The payment industry is making great strides in driving digitalization and innovation in the last few years. The payment methods evolution is going on the accelerated rates, drastically bringing to the forefront the technologies that have been in their steady development for years.
One of these technologies to disrupt the financial sector is cryptocurrency. Cryptocurrency resulted into an exceptional rise, being one of the most widely embraced cutting-edge technologies in COVID-19 and post pandemic reality.
Cryptocurrency is seen as a vast undeveloped field that keeps in itself a big potential for enormous financial opportunities.
Due to digitalization and emerging payment methods, the interest in cryptocurrency by businesses and financial institutions is growing due to the advantages and opportunities that cryptocurrency offers. The underlying value that has been brought by cryptocurrency on the financial market makes it one of the main drivers of financial disruption.
In this article, we will analyze how the appearance of different types of cryptocurrency influenced the payments industry and what new payment and technological opportunities has emerged under the influence of cryptocurrency.
The crypto and blockchain empowering new technologies
The rise of cryptocurrency has a great impact on future payment technology. One of these technologies is Blockchain. The term “blockchain” itself refers to cryptocurrency. The symbiotic combination of blockchain and cryptocurrency lays the foundation for the evolvement of cutting-edge payment technologies, such as the Internet of Things.
Blockchain in transactions is a DLT (distributed ledger technology), that plays the role of interconnected blocks that contain the transaction information including payer address, payee address, timestamp, and transaction value.
The traditional transaction systems encounter many obstacles that result in inefficiency, low security, additional costs, and regulation issues with the extra workload. Blockchain is a completely different technology that can be leveraged to provide innumerable benefits due to its structure enablıng fast peer-to-peer transactions removing the need for intermediaries and thus providing speedier and cost-effective transactions.
The impossibility to change the information in interconnected blocks eliminates the cases of cyber financial crimes, making DLT as one of the most secure technologies.
According to Deloitte transactions have a 40-80% reduction in their costs (8% of transfer today) due to blockchain.
The newly emerging technology the Internet of things (IoT) is widely adopting blockchain. Blockchain facilitates IoT transactions being the basic technology that unfolds the perspectives and opportunities of smart payments.
The convergence of IoT and blockchain enhances IoT cost-effectiveness and compliance. This combination can be considered completed by integrating so-called Internet of Things Cryptocurrencies, such as IOTA (MIOTA), MXC, and IOTEX. All these cryptocurrencies are known as distributed ledger cryptocurrencies that serve to facilitate the connection between the IoT device and blockchain in the IoT ecosystem.
Cryptocurrency as payments and business facilitator
Cryptocurrencies are gaining more attention from consumers, businesses, and financial players worldwide. Modern business and financial players refer to cryptocurrencies as the tool to enhance operational, financial, and investment opportunities.
The agile and flexible nature of cryptocurrencies allows them to provide secure, instantaneous, and borderless payments and results in rising demand and overall value of cryptocurrency.
Generally, the implementation of crypto in cross-border payments can be considered one of the main drivers of the overall mainstream acceptance of crypto coins. As a result, 2021 can be a remarkable year when major payment networks and companies turn to cryptocurrency for fast and convenient transactions.
For example, VISA- One of the major payment networks, announced on the 29th of March that it has been going to settle transactions in USD Coin (USDC). In addition, Visa has recently announced that crypto-linked card usage tops $1 billion in the first half of 2022.
Mastercard is working to allow thousands of banks and merchants on its payments network to integrate cryptocurrency in their products. Nowadays Mastercard is offering its customers access to cryptocurrency digital wallets, cryptocurrency-branded debit and credit cards, and cryptocurrency-based loyalty reward programs.
PayPal, in its turn after allowing access to its users to buy and sell cryptocurrency has enabled its customers to instantly convert their Bitcoin, Ethereum, Litecoin, or Bitcoin Cash to US dollars (with no additional transaction fees), which PayPal then uses to complete the transaction. Hence, merchants from all over the world get the security service for carrying out secure and unrisky cross-border transactions.
The rise of crypto exchanges such as Coinbase provides the opportunity for peer-2-peer transactions between crypto accounts enabling immediate cash acceptance, which is especially significant in remittances.
All these significant changes in the perception of coins put the businesses in the direction of accepting and folding out the crypto benefits for internal processes, such as the smooth and frictionless payment transactions, acquiring of new demographic groups, and diversification of payment acceptance methods.
These factors enhance the cases of crypto adoption into the mainstream market.
Cryptocurrencies are at the forefront of their time. They are catalysts for the payment evolution and drive a new approach that has shaken the traditional methods. Now when payment applications, e-wallets, and instant payments are heading over the whole payment sector, it’s no doubt that crypto has got its rise in time and is here to stay for a long time.