Eight out of 10 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 5 per cent 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 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 the Second Payment Services Directive 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.
According to the research, key advantages include lower cross border payments costs, lower transaction fees and improved fraud prevention however it is important to note 87.1 per cent of respondents were unable to form a view.
Banks and fintech companies adopting new technologies for instant payments, mobile payments, incentives to encourage use of digital payments and use of open data are some of the emerging trends that will push 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 is their decentralised nature yet even this key element cannot overcome the disparate nature of payment channels.
Cryptocurrency will experience its lightbulb 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.
Martin Smith is Head of Markets Analysis at East & Partners