CRYPTOCURRENCY PUSHES INTO PAYMENTS SPACE: Two major retail players announced new initiatives this week designed to expand customers’ ability to pay with cryptocurrency.
- Starbucks and exchange operator Intercontinental Exchange are launching a platform to facilitate the use of digital currencies for common transactions. The platform, called Bakkt, will use Microsoft cloud solutions to allow users to convert Bitcoin to cash. Starbucks has not disclosed its specific role in the development, but the companies believe the new platform will be successful given Starbucks’ success with its mobile wallet and loyalty program, Starbucks Rewards, which now counts over 15 million members. Though Bakkt doesn’t seem like it’ll enable direct cryptocurrency transactions, it could strengthen the relationship between Bitcoin and traditional retail.
- Coinbase is adding cryptocurrency acceptance capabilities for merchants using major e-commerce platform WooCommerce. Now, sellers using WooCommerce, which is estimated to be used by 28% of all online stores, can add a plug-in that will allow buyers to send money using Coinbase Commerce, the exchange’s current crypto payments platform, to the seller. This could provide Coinbase with a large addressable market in the digital currency space and expand crypto acceptance.
These initiatives could help create a market for cryptocurrency payment solutions. Though the cryptocurrency market remains large, fluctuating value combined with inconsistent fees and high rates of transaction failure have led major payments companies, including PayPal and Stripe, to cease cryptocurrency acceptance. And it’s becoming harder to buy cryptos since major banks, including Bank of America, Citi, JPMorgan Chase, and Wells Fargo, all prevent their customers from using credit cards to purchase cryptocurrencies. Demand for solutions remains tepid — just three of the top 500 e-tailers accept cryptocurrencies — but new offerings from wide-reaching players could change that, with broader availability piquing the interest of more users.
In order to do so, the initiatives need to capitalize on the proven advantages of cryptocurrencies.
Crypto-based payments have some safety advantages compared with payments companies’ because they protect user data and could be faster, as they eliminate the need for middlemen. If these new offerings are popular among merchants, or stoke demand among consumers, we could see an uptick in crypto-based payments. That could help WooCommerce and Coinbase grab new merchant partners that are looking for an easy way to accept cryptocurrency. And if Bakkt can streamline the exchange of cryptocurrency to cash, especially if it’s connected to retail payments, it could improve users’ customer experience or push them to explore paying with cryptos, which in turn could boost their usage as a payment method.