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As payments markets feel the full force of ‘Fintech’
advances and product innovation, corporates are
placing greater importance on which areas of payment
infrastructure functionality to allocate strategic
investment. Developing capability for mobile
payments and cryptocurrency may have seem
far-fetched five years ago yet now present as
legitimate competitive advantages within a market
reinventing and transforming itself at increasingly
breakneck pace.
Acceptance of digital currency
remains largely misunderstood or off the agenda for
the majority of Australian merchants according to
East & Partners latest 2018 Merchant Payments
research, based on direct interviews with 2,239 CFOs
and corporate treasurers across both retail and
non-retail sectors. E&P’s November 2013 Research
Note
“Bitcoin: The Innovative Future of Currency…or Hyped
Up Flash in the Pan?”
provides a fascinating insight into both Bitcoin and
digital currency’s inception and the presiding mood
and conjecture felt towards the technology break
through at that time.
Fast forward five years and cryptocurrencies have
exemplified the classic boom and bust behaviour
repeated so often throughout economic history, be it
the Tulip Crisis of 1636, South Sea Company crash of
1711, Great Depression of 1929, 1997 Asia Asset
Price Bubble or 2001 Dot Com boom. Be it Bitcoin,
Litecoin, TRON or Ethereum, prices have collapsed by
between 50 to as much as 90 percent in 2018 alone.
Although just over one in ten Australian enterprises
express no plans to accept digital currencies within
the next two years, 83 percent are unsure.
Receptiveness to cryptocurrency is relatively strong
given more than three quarters of the Australian
market are yet to form a coherent view. Eight out of
ten merchants are arguably open to accepting
cryptocurrency in the near future if the benefits
and drawbacks can be spelled out clearly. From small
business owners to large institutional
conglomerates, key decision makers demand tangible
revenue and cost saving benefits before investing in
acceptance of yet another new payments channel on
top of the ever increasing range of debit, credit,
online, mobile, wearable and biometric payment
methods.
Currently a minority five percent of merchants plan
on accepting digital currencies such as Bitcoin and
Ethereum by 2020. One of the most confronting
challenges facing greater uptake of digital currency
is linking the mania and hype generated by media and
market participants with practical, ‘real world’
applications. The amusing use of images of physical
Bitcoins in media articles about Bitcoin illustrates
the very point that understanding of the technology
is poor. The inherent motive of digital currencies
is iconoclastic towards physical currency, seeking
to unseat or supplant money as we know it.
Illustrating a Bitcoin article with an image of a
physical coin goes against the whole concept of
cryptocurrency in itself.
In terms of cryptocurrency applications that will
hasten uptake, in the legal world lawyers will
undoubtedly adopt cryptocurrency, blockchain and
artificial intelligence in line with existing smart
contract advances however uptake is expected to be
gradual. Enhanced two-factor security requirements
under PSD2 will also drive merchants towards faster,
cheaper payment methods, noting security and fraud
prevention have always been pressing factors in the
adoption of new technology. The bitcoin network is
nearing its tenth anniversary yet as a common method
of payment it is yet to reach the heights of its own
lofty ambitions.
Key advantages cited by merchants in East &
Partner’s research include lower cross border
payments costs (10.3 percent), lower transaction
fees (2.9 percent) and improved fraud prevention
(2.5 percent) however it is important to note that
87.1 percent were unable to form a view. Banks and
fintech companies adopting new technologies for
instant payments, mobile payments, incentivisation
of digital payments and use of ‘Open Banking’ data
are some of the emerging trends that will push
forward the adoption of digital payments however
broader adoption will largely depend on whether
Bitcoin market participants can successfully scale
up the system. The most valuable characteristic of
cryptocurrency networks are their decentralized
nature yet even this key element cannot overcome the
disparate nature of payment channels as it stands.
Cryptocurrency will experience it’s ‘light bulb’
moment when these independent payment applications
integrate more closely, marking the point at which
corporates and even central banks identify
opportunities and invest in innovation that can
benefit from digital currencies. Until that point
the consensus remains a simple “wait and see”
approach until that tipping point is reached. |
