COMMENTARY: Why Cryptocurrency at the Point of Sale Is the Next Contactless Step for Merchants

How people purchased goods and services online, at the in-store point of sale (POS), or on mobile devices changed significantly during the pandemic. Whether or not businesses closed their brick-and-mortar storefronts, they experienced a shift to contactless and online channels as a safer way to transact for businesses and consumers. 

Now, the increased use of contactless payment acceptance opens the door for various ways to transact. Alternative payment methods, such as digital wallets, have also become mainstream at the expense of credit cards, bank transfers, and cash. General-purpose digital wallets such as Apple Pay, Google Pay, Samsung Pay, and specialty wallets like those from Starbucks and Dunkin’, have all experienced a significant uptake recently. In 2020, digital wallets accounted for 44.5% of e-commerce transaction volume and 25.7% of global POS payment methods, according to the processor FIS. 

Building on the preference for contactless digital transactions, the newfound popularity of cryptocurrencies has entered the picture. Historically, the value of digital currencies has been volatile because of speculation and uncertainty in the market. Cryptocurrencies are not yet regulated like other currencies. But governmental regulatory bodies are beginning to take a closer look.

As interest in cryptocurrency grows, consumers are gaining interest. The next wave of payment-acceptance innovation will most certainly include cryptocurrencies alongside popular digital wallets. Merchants that do not adopt systems to allow customers to transact in a variety of digital currencies may very well be left behind. 

Consider that influential brands have recently made inroads in acceptance of cryptocurrencies. Automaker Tesla bought $1.5 billion in Bitcoin and announced plans to allow customers to purchase cars using the digital currency. The NBA’s Dallas Mavericks franchise is now accepting multiple cryptocurrencies for ticket and merchandise sales. The Bank of New York announced plans to hold and transfer digital currencies for customers. And Mastercard said it will allow merchants to accept certain cryptocurrencies in its network in the near future. 

These are only a few of the merchants preparing for the impending demand by including digital currencies in their business strategies. Merchants cannot limit payment choices if they want to maintain and potentially expand their customer base and capture those segments of the market that wish to transact in the currency of their choice.

Digital wallets provide a simple and secure mechanism that can store and apply digital currencies, either as currencies or associated with credit and debit cards. Consumers pay for goods in a variety of ways today. That means they may have Apple Pay and a Bitcoin wallet app on their mobile phone. If they choose to pay with a credit card, they select the Apple Pay wallet, and if they want to pay via Bitcoin, they select the Bitcoin wallet. 

Merchants offering POS support for cryptocurrency as well as traditional methods can accept either payment method. The process at the POS and through approval and funding are essentially identical for both the merchant and consumer. However, at the payment gateway, transactions follow varied paths for authentication and processing.

Understanding how a digital-currency transaction is processed is vitally important to merchants. Specifically, cryptocurrencies are transferred from the consumer’s digital wallet to a merchant account. Some payment-gateway services will manage the conversion of cryptocurrency to dollars or other local currency before transferring to the merchant’s account. If this service is not supported, merchants must manage their own cryptocurrency wallets to accept and manage their funds.

Reluctance by some merchants to adopt cryptocurrency may be overcome by lower transaction fees, which can be about half of those for credit card transactions. This differential is significant, particularly for merchants selling big-ticket items. Consumers also benefit from the ability to transact with digital currencies. Traditional banking and payment systems don’t provide the same anonymity for buyers, nor do they provide the same level of security for both buyers and sellers.

The key is that customers always want options. There’s a segment of the population that wants to pay for items using digital assets, and they want that choice in a seamless experience. At the same time, contactless payments have grown in importance. To keep consumers satisfied, merchants should offer a seamless experience where the customer can pay with credit or debit cards, digital wallets, or crypto wallets. 

—Ronny Yakov is chief executive of The OLB Group, New York City.