As a business, accepting crypto is harder than it should be. The technology is different, but that’s nothing new.
The problem, according to George Davis, co-founder and chief product officer at crypto payments technology firm BVNK, goes back to cryptocurrency’s beginnings with bitcoin. Specifically, that it started as a peer-to-peer payments product, designed to bypass financial institutions, and then grew into an investment product before businesses began to take it seriously as a payments currency.
“Crypto evolved the retail investor first, so there’s a huge early adopter community in crypto going back years,” he said. In most traditional markets, consumers were the first. But in crypto, “we found businesses have actually been left behind and it’s far less likely for a business to have held crypto than is for any given consumer you find on the street.”
As a result, crypto moved too fast for traditional finance — “the traditional banks and payments companies didn’t really know how to serve them.”
Or, for a long time, trust them.
“From running a crypto business before, some of our founders really felt pain of actually trying to get a bank account, trying to pay people around the world, trying to accept payments from your customers,” Davis said. “The same is true with payments. It’s really hard to accept payments from your customers, because again, payments companies don’t really understand you.”
That means high fees for assumed risk, high foreign exchange rates and tougher know your customer (KYC) requirements.
As a result, “crypto is really underserved compared to what a traditional FinTech might be able to do,” he added. “These businesses know they have to do it to get that volume — they need to get those customers — but they don’t know how.”
One thing that surprised BVNK’s founders, Davis said, was that despite the current market volatility — bitcoin is down more than 50% since November — the number of consumers who want to pay in crypto is still growing, aggressively.
Which makes sense, as the number of U.S. crypto users has grown to almost 60 million over the past 12 months, according to PYMNTS’ newly released Crypto Consumers study.
See also: The U.S. Crypto Consumer: Cryptocurrency Use In Online and In-Store Purchases
What is changing are the cryptocurrencies they want to pay with.
“On the consumer side, we are seeing huge demands still to pay, especially with stablecoins,” Davis said. “These consumers have retreated from more volatile assets like ethereum and bitcoin.”
They have started moving into holdings like USD coin (USDC) and tether (USDT), which in theory let them leave money in the crypto ecosystem without taking losses — and without paying off- and on-ramping fees.
“We’re seeing a huge demand and a huge amount of volume for USDC and USDT for these businesses,” he said. “Stablecoins are much more like infrastructure than an investment.”
That’s especially true for cross-border transactions, Davis said, noting that a growing number of businesses are interested in bypassing the fees and delays of SWIFT.
At the same time, he said, “We are of the view that crypto will become the infrastructure of the future, but it doesn’t replace everything that we have today.”
Nor would he advise businesses to keep more than a little bit of their treasuries in crypto.
Take it Easy
BVNK focuses on the B2B side, helping businesses accept and use crypto without having to learn a new payments rail.
A chief financial officer or treasurer should view accepting or using crypto “no differently than picking up another fiat payment method,” he said. “Our focus really is making sure that there is no difference in that assessment flow, that it feels exactly the same as when your customer pays you in fiat.
“So we’ll handle the refund flows, we’ll handle the payouts, we’ll handle what happens when they underpay, what happens when the blockchain is slow, etc.”
While KYC requirements in the crypto payments world are growing tougher — particularly as the European Union approaches the endgame in its Markets in Crypto Assets (MiCA) legislation — it generally isn’t a field BVNK has looked at. It’s launching a low-KYC on-ramp with the goal of making account-to-account transfers easier because it uses crypto but doesn’t touch consumers anywhere, Davis said.
While BVNK’s crypto business is currently focused mostly on the European mid-market businesses, it is launching a big push into America, Davis said, thanks to a $40 million Series A funding round.
Read more: Crypto Banking Firm BVNK Raises $40M in Series A
What he found interesting was how quick a process it was.
Venture capital firms’ investments, up until recently, have had “a very heavy focus on infrastructure, investing in companies … to make that infrastructure sustainable and stable for the future of businesses using this technology.”
What BVNK found, he said, was “a huge amount of interest in investing in the B2B side, especially because it’s not so susceptible to that, that volatility in the market.”
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