How stablecoins can revolutionize ecommerce

Technology

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As consumer use of crypto increases, is it time for ecommerce businesses to adopt stablecoins for payments and settlement?

Ecommerce retailers understand why adopting a mix of payment methods is crucial to increase conversion, improve acceptance rates, control costs and foster customer loyalty. The emergence of stablecoins—and crypto more broadly—gives them another category to consider.

It's early days, of course. Outside of the Web3 world of NFT marketplaces and metaverse applications, few transactions happen using stablecoins. But the interest is there. Research from Visa suggests that one in five consumers aware of stablecoins are interested in using them to spend. This number rises to 30% in emerging markets.

Statistics such as these are causing the world's biggest ecommerce retailers to carefully consider the role of stablecoins and other crypto assets in their business.

Adidas is one of those brands. The global sportswear giant has already taken the plunge into the metaverse with various NFT drops. And stablecoin for payments will likely follow at some point, said Marko Ivanovic, Director of Omnichannel Payments, during a recent Checkout.com hosted crypto roundtable: "Adoption of stablecoins as a payment method will simply become about giving customers what they want. I can imagine a future where stablecoins are one of the main payment methods we offer."

The power of stablecoins for selling and settlement

While consumer demand will likely lead most retailers to begin offering and accepting stablecoin payments, their ability to lower operating costs will likely be what leads retailers to favor them over traditional payment methods. 

For small value payments, the fixed costs of using banking and card networks every time profoundly impact margins. Moving money on a stablecoin's blockchain network could be far more cost-efficient regarding unit costs and bulk processing multiple transactions simultaneously. 

Cross-border transactions are another area where stablecoins have the potential to shine. Every retailer operating across multiple markets understands the cost and complexity of cross-border processing. Those issues diminish with the borderless nature of stablecoins, making it a tool that could truly unlock the power of the global digital economy. 

Joao Reginatto, Circle's VP of Product, shares this bright future for stablecoins. However, he offers a slightly different vision, where stablecoin adoption first occurs in the treasury departments of ecommerce brands. "At the moment, stablecoins can't compete with many digital payment methods in terms of ease and convenience. Where stablecoins can add benefit is behind the scenes, providing a better settlement process than the technology currently used for fiat payments."

This interest is something we see daily at Checkout.com. Our research earlier in the year found that 36% of businesses are considering using stablecoins for settlement. And since launching our Stablecoin Settlement solution, we've been inundated with requests from businesses wanting to learn more.

Reaching the tipping point

As the potential benefits stablecoins offer businesses are becoming more apparent, the next question is: how soon will they be realized?

That depends on multiple factors. Payment providers need to integrate stablecoins onto their platforms; for merchants wanting to hold stablecoin directly, treasury departments need to know how to reconcile and treat them on their books; and awareness and education need to drive consumer confidence and adoption.   

One factor that will prove crucial is for more fiat currencies to be represented by stablecoins. The biggest stablecoins, like Circle's USDC, are pegged to the US dollar. Global retailers that operate in multiple markets will ideally want to let their customers pay in stablecoins denominated in the local currency and have exposure to a mix of fiat-backed stablecoins on their balance sheets. 

Circle's Joao Reginatto says this is happening. "Within the next two years, the currencies of the G10 countries will be well represented by stablecoins. Alongside this, we'll see innovations in FX that will enable on-chain stablecoin swaps, making it far easier and cheaper to adjust your exposure to specific currencies." Earlier this year, they launched EURC for the Euro market.

Regulation that enables

Pessimistic retailers may look at the collapse of Terra—and the less dramatic but still significant moments when Tether lost its peg to the US dollar—and predict that draconian regulation is on the way. Their pessimism is likely misplaced.

For starters, there seems to be no big cry from consumers, of whom 51% see stablecoins as much lower risk than non-pegged crypto. And CFOs and corporate treasurers are showing a significant appetite to transact in stablecoins: 77% say they've led to an increase in cross-border transactions, and 80% say they've contributed to a decrease in chargebacks. Regulators will not want to get in the way of these commercial gains. 

What we've seen from the regulation developed so far is a broadly supportive view of stablecoins and a world in which algorithmic stablecoins like Terra are unlikely to fall within the regulated definition of a stablecoin, instead stablecoins used in payments will refer to fiat-collateralized coins. The protections mooted should do far more to reassure customers and encourage adoption than curtailing use.

Jaoa Reginatto says: "Many policymakers have a very progressive view of stablecoins, but also understand that privacy and KYC are vital for people and businesses. I see the regulation as enabling the promise of stablecoins to do good for consumers and retailers." 

There's no better time to consider stablecoins than now

Adopting any new technology requires serious consideration for ecommerce brands. That's true and more for stablecoins and crypto, given the complexity and hype surrounding the technologies. 

But, the risk of inaction in today's highly competitive digital economy is likely greater. As Marko Ivanovic told us: "We're committed to exploring stablecoins at Adidas. As merchants, we tend to follow a trend for a long time and only act once the movement has become mainstream. From the Adidas side, we want to be ahead of the trend and integrate it into our ecosystem sooner rather than later." 

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Written on Sep 06, 2022 by

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Max Rothman

Head of Crypto & Digital Assets

Keep up-to-date with all things payments

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