumer retail spending patterns in recent history — and has rapidly accelerated channel-shift. According to an updated 2020 forecast report from eMarketer: e-commerce retail spending in the U.S. will increase by 18.0% while brick-and-mortar retail spending is expected to decrease by 14.0%.
More and more retailers are doubling-down on their e-commerce propositions and our team at Storesome are helping brands to build their own online marketplaces.
However, a boom in transactions taking place digitally will create ample opportunity for fraud, and merchants will start to feel some of the operational inefficiencies that traditional payment systems represent. On the buyer side, with the closure of retail stores and the acceleration towards a cashless society, the offline-to-online shift will leave vulnerable over 1.3m adults in the U.K. and over 14.1m adults in the U.S. who do not have access to a basic bank account.
But there is a solution that could help merchants to alleviate operational inefficiencies and charges from traditional payment systems, overcome fraud and tap into a market of buyers locked out of the traditional banking system: by accepting crypto currencies.
A platform in that space, Utrust, has turned that concept into a credible solution over the past few years. Utrust is the leading cryptocurrency payment solution, designed to modernise the finance and payments industry and solve the problems of traditional payment methods, by offering instant transactions and immediate crypto-to-cash settlements for the merchant.
In February this year, at Retail Without Borders (Europe’s largest online marketplace event by the Pentagon group) I had a chance to lead a panel with Sanja Kon, Utrust’s CEO.
Prior to Utrust, Sanja headed multiple international roles at PayPal and eBay, including Head of Marketplaces for PayPal UK and Head of Partnership for eBay Europe. Sanja has a wealth of knowledge within the fintech industry and we had a great discussion around the benefits of cryptocurrencies in marketplaces. It feels like a great time to share those benefits.
1. Improve operational efficiency by drastically reducing the costs associated with payment processing fees.
Merchants face two main challenges when using traditional payment systems. Firstly, merchants are charged both a gateway fee (to cover the costs of receiving and processing the transaction) and a transaction fee (a contribution for the convenience of accepting credit card payments). “An e-commerce merchant will end up paying between 3-6% or more in payment fees, especially in the case of cross-border trade transactions,” Sanja explains. “Merchants are being underserved and overcharged on every single transaction.”
In a market where customers demand the lowest price possible and e-commerce businesses have to compete on such, single-digit cost savings can make up a large part of the bigger picture and strengthen a business’ position (and their bottom line) in what is a competitive landscape.
“In addition, chargebacks represent a $40 billion USD loss for merchants annually, with fraudulent chargebacks growing 30% year on year,” Sanja reflects on one of the industry’s growing problems, chargebacks (when cardholders dispute a transaction with the bank instead of contacting the merchant for a refund, often illegitimately).
For merchant customers, Utrust provides significantly lower fees versus traditional payment options, no chargebacks, direct bank settlements and multi-currency support. Merchants can drastically reduce their payment processing fees by accepting cryptocurrency as a payment (Utrust fees are as little as 1%), as well as eliminating the risk of chargebacks.
2. Enable a new segment of customers and access a new revenue stream.
For many of us, having a bank account is a basic fact of life. However, as I briefly pointed out earlier, over 1.3m adults in the U.K. and over 14.1m adults in the U.S. do not have access to a basic bank account. Traditional banks can reject customers applying for accounts if they do not have enough forms of ID. Even more alarming: over 1.7 billion people globally are essentially “locked out” of the banking system in this way.
By enabling cryptocurrency as a payment method on your marketplace, you also enable the millions of consumers locked out of the banking system to shop with you. As physical stores close and shoppers are forced to adapt to the online environment, the millions who do not have access to a bank account or debit card will almost exclusively look for marketplaces and retailers that can offer alternative methods.
Sanja also reflected on the incumbencies of cross-border transactions, which can pose as an obstacle to marketplaces in making international sales. “People are required to convert their native currency to make an international payment and they have to depend on third parties such as banks or a payment platform. There are several obstacles in cross-border transfers and customers will end up paying high costs in payment fees.”
By enabling cryptocurrencies on your marketplace, not only could you activate the local market of those in your region who cannot pay with traditional payment methods, but make strides toward the much larger proposition: the global marketplace.
3. Position your brand as a leader in the adoption of disruptive technologies.
A ripple effect of accepting cryptocurrencies to solve operational problems and enable a new segment of the market is the boost it offers to how consumers view your brand.
Take Newegg, the computer hardware and consumer electronics marketplace. Five years ago, they were one of the first major online shopping destinations to accept Bitcoin, and their early-adopter customers were quick to embrace this new payment option. As a result, they received a frenzy of free media from tech reporters adulation of the tech community.
Newegg has since rolled out its initiative to 73 countries. “Broadening the ability to pay with Bitcoin to the majority of our global network underscores our commitment to bring innovation to the online shopping experience, and answers customers’ growing preference for our Bitcoin payment option,” said Anthony Chow, Newegg President Global Sales.
I asked Sanja for her take. “Right now, this is a blue ocean where any new player won’t face a fearless competition – and that’s a benefit for consumers and sellers. Today, accepting cryptocurrencies on your online store or marketplace not only puts your brand perception as an innovator and disruptor, but also allows you to have a great awareness among these buyers that don’t have a lot of options.”
“In the next five years, with the institutional adoption of digital currencies from central banks (such as e-Euro, Digital Yuan, and Digital Dollar) as well as industry players like Facebook, money will become a digital commodity and we will witness mass adoption of this payment system. Those that join on the first wave of adoption will have a first-mover advantage over everyone else and be able to develop a loyal customer base earlier than the competition.”
Sanja’s Advice to Marketplaces Considering Accepting Cryptocurrency
“Don’t wait any longer. Without any investment, you can open your marketplace to a new audience and a new generation of consumers, with a borderless payment option and a truly global market with lower fees, fewer intermediaries and a blue ocean of opportunities.”
I hope you enjoyed this piece and many thanks to Sanja for contributing her insight.
If you’d like to learn more about Utrust, you can get in touch with Sanja at firstname.lastname@example.org.
If you’d like to learn more about the future of retail marketplaces and trends within the industry, we’d be glad to help you. Get in touch today and book your free 90-minute discovery session.