Assessing the future of crypto payments — an interview with Nuvei

In terms of verticals, there has been more adoption in areas such as online gaming, NFTs, and digital services. At this stage, cryptocurrencies have mostly failed to gain meaningful traction for mainstream commerce due to price fluctuations. But stablecoins and central bank digital currencies (CBDCs) offer some type of a promise to change that. Still, each is at a relatively early stage of development and crypto payments are mostly nascent today. Crypto payments are growing fast, currently representing an estimated annual volume of at least USD 6 billion, but this is a tiny fraction of the USD 10 trillion global ecommerce market. Despite its current limitations, Bitcoin continues to be the most widely used cryptocurrency, accounting for 60% of total volumes.

Could you portray the average crypto payments consumer or share some valuable statistics for merchants to consider when offering C2B crypto payments?

There are around 300 million users worldwide, with only approximately 15% to 25% using cryptocurrencies for merchant payments. Users are usually homogeneous — generally young, male Millennials in 74% of the cases. Their average, annual income is around 100k USD.

Approximately 70% of users purchased crypto (initially) as a store of value or as a speculative investment, while only 20 to 25% of consumers use it for making payments online. For various reasons, users still consider cryptocurrency as means of investment rather than a means to make purchases for goods or services.

We do, however, see a broader acceptance of crypto in developing markets with a history of financial instability and a high proportion of the unbanked population. In markets with an unbanked population, crypto and stablecoins are used for low-value P2P remittances, as crypto offers a mechanism to store and transfer funds without a bank account, and stablecoins are perceived as more stable than the local currency. 

Mainstream merchants have not yet accepted cryptocurrencies as a viable alternative alongside traditional payment methods (though Airbnb announced they might accept crypto). What are the main concerns that stop merchants from adopting crypto payments?

Despite some notable brand names accepting crypto, broader merchant acceptance is hindered by misconceptions about crypto payments, leading to poor merchant education and awareness on these topics. 

These misconceptions are:

Crypto settlements — merchants assume that if they accept crypto payments, the settlement will be in crypto, exposing them to price volatility, custody, and taxation risks. But the most widely used model is to accept crypto but settle in fiat. Crypto custody and related services are offered by specialised PSPs that can offer risk mitigation against such risks.

Fraud — merchants fear that crypto payments will be accompanied by high levels of fraud and chargeback. But, due to the push nature of the payments, chargebacks for cryptocurrencies have extremely low levels of fraud. So, there's less fraud or chargebacks when it comes to that.

Volatility risk — merchants are exposed to volatility, as crypto prices may fluctuate while the consumer is in the checkout flow (this is mostly the case for a specific cryptocurrency such as Bitcoin). But PSPs that serve merchants typically offer a 15–20-minute window, locking and guaranteeing the rate for this period.

Costs, economics, or lack of a business case — merchants perceive crypto as expensive to accept and often incurring high mining fees. However, crypto payments are generally cheaper than card processing, and the mining fees can be supported by consumers rather than merchants.

Regulation — lack of regulatory clarity is the primary reason behind low merchant acceptance for crypto payments. Several markets have strong policies in place against transacting with crypto. Some countries are banning mining and transacting with crypto, not allowing users to purchase, order, or hold funds in crypto. Not to mention AML requirements around the world that might hinder crypto adoption. 

Finally, the entire crypto payments flow is still clunky compared to card processing, bank transfers and digital payments offered by many legacy financial services providers and new players over the past 15 years. When paying with crypto, the user has to go through several steps to complete a simple transaction for goods and services.

Can you name some market initiatives or other disrupting forces that are coming to the forefront creating the right catalysts for accelerated acceptance and usage of cryptocurrencies in C2B commerce?

Let's focus on two specific areas – stablecoins and NFTs. 

Stablecoins are cryptocurrencies with their value pegged to a fiat currency, a basket of fiat currencies, or specific exchange-traded commodities. They are significantly less volatile than cryptocurrencies, and since their inception, stablecoins have primarily been used by crypto traders as a mechanism to store proceeds from their crypto investments. This avoids fiat conversion fees and helps reduce volatility risks that traditional cryptocurrencies fail to offer. Now, they are not widely used for commerce and payments, but more for investment. Still, we expect stablecoins to be a catalyst for driving crypto payments acceptance in the future.

NFTs (non-fungible tokens) meanwhile have exploded over the last year. NFT sales have surged from less than one billion throughout 2020 to USD 20-25 billion in 2021. They moved to the forefront of digital commerce and their usage represents an early example of a truly crypto-native, digital commerce consumer use case. NFTs are unique, tokenised digital assets that define the ownership of an underlying physical and digital good. The technology sits on the secure blockchain that validates the digital ownership of the underlying asset.

What could be challenging for merchants when trying to tap into these new ways of paying? How can they overcome these, to reach the benefits?

We first need to shake off some of the misconceptions, which I previously mentioned regarding payment settlement, fraud prevention, volatility, etc.

The second thing is that crypto payment acceptance is an emerging vertical for many merchants and businesses. Therefore, partnerships are needed with companies that can offer cutting-edge technology to support crypto exchanges, merchants, and wallets. Merchants and businesses are encouraged to leverage partnerships with specialised crypto PSPs that enable a baseline for crypto acceptance and propositions.

What are the next steps needed for merchants to adopt C2B crypto payments and how do Nuvei’s products and services support these changes/evolution?

Mainstream payment networks and payment service providers like Nuvei play a central role in crypto acceptance payments for large and small merchants. As such, it's important to mention that we have already built and developed our cryptocurrencies acceptance proposition. 

It includes simplifying the vast area of forms of crypto in digital currencies, the flexibility of offering, different settlements, alternatives, including fiats, things servicing the challenges and exceptions that arise from crypto payments complexity.

About Raphael Tetro

In his role as SVP Merchant Services at Nuvei, Raphael drives the company’s rapid expansion into new verticals and territories. Drawing from his years of extensive experience in the payments and fintech industries, Raphael is a pro at supporting merchants from a broad range of verticals, assisting them to optimise their payment strategies. He has a proven track record of expanding the digital business scope of numerous medium and large-sized companies through a solutions-based approach. Raphael holds a degree from the Lauder Business School in Vienna and had graduated with honours.  

About Nuvei

We are Nuvei (Nasdaq: NVEI) (TSX: NVEI), the payment technology partner of thriving brands. We provide the intelligence and technology businesses need to succeed locally and globally, through one integration – propelling them further, faster. Uniting payment consulting and payment technology, we help businesses remove payment barriers, optimise operating costs, and increase acceptance rates both locally and globally.