Back in the early days of Bitcoin, revolutionary zealots were proclaiming that Bitcoin would sweep the world and replace Visa and MasterCard as the kingpins at the point-of-sale, whether in retail or on the Internet. The times and speeches harkened back to sixties, when payment cards were gaining traction over cash, checks, and department store proprietary card systems. Veterans of the payments world scoffed at such claims, knowing full well that the hurdles to cross would be enormous for cryptocurrecies.
Why would payment veterans scoff? There is an old “chicken-and-egg” adage that rules the payment world from the merchant’s perspective. No merchant will undergo the cost enhancements necessary to accept a new payment vehicle unless there are a considerable number of people that have it and are willing to use it at the point-of-sale (POS), retail, online, or otherwise. Bitcoin has had a rough time of it, and other Altcoins will have the same issue, but you cannot ignore headlines such as these:
The first hurdle has always been the regulators, but attempts to close Bitcoin down in its early days failed in multiple jurisdictions. It is an acceptable alternate currency, even though volatility and anonymity bring it a mystique not found in fiat currencies. Where volatility may hinder its ability as an exchange-of-value vehicle at the POS, fraud has been a bigger hurdle that continues to grow over time. Since the inception of cryptos, software professionals focused on operational details, leaving security issues to arise later in the process. Unfortunately, the criminal element of our society has staked a claim in the cryptocurrency sector and is not leaving anytime soon.
Ever since 9/11, banking regulations have focused on providing transparency in all currency flows, especially those that cross a national border. Cryptocurrencies provide a level of anonymity that is in exact opposition to new governmental standards across the globe. Detractors contend that “Dark Money”, i.e., money from drug dealers, arms salesmen, tax evaders, money launderers, and terrorist organizations, has found a home in the public crypto ledgers. Estimates run as high as 25% or higher, but no one knows for sure, only that it is certain that anyone seeking privacy will gravitate to this medium.
The size and breadth of the major payment systems of today are additional challenges. There are over 20 million merchant locations accepting payment cards, a figure that dwarfs the crypto success headlines above. Even if Bitcoin could achieve geometric growth at the POS, many doubt if its system infrastructure could handle the volume load. The major systems are also innovating and working closely with governments to institute better payment alternatives, as well.
That brings us to cost and ease of use, the real Achilles heels for POS acceptance domination or just plain growth. The time it takes to verify a transaction is also cost intensive. Electronic wallets may provide an integral step to arbitraging the problem, but there are limits. Each cryptocurrency platform also operates in its own unique way, which means that cost/speed dynamics vary: “Bitcoin may be the most sought after since it is the first know digital currency, but it is worth noting that different altcoins like Litecoin, Dash, Bitcoin Cash, and many others are seamless, cheaper and faster than Bitcoin as a payment method.”
Merchant acceptance of cryptocurrencies will vary over time. San Francisco and New York tout the best acceptance demographics, but each is a destination center for international travelers. Believe it or not, this new revolutionary path is much like what transpired decades back with cards, but it is doubtful that acceptance will ever reach the ubiquitous levels of the major payment systems of the world. It will be a niche player.