As businesses were pushed to make payments in new ways due to the events of 2020, they took a closer look at how emerging payment methods could provide the speed and convenience they were seeking.
As a result, interest is rising in how cryptocurrencies could provide such benefits worldwide and how supporting technologies, such as blockchain, can play a role in meeting payment needs.
In fact, 40% of companies in the Americas, Africa and the Middle East plan to use digital assets to make purchases within the next year, according to The Cryptocurrency Payments Opportunity, a PYMNTS and i2c Inc. collaboration.
“Consumers’ and businesses’ perceptions of cryptocurrencies have evolved greatly over the last decade, from crypto-insider discussions to being something taken more seriously and tracked by financial companies and media to where we are today, which is actual discussions around dinner tables, businesses and boards,” Jim McCarthy, president of i2c, told PYMNTS.
More Businesses Perceive Crypto as Spendable Currency
The overall perception of cryptocurrencies among businesses appears to be shifting from an asset class to that of spendable currency, though virtual currencies still are years away from becoming established as part of the mainstream payments ecosystem.
For example, an August 2021 PYMNTS report found that multinational businesses are six times more likely to use the cryptocurrencies they hold for transactions rather than keeping them as assets, and 50% of surveyed firms noted they either already use or are planning to use digital assets for cross-border payments.
It also found that most financial institutions (FIs) are anticipating a surge in cryptocurrency payments soon, with 93% of banks agreeing their business clients would tap digital currencies for both investments and transactions.
Although virtual currencies are not yet mainstream, businesses, FinTechs and FIs are all taking rapid steps to move toward that reality, and many of them are building out the key digital infrastructure necessary to facilitate smooth payments. In fact, 10% of FIs currently support at least one form of cryptocurrency.
Companies See Potential Applications for B2B Payments
This movement is creating greater competition between legacy FIs and nimbler FinTechs looking to play a dominant role within the space, especially as crytocurrencies’ potential applications for B2B payments capture the attention of more companies.
Enabling smooth conversion to cryptocurrencies for payments, therefore, is imperative for FIs to remain competitive, especially as both banks and businesses prepare for a future in which digital assets are commonly accepted for B2B use cases.
This also includes the cross-border B2B payments space, as utilizing cryptocurrencies and the blockchain technologies that support them for cross-border payments could provide companies with key advantages over the next few years as business becomes more global.
Cross-Border Payments is the Big Use Case
“That’s the big use case,” McCarthy said. “If you ever needed to move money around the world, you learned quickly that it wasn’t easy. And so, cryptocurrencies present several cross-border benefits to business — and, I’d argue, consumers — with international interests [in terms of] money transmission.”
He added that crypto moves more easily across borders, doesn’t have to go through a myriad of correspondent banks to transfer value and removes a lot of the opaqueness that comes with moving money via traditional methods.
As a result, there is now pressure for financial entities to create seamless cryptocurrency payment tools. They face several challenges in doing so, however. A lack of global standards around payments via digital currencies remains, and many businesses still have lingering questions over digital assets’ security.
Innovation and Growing Pains are Both Expected
It is critical for businesses, banks and issuers to examine the future role of cryptocurrencies in both the B2B and consumer space, as well as the role of technologies such as blockchain.
McCarthy said i2c is seeing tremendous innovation, growth and potential over the next few years, tempered by the expectation that as crypto becomes more mainstream, it will bring growing pains in the form of regulation, compliance and oversight from central banks and regulators.
“All that added circumspection will likely bring with it some things that are not all good, but others that are probably not all bad either,” McCarthy said. “A more level playing field in terms of protection for consumers and businesses and bringing people more efficiently into the formal digital economy are not bad things.”
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