Consumer acceptance of crypto payments

Massimiliano Silenzi’s CryptoRefills shares key findings from the 2022 Retail Cryptocurrency Adoption Report with The Paypers.

What’s Happening Right Now With Crypto Payments: Are Merchants Accepting Them? What are their biggest concerns when it comes to crypto payments?


Unlike many reports in this sector that focus on merchant acceptance of crypto payments, our research focuses on the consumer side. So our visibility is limited to what people who buy with crypto think about merchants that accept crypto. And according to these ‘Cryptoshoppers’ the answer is clearly that there aren’t enough merchants accepting crypto.

As for the reluctance of retailers, I can only give my opinion based on our B2b2C interactions with some big brands and retailers. I see a combination of limited understanding of the technology and its potential across departments and at higher levels of the company, and reputational concerns. Technology and service providers to securely process crypto payments and protect against any type of AML risk are widely available. The payment departments seem to be quite knowledgeable and even have managers and teams dedicated to cryptocurrency. This is one of the reasons why we publish our annual report, to educate all levels about the potential of cryptocurrency to buy.

Do customers demand it?


According to our research, absolutely yes! In our 2021 survey, the main problem for customers (for them 49.3%) when paying with Crypto was high transaction costs (fees for Bitcoin, gas on Ethereum, etc.). Instead, in 2022, the problem of high fees is now in second place (with 35.3% of users complaining about the problem), and the number one problem facing crypto buyers (40.5%) is the unavailability of merchants and brands that accept crypto.

What is the untapped potential behind crypto payments?


I see great untapped potential for stablecoin payments over Ethereum Layer 2 or highly scalable blockchains such as Avalanche or Fantom. For those less familiar, and very generally speaking, Layer 2 generally works by blocking funds on the underlying blockchain, conducting transactions on a dedicated high-speed network, and then redistributing the funds on the original blockchain periodically or when the parties agree to do so. We were the first in the world to launch them at the e-commerce checkout, almost two years ago, when layers 2 were only used for Defi or games. It was a great success. Imagine paying with USDC through the Polygon, Arbitrum or Avalanche networks, with almost zero fees and instantly confirmed transactions. This powerful combination solves two important problems for both merchants and buyers, by avoiding exchange rate volatility, instant transaction confirmation, and avoiding costs for the parties to the transaction. I also believe that Bitcoin Lightning Network payments will surprise us in the future, especially in emerging markets.

Could you please describe the cryptocurrency buyers you encountered in your survey?


This year, we significantly expanded the depth of our research to understand user demographics, needs and preferences in greater detail. In fact, for the first time in our 2022 release, we’re incorporating a multivariate statistical methodology (K-prototype cluster analysis) where we basically analyze how different responses influence each other to define identifiable user segments. In our previous report, we did not use such a detailed analysis and described crypto buyers as belonging to two broad groups. The first group sees cryptocurrency buyers from emerging and fragile economies using crypto for financial inclusion and as a hedge against local currency depreciation or other problems. The other is instead from advanced markets, consisting of sophisticated, young and usually highly educated crypto enthusiasts who spend a lot of money.

This interpretation in the 2021 report was not incorrect, but it was probably too broad a generalization in relation to the new information we can derive from our new cluster analysis. In our new analysis, we identified seven global customer segments and go into detail describing their demographics, their knowledge and enthusiasm for blockchain, their preferences (for example regarding cryptocurrencies, technologies and products) and their purchasing habits.

What advice would you give to merchants who are skeptical about accepting crypto payments?


My first piece of advice would be to take the time to understand the technology (it’s not easy, I know) and truly assess its potential for growth. In terms of technology, aside from really serious and licensed processors that can help a lot, it’s important to understand how blockchains work to overcome skepticism, especially around anti-money laundering concerns. For example, a minority of experts may not be aware that there are tools (also integrated by any serious processor) that monitor incoming funds and analyze user wallets to detect and block any suspicious transactions (e.g. sources from ransomware, fraud, sanctioned entities, etc. .)

To assess the potential, I sincerely encourage them to read our report (even the free version is packed with data), to understand how the merchant’s offering and marketing strategies can meet the specific requirements of the growing number of crypto buyers; whether serving the unbanked, targeting highly engaged crypto communities, reaching out to earners and spenders, etc.

In the end, my recommendation is that there are ways to dive in, get a feel and learn more without going ‘all-in’ on crypto. We work with several major brands that want to introduce their products to crypto consumers through our store and help them better understand the market and technology.

What technological solutions are there that can enable them to accept crypto payments, eg Lightening Network, stablecoin?


I would say that there are mainly three ways to accept crypto today. The first is self-processing of transactions. This is technically possible, there are even open-source payment servers, but it comes with enormous complexity, probably insurmountable technical and financial complexity unless blockchain is the core of the business model.

Another approach is to look at a crypto payment processor that will process the blockchain transactions and settle the amount at the fiat merchant doing all the necessary KYC.

The third option is to integrate payment APIs from major crypto exchanges. Transactions will be processed off-chain, meaning the exchange will move crypto funds from their KYC’d user account to the merchant account without interacting with the blockchain. The downside of this solution is that it only makes crypto payments possible for clients of a particular exchange, but it’s generally a fast user experience and may offer some co-marketing opportunities.

The availability of specific technologies (e.g. Lightning Network) and supported currencies (Bitcoin, Eth, Stablecoin, etc.) will largely depend on the service provider’s offer.

What are the main conclusions of the report?


The first and most important for me, especially at this time for the crypto industry, is that we are seeing an increased demand for crypto payments and there are many customers from all over the world who, for very different reasons, demand a wider acceptance of crypto payments. We also see this in the increased frequency with which cryptocurrency buyers spend their cryptocurrencies (83.4% spend cryptocurrencies at least on a monthly basis, 39% on a weekly basis). Consumers who have at least once spent cryptocurrencies for shopping but said they rarely or almost never did so fell from 25.4% in 2021 to 16.6% in 2022. Also interesting to me is the higher demand for stablecoins, likely driven by market circumstances, but also by layer 2s.

About Massimiliano Silenzio

Massimiliano Silenzi is an Italian-American entrepreneur with +15 years of experience in payments and technology. He is the founder and CEO of CryptoRefills, former CEO of Onebip (mobile payments) and has held innovation, leadership and international management roles in mobile payment and commerce startups, as well as telecommunications companies such as Ericsson Enterprise and Telecom Italia Mobile. Massimiliano has a bachelor’s degree in business administration, a master’s degree in marketing management and a doctorate in business and finance.

About CryptoRefills

CryptoRefills was born with the idea that there are huge opportunities around blockchain to create better money and financial inclusion, freedom, privacy and fairness.

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