Financial institutions (FIs) are preparing for an anticipated surge in the usage of cryptocurrency, and competition among FIs angling to underpin businesses’ cryptocurrency payments is likely to be fierce.
The Cryptocurrency Payments Opportunity, a PYMNTS and i2c collaboration, reported that while only 10% of banks are currently enabling access to at least one form of cryptocurrency, 75% of FIs plan to expand their support for virtual currencies over the next 12 months.
“Consumers’ and businesses’ perceptions of cryptocurrencies have evolved greatly over the last decade, from crypto-insider discussions to being something taken more seriously and tracked by financial companies and media to where we are today, which is actual discussions around dinner tables, businesses and boards,” i2c President Jim McCarthy told PYMNTS.
Eyeing Cryptocurrencies’ Potential Benefits
Businesses are analyzing how virtual currencies could address their payments needs. Those looking to go global are particularly interested in crypto as they search for solutions that can help them ease the pain points associated with cross-border business-to-business (B2B) payments.
“Because it’s inherently a network-based asset, crypto moves more easily across borders in that you don’t have to go through a myriad of correspondent banks to transfer value,” McCarthy said. “It also removes a lot of the opaqueness that comes with moving money via traditional methods.”
As a rising number of companies and consumers tap virtual currencies for their payments and financial needs, businesses, FIs and FinTechs alike are eyeing cryptocurrencies’ potential benefits. The surging commercial and consumer interest in cryptocurrencies suggests that the FIs that were early adopters of digital asset technology are well-placed to foster more loyalty for clients and customers.
Developing Seamless Transaction Methods
Supporting smooth and speedy cryptocurrency payments experiences still can be challenging, however. This is especially evident when it comes to cross-border payments, which are notoriously complex and friction-laden — even when fiat currencies are used. Changing regulations, the availability of key digital infrastructure and trust all can hamper cryptocurrencies’ adoption.
As a result, international firms that wish to make cross-border B2B payments via cryptocurrencies could face significant hurdles, meaning banks must carefully examine trends surrounding virtual currencies worldwide. Eliminating friction points is key to the growth and adoption of cryptocurrencies on a global scale.
“From our vantage point, supporting millions of crypto-backed cards around the world over a single global platform, we’re seeing tremendous innovation, growth and potential over the next few years,” McCarthy said. “However, that optimism is tempered by the view that, as crypto becomes more mainstream, it will bring with it more growing pains in the form of regulation, compliance and oversight from central banks [and] regulators.”
Banks must continue to keep a careful eye on how businesses and consumers are interacting with cryptocurrencies to determine how best to position themselves as dominant forces in the space. Consumers and companies are likely to become increasingly comfortable utilizing digital assets for payments, which means developing seamless, swift cryptocurrency transaction methods will be key for FIs.