Crypto’s Payment Ecosystem Poised for Takeoff
The cryptocurrency ecosystem is undergoing profound changes. As more and more consumers, merchants and banks embrace the potential of cryptocurrencies for the payment of goods and services, crypto is poised for takeoff. Cross-border remittances, crypto cards, crypto lending, and loyalty programs offer huge opportunity for crypto. These were the top takeaways from last month’s Iupana webinar entitled Crypto: from Speculative Asset to Payment Tool (provided in Spanish with English subtitles), featuring Filomena Ruffa, General Manager for Latin America at Crypto.com, Arnoldo Reyes, Head of Fintech, Ventures and Business Development at Visa, and Kevin Fox, Head of Global Sales at i2c.
Panel members highlighted four promising use cases for crypto as a mode of payment.
Cross-border remittances, estimated at over a US $1 trillion annually, have an average transaction cost of 7%. Panel members agreed that using cryptocurrencies is cheaper, faster, more secure, and more efficient than using fiat currencies. Crypto also provides greater visibility. “Crypto is quickly turning into the leading international currency,” said Kevin Fox of i2c, noting that it is less complicated to exchange crypto for a local fiat currency than it is to exchange US dollars for Argentine pesos or other currencies.
Crypto assets are increasingly being viewed as liquid assets. As such, they provide an attractive alternative as collateral for loans. While price volatility of crypto assets is still an obstacle to widespread adoption, the panelists agreed that growth prospects for crypto lending are bright. As consumers and companies look for new, low-cost alternatives to finance their needs, expect plenty of innovation and new players in this space.
Crypto-backed credit and debit cards are another example of crypto’s evolution. Kevin Fox summarized key findings of i2c’s study of crypto card programs that was released a few weeks after the webinar was held. Sampling millions of crypto-backed cards across three continents, the i2c study revealed that crypto card programs are growing much faster than traditional cards, with significantly lower customer churn. The study also found that cross-border transactions account for a markedly higher percentage, both in number and total value, for crypto cards than for traditional cards. The report provides additional proof, said Fox, that we are entering a new phase in the evolution of crypto as a mode of payment. To access the full report entitled Crypto-backed Cards: Behind the Numbers, click here.
Loyalty programs, which have experienced little innovation since Discover card introduced its cashback program more than 30 years ago, are ripe for disruption. Visa’s Reyes predicted that crypto loyalty programs will explode in the next few years, as banks, stores, airlines, and restaurants look for new alternatives. By partnering with crypto platforms, noted Filomena Ruffa of Crypto.com, banks and other merchants will begin offering innovative new ways of redeeming loyalty points.
The evolution and expansion of crypto as a mode of payment will not be without its challenges. Panel members agreed there is a still a need to educate consumers, merchants, the financial industry, and government regulators about the benefits of crypto. Overcoming taxation and government regulation issues will be complicated. But panelists nonetheless expect to see a wave of innovation in the crypto ecosystem in the months ahead to help pave the way forward.
That innovation, they underscored, won‘t come from one player but rather through global alliances involving crypto platforms, payment processors and established financial players. They spotlighted the alliance formed by Crypto.com, Visa and i2c as a promising example of such global collaboration. “We are witnessing a big shift in the payments industry,” said Visa’s Arnoldo Reyes, “It used to be the new digital players versus the traditional financial institutions like the barbarians at the gate. That has all changed.”