Cash, credit or crypto? Why Asia Retailers Embrace Blockchain and Cryptocurrency Payments

Asia is the world leader in cryptocurrency investment as Central and Southeast Asia accounted for a third of NFT sales in the $22 billion trade last year. Asian consumers are actively trading cryptocurrencies and using them to pay for goods and services, while retailers are using blockchain in retail. Cryptocurrency transaction value is expected to exceed $16 billion by 2023, prompting 75% of merchants to get ready to accept the new currency.

The purchasing power and increasing income of individuals is expanding in the region. With nearly 700 million inhabitants, Southeast Asia has one of the world’s fastest growing populations; 440 million people are active internet users and more go online. The tech-savvy youngsters are willing to try new things, thus embracing cryptocurrency after witnessing the many incentives to participate – like Play-to-Earn GameFi schemes. Even for the wealthy, virtual assets including cryptocurrency funds, NFTs and stablecoins now account for up to seven percent of an investor’s portfolio, making it the fifth largest asset class. Asian consumers are eager for faster, safer and more hassle-free payment options – something cryptocurrencies can offer and retailers need to heed.

Trade with Crypto

Today, more than 18,000 companies accept cryptocurrency as payment for their products or services. Naturally, cryptocurrency trading has increased the wealth of young tech-savvy individuals, with brands now focusing on attracting this new group of affluent consumers – and it’s no surprise since 52% of investors in Asia are betting on crypto. Best known for their Web3 efforts, Gucci has also started accepting cryptocurrency payments from BitcoinBTC
to DogecoinDOGE
. Customers receive a payment QR code that they scan to pay through their digital wallet. Driven by the proliferation of cryptocurrency use, Gucci now provides cryptocurrency and NFT training to its employees.

But it’s not just in luxury, cryptocurrency is now starting to be offered in everyday retail experiences alongside cash and credit. A wide selection of retailers from sneakerhead marketplace Novelship, to shoe and bag brand Charles and Kieth and global coffee chain StarbucksSBUX
to name a few, now accept cryptocurrency for commercial transactions, allowing consumers to pay directly with their digital wallets. Charles & Keith saw that Singapore customers account for 70 percent of cryptocurrency transactions on their site. This is for the benefit of those who own cryptocurrency and may be seeking multiple channels where they can purchase goods and services using their investments.

Accept alternative payments

Asians adopted digital payments over Covid-19, spurred by contactless payments and consumer vouchers, and have discovered a new fondness for digital payments among QR code payments, digital wallets, BNPL (Buy Now Pay Later) and even biometric payments. Dealers favor this because of low commission rates and convenience. A quarter of consumers in Asia are cross-border shoppers, whether online or through physical travel; cryptocurrency has enabled a more seamless, global and interoperable payment solution wherever they are in the world.

Hong Kong’s major mall operators such as New World Development’s K11 Musea, Times Square and Harbor City have also celebrated innovative digital collectibles from showcasing Bored Ape Yacht Club, Moonbirds and CryptoPunks to Asia’s NFT collection Bunny Warriors and Hertz City in their malls to entice interest and expenses from these new cryptocurrency elites. But which direction is the continent heading with its blockchain use in the retail world?

A new mall incentive sees properties reward shoppers with lucrative cashback vouchers for their spending, some even seen circulating on second-hand marketplaces such as Carousel​l. LiberSave, a digital coupon solution software that uses blockchain behind its processes, steps in to connect sellers and buyers. The use of blockchain as the basis for coupon processing allows merchants to use best practices for managing digital assets, keeping transaction history unchanged to increase reliability and security. An innovative approach to cashback, discounts and promotional campaigns is realized through coupon digitization and optimization of the user experience.

Not just used to parading around as a forward-thinking early adopter of next-generation financial technology, there are many benefits to accepting crypto, and it’s also financially rewarding. Traditionally, credit card rates charge up to two to four percent of transaction fees, while cryptocurrency is half that if any. Cross-border sellers also lose out on unfavorable exchange rates, making cryptocurrency a better option and easing cross-border transaction fees. Unlike electronic bank transfers that can take days to process, cryptocurrency payments are transferred in real-time, allowing merchants to receive assets on hand and a steady flow of cash.

The transparent nature of cryptocurrency payments also helps reduce fraudulent transactions. The pandemic saw an increase in credit card fraud with the dollar volume of attempted fraudulent transactions rising to a third in 2020 compared to the previous year. Given that, cryptocurrency is now considered more secure than credit card payments because cryptocurrency does not require third-party verification. Transactions are registered across the entire public network where both sender and recipient of the payment can access relevant information about the transaction, and verify when and how a cryptocurrency transfer was processed.

Phemex, a cryptocurrency exchange and trading platform has also seen an increase in international buyers. An increase from two million to five million users was observed within one year, with Asia Pacific being one of the top trading countries. Simply offering new ways to pay by opening up cryptocurrency payments also unlocks access to new demographics, catering to the cutting-edge clientele that value transparency in their transactions. People now earning cryptocurrency wages are spurring demand for cryptocurrency payment options. The financial management platform was led by Morgan StanleyMS
managers who had found opportunities for retailers in the new digital economy. Nicolas Tang, internal communications director at Phemex, comments on alternative payments: “Settlement on blockchain networks is far more capital efficient than existing payment networks. Cryptocurrency volatility may prevent some from directly interacting with digital assets, but Web3 is changing finance in ways that modern businesses really can’t avoid.”

The challenges ahead

It is arguable that cryptocurrency is volatile and indeed subject to price fluctuations. Even as an investment, this can also affect income streams where, in current market conditions, the value of cryptocurrency received today may be worth another. Therefore, some dealers take in cryptocurrency only for their own investment reasons. Okra, a restaurant in Hong Kong, allows diners to pay with cryptocurrency, but only so the business can pay its suppliers and convert prices to fiat.

The use of cryptocurrency to receive or make payments can be treated as an exchange transaction as it is considered a digital asset. Legislators are constantly creating regulations to manage the uncertainty and difficulties, hence ongoing legal and regulatory developments. As more retailers accept cryptocurrency, there are still roadblocks to overcome, especially in the legal sector. Take South Korea, where regulators have imposed strict requirements on cryptocurrency exchanges such as certification from the country’s Information Security Management System (ISMS). In 2021, many exchanges fought at the last minute to be certified for operation, with only a fraction succeeding. Close to a third of the nation’s full-time employees have invested in cryptocurrency—compared to only about 11% of Americans who have invested in cryptocurrency. Then there is China, which has banned cryptocurrencies outright, shutting its population out of the chance to enjoy crypto-focused retail services. Given that China is the most populous nation in Asia, this retail revolution may not be uniform across the board.

Investment in the future

Asia is an epicenter of innovation, incubating countless blockchain projects that compete with traditional financial institutions. The consumer market, especially in Asia, has always been one that has been changing and evolving, and as cryptocurrency becomes even more part of everyday life, the retail experience will follow suit. More brands are accepting cryptocurrency for their products with new opportunities for cryptocurrency holders to use tokens. If Asian retailers fail to capitalize on this, they risk being shut out of the market and alienating consumers. Despite the challenges that can be observed in the region, there seems to be no stopping the Asian crypto-retail movement. If the current trajectory of cryptocurrency used in retail in Asia continues, we could be looking at even greater use over the next decade.