Currently banks are following the development of crypto currencies to be able to advise their clients on advantageous investments. In parallel, however, they are missing out on a fundamental business, they could be making with crypto as payment currency.
After the introduction of Bitcoin in 2009 and the following ups and downs, the question of it being a crypto bubble has now been answered. What started as a short-term trend and vision, has established itself as a relevant investment option by last year for sure. It’s not for nothing that Bitcoin is often called digital gold. Banks used to closely monitor the trends of BTC and NFTs, to then enter the market with investment packages accordingly. This is what gave Bitcoin and its followers the reputation of beneficial investments. However, this is a limited view. Only once crypto currencies have been fully accepted as an alternative form of payment, their future-oriented impact on the entire economy will be able to show its full power.
As so-called acquirers, payment solutions providers have been acting for a while already as middleman for credit card payments and other digital payment options. Merchants and business owners pay a minor percentage of their turnover for this service. Paying with digital wallets works the same way. However, only few people are aware that paying with cryptocurrencies has already arrived on the ground, both in stores and in ecommerce. The success story of SALAMANTEX in Austria is proof. In this European country, selected stores and Restaurants are already accepting crypto currencies as alternate form of payment. In the near future, the same business model will be rolled out to Germany.
But where is Germany heading to? Most banks still lack in courage and the commitment to pioneering. As example, Deutsche Bank sold its payment branch and subsidiary ‚DB Payments‘ in 2004* — which more and more turned out to have been a bad decision. In 2021 this major bank then decided to enter the acquirer business afresh*.
At least before the pandemic, crypto currencies were still far from being a trusted form of payment; and the German government’s decision to consider it as cash leading to a strict and tedious check for amounts above 1000 EUR led to additional barriers. Germany’s love for cash payments seemed to stand in the way of digital payment alternatives. But then the pandemic happened and things changed dramatically: digital and crypto currencies have never been so popular as they are now.
So how can banks and merchants benefit from the business with arising forms of payments on the long-term?
What’s sure: paying with crypto currencies is becoming more and more popular, as a recent study by Mastercard has discovered*. This trend is visible across all generations and will be accelerated through the introduction of the eEuro. Market dynamics are changing rapidly, as recent developments have shown. This is why partnerships are the most pragmatic recipe for success, to integrate quickly and efficiently into existing payment infrastructures. Especially solutions providers specialized on the blockchain and familiar with existing regulations around the topic, will offer the most advantageous cooperations. This approach has already been tested and found beneficial — as shown by the partnership of the Austrian SALAMANTEX with POS device manufacturers and established acquirers as transaction banks. What worked well in a smaller dimension in Austria, can now smoothly be expanded to other regions worldwide. The payment market offers major growth potential, as Deutsche bank understood as well.
Crypto is only the beginning - an outlook onto the digital payments of tomorrow:
Nevertheless, we are still at the beginning of the digital transformation and crypto currencies as alternate form of payment are right in the centre of this development. Crypto will act as door opener for even more digital assets to be considered trusted forms of payment in the future. As such, tokenised real estate, loyalty points and airmiles or locally-issued city tokens, are expected to also enter the payment market soon. This only represents a small part of the business models which are currently being developed and implemented across the globe. It’s clear that the potential of crypto currencies goes way beyond the simple business with derivatives.