Cash, Credit or Crypto? Why Digital Currency Is an Inevitable Payment Option

On May 22, 2010, a date now known as Bitcoin Pizza Day, a Florida man made the first-ever bitcoin-based purchase for—you guessed it—pizza. He reportedly exchanged 10,000 bitcoins for two large Papa John’s pizzas. Had he instead held on to his stash, it would have been worth roughly $650 million in October 2021 when a single bitcoin hit a high of $65,000. (Today, given the dramatically fluctuating value of cryptocurrency, it’s worth about half that much.) Since that fated day 12 years ago, we’ve seen everything from movie theaters, convenience stores and fast-food chains to luxury fashion brands and an NBA team start accepting digital currencies like bitcoin, ethereum, dogecoin and shiba inu. While Amazon, Walmart and Target confirmed they do not currently accept cryptocurrency, experts say we’re about five to 10 years away from seeing cryptocurrency as a mainstream retail payment option. This evolution, they say, is inevitable, and momentum is already building right under consumers' noses. “I think primarily it is 'don't be left behind and don't lose your customer,'” said Tim Vanderham, former CTO and evp of software at payments giant NCR. “I think that's the No. 1 driving factor.” A shift on par with email Estimates vary, but a November 2021 Pew Research study pegged the cryptocurrency market at about 53 million users in the U.S. Vanderham estimates we’ll reach 1 billion worldwide users of bitcoin alone in the next four to five years. According to research from consulting firm Nielsen Norman Group, it took the internet nearly 40 years to reach that milestone in 2005. Brock Pierce, chairman of the nonprofit Bitcoin Foundation, likened the state of cryptocurrency to where websites were in the late 1990s. “Your brick-and-mortar business was still more important at that point,” he said, “but that doesn't mean the writing isn’t clearly on the wall.” And that, he continued, is because both are superior to the status quo, and cryptocurrency will eventually do for money what email did for communication. “It's like saying you can send a message with an envelope and a stamp, or an email,” Pierce said. Accessibility, the metaverse and a crash Spurring crypto's growth is the simple fact that it’s increasingly easier for consumers to get their hands on it. Mainstream payment platforms like Venmo, PayPal and Stripe now allow users to buy and sell cryptocurrency, which means interested consumers don’t have to seek out a cryptocurrency exchange or a broker to take the plunge. What’s more, Coinbase has added support for Apple and Google Pay, allowing users to pay with crypto via debit cards. The metaverse is also responsible for driving interest, particularly among young consumers. “Anything that you're doing in [virtual platforms] Decentraland or Sandbox has to have a crypto-based currency in order to interact and spend, and that really started with the Robloxes of the world and the Fortnites where you are buying virtual skins and things like that,” said Farrell Hudzik, evp of financial institutions at advertising platform Cardlytics. Even the recent crypto crash—in which economic uncertainty prompted a massive sell-off that wiped out a reported $300 billion in value—could help spur further adoption. That’s according to Alanna Gombert, publisher and CRO at blockchain media company Decrypt Media, who noted the lower value could prompt more spending. In fact, she said, NFT sales “go way up” after a crash because “people can afford to buy them, so they do.” Relevancy While you may not see the average American pull out a digital wallet to make a purchase tomorrow, the concept isn’t exactly unprecedented in the retail industry. Online electronics retailer Newegg has accepted bitcoin since 2014, for example. Then, in 2019, digital currency got a shot in the arm when payment platform Flexa announced an app called Spedn along with a partnership with cryptocurrency exchange Gemini, which reportedly let users spend cryptocurrency with early retail partners including Crate and Barrel and Nordstrom. That list has since grown to include Chipotle, Regal Cinemas, Sheetz, Bed Bath and Beyond, GameStop, Office Depot, Petco and Ulta Beauty. Meanwhile, luxury brands like Gucci have begun testing crypto. A Gucci rep said that as of May, customers can pay with 10 digital currencies, including bitcoin, ethereum, litecoin, dogecoin, shiba inu and five stablecoins, or digital currencies tied to stable assets like the U.S. dollar or gold that are therefore less volatile. Even coffee giant Starbucks allows customers to at least indirectly pay with digital currency if they add digital asset platform Bakkt as a payment option in the Starbucks app. Similar workarounds in which shoppers can use crypto for payments even though the retailers don't directly accept the digital currency are also reportedly available for Amazon and Walmart. Benefits Hudzik called the shift to crypto a “relevancy play” for retailers. “I think more than anything, it's demonstrating a level of innovation and flexibility to a base,” she said. But there are material benefits for retailers as well. For starters, digital currencies are settled via blockchain technology, which is faster and cheaper than current payment systems. “Blockchain will make those payments virtually instantaneous from the consumer to the merchant and you can pay, settle and have finality of that exchange 24/7/365,” Vanderham said. Cryptocurrency also reduces cross-border taxes and conversion rates because, as Gombert put it, “there's no exchange rate.” “If you go to France, bitcoin, for the most part, is the same value as it is in the U.S., because it's one entity … so it opens up more possibilities for other markets,” she said. What’s more, unlike traditional currency, the value fluctuates, so retailers could potentially take in crypto and then treat it as an investment. In other words, if a luxury brand accepted half a bitcoin for a dress—or about $15,000 as of June 1—that half bitcoin could then increase or decrease in value. “So retailers become more heavy investors because [they’re] actually in the market with a financial instrument that changes in value over time much more than the U.S. dollar,” Gombert said. “Obviously, there are things like inflation, which we are going through right now, but there is not as much of an investment value by holding $1. It's not going to go up to $10 tomorrow.” And even if the value of cryptocurrency goes down, retailers could still make money by shorting it, she added. Loyalty and inevitability For his part, Vanderham suspects retailers will eventually release their own coins, which customers will store in digital wallets as part of a high-tech loyalty program. This, too, will help crypto go mainstream as even not-so-tech-savvy consumers take the leap with digital wallets to capitalize on membership benefits. Retailer-specific coins would also give merchants more insight into shopper preferences. “They can use it as a form of loyalty points or currency or using it as a form of ‘I know who you are, I know what your preferences are,’ and using that as a way to do digital marketing because they're storing all of that data on a blockchain,” Vanderham said. “It's going to be more efficient and easier to do the right level of targeted marketing to their loyal customers.” Eventually, crypto will be just another asset in consumers’ wallets, alongside cash and credit cards. “It will be part of our everyday lives, so retailers will need to support it and therefore technology providers will need to support retailers so consumers can have their choice of payment forms,” Vanderham said.