Digital currency has its difficulties, but as major brands such as Starbucks and Whole Foods explore how to adopt it, it’s likely that cryptocurrency is here to stay, and it could be the payment method of the future.
You could argue it’s too early to talk about the emergence of cryptocurrency in the UK retail sector. One association we spoke to was baffled as to why we were even considering linking such a niche form of payment to garden retail.
With cryptocurrency being so volatile, how likely is it that consumers would adopt it as a payment method in the UK?
Cryptocurrency as a form of payment
Still no major high street retailer in the UK accepts cryptocurrency as a form of payment. Strides are being made elsewhere, though.
Starbucks, for instance, announced last year that customers in the US will be able to reload their Starbucks Card on its app with Bitcoin by using digital asset platform Bakkt.
Bitcoin will be converted into US dollars to load funds onto the card – though the chain still does not accept Bitcoin as a direct payment method in its stores, and the partnership with Bakkt could be seen as somewhat of a gimmick.
“The main way for consumers to channel crypto into a retail environment is a Bitcoin loaded debit card linked to an App or payment gateway such as NowPayments. The card can also be used to take out fiat cash from an ATM,” explains Katharine Wooler, managing director of crypto wealth currency Dacxi.
“In terms of online retailers, Amazon offers the facility of buying a gift card and paying in Bitcoin – then the money can be spent at Amazon.
“An increasing number of vendors on marketplace site Etsy accept Bitcoin. On the high street, Amazon-owned Whole Foods and Starbucks are leading players. The list of small businesses is growing monthly, although the early adopters are mainly businesses where the margin is sufficient to mitigate the impact of volatility.”
Retailers’ reluctance to accept cryptocurrencies as a payment method is the “main limiting factor in a broadening use of digital currencies,” says Katharine. “Over 6% of UK adults already own cryptocurrency – but they can’t pay with it until retailers accept it.
“With all technology, early adoption may be slow, but we expect acceptance of crypto to rise at an exponential rate, and we expect that to start to happen within the next six to 12 months.”
Even if retailers were to accept cryptocurrencies, would the 6% who own cryptocurrency – or the 94% who don’t – look to buy it for use in stores?
For British Garden Centres, the demand is not yet there to introduce this form of payment and the chain said it is currently “happy with all traditional methods of payment.”
Epos providers aren’t seeing the demand either, but that’s not to say it’s not being considered. “We believe it’s a bit early to action [payment via cryptocurrency into our epos system], but it is being reviewed month to month. No customer has yet requested this,” says David Seville, sales and training executive at Open Retail Solutions Ltd.
Regulating cryptocurrency could be the key to changing this, suggests David, and if the Bank of England was to release a ‘stablecoin’ – in other words, a digital currency that is pegged to a ‘stable’ reserve such as pound sterling (GBP), so it stays at a fixed value, reducing the volatility.
Isle of Man-based fintech company Blackridge, for instance, recently launched poundtoken, which it’s toting as the first British regulated stablecoin backed 1:1 to pound sterling.
“I think most people have heard of crypto now but understanding it and wanting to use it day to day is far off for most of the public. I think it is more perceived as an investment opportunity than a currency,” says David.
The Bank of England appears to agree, saying on its website: “It’s generally slower and more expensive to pay with cryptocurrency than a recognised currency like sterling.
“Development is underway to make cryptocurrency easier to use, but for now it isn’t very ‘money-like’. This is why central banks now refer to them as “cryptoassets” instead of “cryptocurrencies”.
“Today cryptocurrencies are generally held as investments by people who expect their value to rise.”
Is Cryptocurrency sustainable?
Cryptocurrency has also come under fire for its carbon footprint; Bitcoin alone emits nearly 37 megatons of CO2 every year – the equivalent to that of New Zealand, according to an article by CNBC. This is down to the immense computer power needed to mine cryptocurrency.
Fiat money – or legal government tender – is regulated through central banks. Cryptocurrency, on the other hand, is tracked through the ‘blockchain’, a shared database or ledger made up of a global network of computers. There are cryptocurrencies being released, though, which have a far lower carbon footprint than Bitcoin.
“We see sustainability as a legacy issue that is causing less concern by the day,” says Katharine. “In the early days of crypto mining the massive reliance on coal-fired ‘dirty’ power in China was very detrimental to the environment. The crypto mining industry has since moved to areas with sustainable and renewable surplus electricity – hydro-electric and geothermal power.”
David sites one cryptocurrency called Chia which doesn’t mine in the traditional way. “It uses excess hard drive space around the world, of which there is ample. Most PCs come with terabytes (TBs) of storage which is hardly touched by the average user. This also levels the playing fields so anyone can start mining at home without specialist hardware.”
If it can overcome sustainability, can it overcome instability and win over retailers? “The biggest hurdle to overcome for retailers will be crypto’s volatility – in a currency market where values can fluctuate by as much as 5% on a daily basis, retailers face the challenge of marking up prices in crypto,” says Katharine.
It’s not necessarily a reason to avoid it, though. “In a commercial sense accepting crypto gives consumers another choice. In addition, in terms of corporate finance, many big companies are already looking to add digital currencies to their treasury in the belief it will continue to increase in value, especially as the recent price readjustment across the digital coin spectrum has made crypto an attractive long-term hold.
“We feel the only ‘con’ here is that businesses coming late to the cryptosphere may lose market share.”
It will attract customers already invested in cryptocurrency, says David – those who “are desperate to go and purchase using crypto and share the experience on social media.”
“There are websites and apps listing retailers who accept crypto, and these places are actively visited by the early adopters. Other benefits will include removing charges for using Visa, Mastercard, American Express etc; the customer will pay you directly. But I would expect some other service charge would end up being applied.
“Also, the merchant may have to decide to cash out the crypto as soon as it is spent so you get the exact amount in pound sterling at the time of purchase; or some merchants may want to hold the asset and cash out once the value has increased – both are potentially possible.”
Will garden centres embrace Crypto?
But how likely are they to be embraced by the UK retail sector, and specifically garden centres?
“There are two aspects to this question,” says Katharine. “Firstly, will the retail sector accept digital currencies as payments for goods? And, secondly, whether they will look to use cryptocurrencies to buy from suppliers.
“To take the second point first, in financial and commercial terms, there are potentially enormous benefits for any business that buys things internationally and pays in cryptocurrency – digital currencies will be global currencies that can cross borders with no need to incur foreign exchange premia. Transactions are extremely quick and permanently traceable through the blockchain. Given the broad spectrum of goods offered by garden retail outlets, this may offer important cost savings on any imported product.
“In terms of accepting payment at the till, the garden retail sector is 99.9% geared up for transactions through chip and pin from customers’ digital wallets. Indeed, many are now cash-averse, and it will be a natural and easy move for retailers to accept digital coin when they so choose.”
For David, it’s somewhat inevitable. “The garden retail sector will have to at some point, depending on when the market matures. Why would any retailer want to restrict potential customers spending with them?”
Cryptocurrency might not be on the cards just yet, then, but it’s worth the garden retail sector exploring its potential now. As Katharine says, with customers increasingly avoiding cash, there could be an opportunity for cryptocurrencies to break through, ‘cryptocrash’ aside.