E-commerce is developing around the world, becoming an important part of international trade. Thus, the share of payments made online in the form of transfers between foreign residents is increasing. The traditional banking system does not have time to rebuild to new requirements, remaining slow and expensive. Cryptocurrencies are being used as an alternative solution, becoming more widespread.
E-commerce Trends and Their Relation to Cryptocurrency
Still, e-commerce includes not only online retail but also any other business processes related to financial transactions via the Internet. Key components of e-commerce, in addition to sales through online stores:
- wholesale purchases and sales, including foreign ones, with import and export payments;
- banking transactions related to capital transfers and payments both within countries and between sending recipients from different regions of the world;
- insurance services provided electronically;
- advertising via the Internet, and exchange of commercial information online.
Following the COVID lockouts and restrictions on offline activity became a catalyst for the development of e-commerce. According to analytics, in 2022 in China, online sales accounted for 50.3% of total retail. The global average is 17-18% and the potential change by 2024 is up to 21.8%.
Thereupon, the amount of online payments is increasing. In most cases, ordinary customers buy goods already located in their country. At the same time, sellers need to purchase products regularly, replenishing warehouses. A significant part of wholesale supplies falls on imports, which must be paid.
The use of bank transfers is associated with a number of difficulties:
- possible restrictions and limits on currency transactions - depending on the regulations of a particular country;
- prohibitions to accept payments to bank accounts (individuals and companies), to make foreign transfers;
- high commissions, long waiting periods - due to checks for compliance with currency control rules, security requirements, and legislation;
- the risks of the transaction rollback by the sender due to litigation.
The traditional banking system slows down the development of e-commerce, which leads to the search for alternative solutions by businesses. The use of blockchain and cryptocurrencies in international payment systems saves entrepreneurs from the problems described. As a result, crypto wallets are being widely introduced by online stores, wholesale suppliers, and international financial institutions.
Benefits of Using Crypto Payments
The essence of blockchain is the decentralization and the anonymity of the operations performed. Transactions are direct and irreversible, there are no intermediaries. The sender and recipient cannot be tracked. In practice, one company transfers money to another for certain goods or services, bypassing the banking system. At the same time, the fact of the concluded transaction can be documented, which leaves opportunities for going to court.
Benefits of using cryptocurrency for e-commerce:
- the speed of payments increases, fees decrease, and limits on transaction amounts are excluded;
- no risk of blocking the funds, or their prolonged freezing due to checks;
- you can pay counterparties anywhere in the world, regardless of whether banks support payments;
- the chain is reduced during the transfer-acceptance of money. Instead of a series of consecutive transfers between several banks, a single direct transaction is executed through the blockchain.
Individuals receive all these advantages by analogy. The buyer can choose and pay for the goods in the online store, regardless of whether it is possible to convert the existing national currency into a supported site. It becomes more convenient to purchase products through foreign markets - limits on the volume of foreign exchange transactions do not apply to cryptocurrencies.
Digital currencies created by states (digital dollar, yuan) cannot replace cryptocurrency, as they are centralized money, completely dependent on the position of governments.
Cryptocurrencies To Watch
Now, let’s consider several interesting coins of the e-commerce sector:
Well-known Ripple, the company behind the XRP cryptocurrency, is on a mission to turn every e-commerce company into a crypto company. The company believes that blockchain technology can revolutionize the way of online shopping, making it faster, cheaper, and more secure.
Ripple's XRP Ledger is a blockchain-based platform that can be used to send payments quickly and easily across borders. It is also very scalable, meaning that it can handle a large volume of transactions. Also, XRP is very cost-effective. All this makes it in demand for e-commerce businesses.
A key feature and advantage of this platform for users is the possibility of margin trading in a fully decentralized environment.
This means that:
- you can get leverage for your crypto transactions without going through the usual procedures for centralized exchanges (such as identity verification and KYC);
- you can shorten crypto and thus earn in a bear market or hedge your opposite spot positions;
- you can trade cryptocurrency derivatives.
Due to the Layer2 solution for trading perpetual contracts based on smart contracts, exchange users have the opportunity not to pay gas fees at the Ethereum level, paying only a small commission to the platform itself. This is ensured by the fact that market makers can sign and transfer orders on a platform outside the blockchain, using it only for settlements. Therefore, this allows opening the lowest volume deals without thinking about the cost of gas.
XCUR is the native token of the Curate marketplace app. Its main goal is to conclude a fairer deal with sellers who have meager profits. Through the Curate app, sales will be charged a flat 4% fee - significantly less than on major platforms. Another difference from other platforms is the distribution between buyers and sellers of 1% from each transaction.
For XCUR tokens, many revenue models have been presented. Retail merchants, brands, and influencers can sign up for Pro membership, while advertisers and agencies can target their campaigns to a certain range of customers and gain higher levels of engagement.
Сhallenges For Crypto in E-commerce
Thanks to Amazon or Overstock platforms accepting different tokens, we see that crypto is becoming a competitive payment method. However, there are several difficulties with the full adoption of cryptocurrency.
Volatility of the market
The cryptocurrency market is volatile and unpredictable. Unstable demand and supply, in addition to high-profile bankruptcies and a shift in consumer sentiment, caused the cryptocurrency price to swing. The cost of some tokens is down, others are up, but others are not surviving at all - the young market is evolving.
And so far there is nothing to be done about this volatility. Not surprisingly, many consider the instability of the value of coins to be the most important problem.
Lack of regulation
The problem of cryptocurrency regulation remains relevant. If the lack of control in the early stages attracted the first users, now this is a stumbling block for users in general. Regulators like the SEC and CFTC have many powers to control digital assets, but a complete settlement of the processes still seems far.
The lack of regulation is holding back further development of the sector, as well as making users wary of investing, while investor protections are limited.
A lack of education
Although many more people are familiar with the concept of cryptocurrency, not everyone is ready to consider it as the main financial means. A survey by Visa found that 44% of U.S. adults have not taken any steps to learn about crypto, such as how to purchase it or where they can store it.
Investing in cryptocurrency is still a fringe activity for many. Plus, finding a reliable source of learning is quite problematic. Especially when crypto scams and "get rich quick" schemes have become so widespread.
The extension of payments with the use of blockchain technology is a catalyst for e-commerce. With the help of the mass use of cryptocurrencies, you can speed up international transfers, and increase their total volume. As a result, conditions are created for increasing the turnover.
With all the challenges, new money is also gaining popularity among individuals. According to Triple-A research, cryptocurrency is actively used by 13.7% of the US adult population (44.3 million people). The response to the popularization of crypto payments was the adoption of appropriate payment services by online stores.