To broaden cryptocurrency’s appeal — beyond the speculative frenzy — broaden its acceptance.
The consumer clamor to use cryptos in everyday retail is certainly there. As PYMNTS’ own research with BitPay has shown, as many as 18% of the U.S. population — 46 million consumers — would be likely to make a purchase.
Read more: How Consumers Want to Use Crypto to Shop and Pay in 2021 and After
And they want to use cryptos to buy everyday items — not just Tesla cars, but groceries and subscriptions, clothes and other smaller transactions.
But you cannot spend what you have if there’s nowhere to spend it.
At a high level, bringing crypto payments more fully to the brick-and-mortar realm would broaden cryptocurrency’s visibility, beyond the exchanges and the headlines trumpeting bitcoin bans (in China) and Elon Musk’s tweets.
A newly announced pact by BitPay, which provides crypto related services, and Verifone, which offers payments technology, would allow merchants to sidestep the price volatility and downside risk that is a hallmark of those digital holdings.
BitPay CEO Stephen Pair, Verifone CEO Mike Pulli and Verifone Head of Alternative Payment Models (APMs) Jeremy Belostock told Karen Webster that the partnership will help consumers embrace cryptos more fully, while letting merchants broaden their customer base by serving those crypto-wielding individuals eager to transact.
In terms of the mechanics, the companies said in their Tuesday (Sept. 28) announcement, merchants can accept the crypto payments directly from Verifone without needing to set up an account with BitPay. The payments are done with native crypto wallets.
Initial wallets supported — so far in the testing phase — include Blockchain.com, BRD, Metamask and BitPay. The trio told Webster that others would follow in the coming months. Verifone’s Pulli said the merchants need to do very little technological lifting to enable the payments and the wallet; they can simply download software on their in-store point-of-sale (POS) terminals.
And for Verifone, the initiative marks the latest development that stretches back over several years. After its 2018 acquisition by an investment group led by Francisco Partner, the company has continued to deepen its presence in the cloud, which in turn has broadened its range of APMs on offer, deliverable and enabled through software upgrades.
“We built a foundation on the [Verifone] house of alternative payment methods,” he said of the hardware/software configurations, “and now we are just building rooms on top of the foundation.”
The initial cryptos accepted include bitcoin, ethereum, dogecoin, bitcoin cash and U.S. dollar pegged stablecoins.
As Pair described it, the transactions are “on-chain crypto transactions that are used to make the purchase. It’s not an off-chain, account-to-account custodial transaction. The payments use the blockchain.”
There’s at least some familiarity with crypto digital wallets and how to use them, which sets the stage for digital wallets to be used in everyday crypto spend. Belostock noted that within payments, and specifically mobile payments, millions of consumers are already used to making peer-to-peer (P2P) payments with those wallets. And many of those same, tech-savvy consumers may be holding crypto, eager to spend their gains as the digital coins have skyrocketed in value.
BitPay and Verifone anticipate a fall rollout of crypto acceptance at the Verifone terminals.
“Now, inside a brick-and-mortar store, you can use crypto the same way that you use a normal credit card,” Pulli said. “And that’s powerful stuff.”
The Merchants’ Questions
But even as the consumers have wanted to spend, the merchants have had questions. As the Verifone and the BitPay executives noted, merchants have been concerned about the risks tied to crypto volatility, namely that the value of the crypto used in the transaction at the beginning may gyrate wildly by the time the transaction settles, possibly to the merchant’s detriment.
Pulli recounted that, during checkout, as consumers select their wallet on the Verifone device and scan the QR code, the crypto funds are received by BitPay, and the funds settle immediately in dollars in the merchant’s bank account. Even when returns happen, he said, the merchant is kept “whole” regardless of the value of the coins when a return is initiated. Pair said that a returns process is the same as would be seen with a merchant using Verifone or any APMs to initiate that refund.
As Pair noted, the pump has been primed for cryptos to be used across a broad swath of in-person transactions, in the same manner that consumers have been doing with their traditional credit and debit cards.
“In the crypto world and the crypto wallet world, this QR-driven experience has been there from Day One,” he said. “They were kind of built for payments, from the ground up… Pretty soon, any financial app anywhere you store money is going to have to have to add payments capability to it.”
The partnership also comes with an option for Verifone to make an investment in BitPay at a future date.