Should merchants accept crypto in 2023? The pros and cons

Tracy Kobeda Brown, VP of Programs and Technology for the MRC, shares with our readers what are the pros and cons of accepting crypto payments for merchants

Between inflation, supply chain issues, continued COVID-19 recovery, and ongoing geopolitical concerns, the payments landscape has shifted dramatically in the last year. Cryptocurrency continues to be an increasingly prominent feature of that landscape. As merchants rush to adapt to the new normal in the coming year, the question of whether to integrate digital currency as a payment method becomes increasingly important. 

The decision is not a simple one. Enthusiasm for new technologies is a key part of innovation, but it must be tempered with strategic and practical implementation to be successful. Determining whether crypto is a good fit for a merchant’s payments stack requires thoughtful analysis of the advantages and disadvantages cryptocurrency acceptance provides.

Many of the reasons consumers are drawn to cryptocurrency as a payment method are advantages for merchants as well. After an initial learning curve for consumers, cryptocurrency offers virtually instantaneous transactions that are cheaper than many traditional payment methods due to fewer third-party fees. Crypto also simplifies cross-border transactions and mitigates the inconvenience of currency conversion.

A powerful potential advantage of accepting crypto for merchants is the finality of the purchase. In most transactions, there are no refunds and no costly chargebacks. All sales are final. While this can free up resources, a potential downside is the added burden to customer service departments when a consumer regrets a purchase.

But perhaps the single most compelling reason merchants should consider accepting cryptocurrency: their customers want to pay with it. Providing the payment method that consumers want will empower them to spend more. It also enables those without access to traditional banking to engage with the economy and will likely continue to play a pivotal role in emerging markets.

These are some of the reasons 73% of small businesses say that new forms of digital payments are fundamental to their growth, and why larger merchants have been cautiously exploring this space for a long time.

As compelling a reason as customer preference might be, there are obstacles that need to be considered as well.

The most obvious concern is continued volatility. The wild swings of even the most stable cryptocurrencies make pricing items a struggle and make cryptocurrency a challenging fit for subscription-based merchants where predictable revenue streams are a critical part of a successful business model. Eventually, these price swings may be less dramatic and more in line with traditional currency exchange rates, but it’s impossible to predict when, or if, that will happen.

Another unpredictable element of cryptocurrency is the shifting regulatory landscape. It’s still the early days of crypto, and the global patchwork of regulatory infrastructure makes compliance a challenge. This may cause problems for global merchants who must accommodate a wide variety of vastly different regulations. There are existing payments-related regulations that global merchants must consider, compliance requirements are not new, but the relatively untested legal and regulatory landscape of cryptocurrency makes predicting what’s coming and adapting to it a significant challenge.

There’s also the concern of additional fraud. Properly executed, cryptocurrency transactions are very secure; but adding new payment types always provides exposure to additional attack vectors. This is an inherent risk that comes with adopting any new payment method, but it’s important to consider that fraud mitigation strategies will need to be updated and tailored to the unique profile of cryptocurrency fraud, and this process may require new staff training, new technologies, and at the very least, new KPIs and tracking methodologies.

There are other challenges too, including the best way to store cryptocurrency, privacy concerns given the transparency of the public ledger, how to account for it as revenue, and when to convert it to traditional currency. These are merchant specific considerations, however, and likely secondary to the immediate challenges faced by organisations accepting crypto for the first time.

As of 2022, global crypto ownership rates average at 4.2% of the population, with over 320 million crypto users worldwide. This is a number too large to simply ignore, though accepting crypto just because others are, is obviously not a viable strategy, especially if it’s antithetical to your business model or not a good fit for your customers.

Perhaps it’s best to start with a simple question: do your customers want to pay with crypto? If so, does your business model support it? Will it be profitable for your business based on customer demand? Do you have the resources to implement the logistical, legal, regulatory, and fraud infrastructure necessary to do it in the right way? Do you have the resources to stay current as crypto continues to evolve? 

If the answer is yes, remember that as adoption grows, so do third-party companies that can help with this complex process regardless of your organization’s size. There are many logistical considerations when adopting crypto into a payments stack, but it’s much easier to accomplish than it was even a few years ago. Merchants don’t have to do it all in-house, and they don’t have to do it alone.

Even if the answer is no and you’re not yet prepared to take that step, it’s still wise to explore digital currencies and blockchain technologies, because they aren’t going anywhere. These concepts continue to be valuable for a wide variety of business concerns, not just payment acceptance, and having the institutional knowledge necessary to successfully utilise them can provide a significant advantage in the years to come.

This editorial was initially published in our Crypto Payments and Web 3.0 For Banks, Merchants, and PSPs Report. The first edition of our report aims to provide a go-to payment resource of crypto terms and concepts for those interested to understand the basics of crypto payments and their long-term impact. Furthermore, it shares practical examples of cryptocurrency-enabled ecommerce and banking services and presents the latest developments in the regulatory landscape. Also, it reveals what are the most innovative companies in this space, that are building the crypto rails.

About Tracy Kobeda Brown

Tracy Kobeda Brown is the VP of Programs and Technology for the MRC. She was head of product for Fragomen, Lockerz, and the CEO of Evil Genius Designs. Tracy created the American Eagle Outfitters website, ae.com, and served as CISO. She earned her Masters from Carnegie Mellon and her Bachelor’s in Economics from The Wharton School. 

About the Merchant Risk Council

The MRC is a global community connecting ecommerce fraud prevention and payments professionals through educational programs, online community groups, conferences, and networking events. As a non-profit organisation, the MRC is headquartered in Seattle, Washington, but embraces members from across the globe.