The price of bitcoin may be dropping dramatically, but among payments companies, interest in cryptocurrency as a revenue generator is growing.
The world’s most famous cryptocurrency is causing heartache for cryptocurrency speculators as, after a year of steady but significant growth, bitcoin has tumbled in price, from a high of around $63,000 in March to just below $35,000 on May 23. The fall has been attributed to recent comments made by Tesla TSLA CEO Elon Musk, as well as a decision by the Chinese Banking Association to ban financial institutions in the country from using cryptocurrencies due to their volatility.
That volatility is certainly on show in bitcoin at the moment, however away from the meme-led retail investment enthusiasm in cryptocurrency, organizations in the payment space are beginning to take digital currencies very seriously.
We’ve just finished the latest earnings season, and cryptocurrency was a common topic across payment processors, card networks and beyond. Many publicly traded companies in the payments industry included updates on their crypto plans in investor calls, and many CEOs faced questions from investors over their efforts in the space.
Visa V and Mastercard MA , for example, both made mention of a suite of movements around cryptocurrency, including a number of partnerships with fintechs specialising in the space. Payments platform Paysafe, meanwhile, pointed to its crypto products as one of a number of routes to growth in Q2 2021, while payments processor FIS FIS highlighted cryptocurrency as one of the strongest areas of growth in its merchant solutions segment.
Recent product announcements also echo greater cryptocurrency moves in payments. Remittance major MoneyGram MGI , for example, announced a partnership with crypto cash exchange Coinme that will see it enable customers to buy and sell Bitcoin at its retail locations. This will open the company “to an entirely new customer segment,” according to MoneyGram CEO Alex Holmes.
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Bitcoin price volatility: A barrier to cryptocurrency in payments?
While the approach to cryptocurrency varies significantly among payment companies, what is common is the mentality driving its exploration. Very few payments CEOs that I’ve spoken to have yet described crypto as being a central pillar of their future business, but it is being seen as a potential way to draw in new customers and build out a new, additional revenue stream.
However, in the past at least, the volatile nature of bitcoin and other major cryptocurrencies has produced significant hesitancy among mainstream payment companies to move into the space, as well as push back from their core banking partners. So are these latest developments a sign that this has changed?
It is noticeable that many of the product rollouts have come amid the recent crypto bull market, and it’s possible that excitement among companies’ investors during this time has encouraged them to take the plunge on projects.
Yet bitcoin has been through these cycles before, and all signs suggest that it will again – and while its current price is down significantly on recent highs, it remains around 400% higher than its value a year ago.
Perhaps more telling is steps payment companies have taken to reduce costs, and therefore risk, as well as in some cases the choice of cryptocurrencies involved.
The use of partnerships has enabled some companies to make moves in the space with little upfront spend establishing infrastructure. Mastercard, for example, has leaned into this approach, with a crypto rewards credit card launched in partnership with Gemini and a crypto card for Spanish customers launched with Crypton. PayPal PYPL has also taken this approach, partnering with both Coinbase and Paxos to realize its own initiatives.
Meanwhile, payment companies that are introducing products that allow companies to pay with cryptocurrency are finding ways to counteract volatility. Visa’s first settlement of cryptocurrency involved the USDC stablecoin, which is pegged to the US dollar, rather than a conventional cryptocurrency that risks highs and lows.
PayPal now allows US-based customers to pay with cryptocurrencies including Bitcoin, but it does not support merchants receiving in cryptocurrency, instead converting the payment into a local fiat currency during the purchase process.
Even those companies that are more focused on cryptocurrency have taken steps to avoid being harmed by volatility. Startups such as US-based Bleumi, for example, which provides a payments orchestration platform for both fiat and cryptocurrencies, allows merchants to choose which cryptocurrencies they want to accept – if any at all – as well as whether they want to receive payment in cryptocurrency itself or have it converted at the point of sale.
Volatility is no longer putting payment companies off cryptocurrency – in fact it is the nature of crypto currencies for now – but the volatility is making payment companies cautious about how they approach the space. The bitcoin price may be a cause for concern and upset many recent retail investors, but there’s still plenty of revenue potential in cryptocurrency and the fiat to crypto space – and more payment companies are exploring the opportunity.