Corporates to Dictate Next Wave of "Cryptomania"

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.

We welcome your thoughts on how you think cryptocurrencies will impact the future of payments