Using Cryptocurrency for everyday transactions – a new era?

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Last week PayPal announced that it would enable US consumers to be able to pay for goods and services online, using cryptocurrency. The transaction at point of check-out will be completed through conversion of the cryptocurrency into a fiat currency, in this case US dollars, to remove some of the volatility that we see with these types of currencies.

This extension into cryptocurrency payments comes off the back of PayPal enabling customers to be able to hold cryptocurrency last year. This is perhaps the most significant move we have seen in paving the way for digital currency to become more mainstream. PayPal’s aim is to roll this service out to c. 29 million retailers/merchants globally, an ambitious move to accelerate adoption.

“This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet,” PayPal head Dan Schulman told Reuters ahead of a formal announcement.

PayPal’s breaking news was rapidly followed by Elon Musk announcing that Tesla will be accepting cryptocurrency as payment for cars, another significant endorsement of this new emerging payment method. So why is this digital payment method getting more airtime and traction? How does this way of making payments help consumers, retailers, and financial services providers? – here we examine the benefits of taking digital currency into everyday transacting.

What is cryptocurrency?

Cryptocurrency is a digital currency based on a technology called blockchain. Most people even vaguely familiar with the concept, have heard of the largest and most popular version called Bitcoin and maybe another, Ethereum. What many may not know is that there are an estimated 5000 different types of cryptocurrencies in circulation in some form or other.

Cryptocurrency can be bought, sold, traded, and exchanged for goods and services online. With some minor exceptions found in some new experimental forms, cryptocurrency does not exist in any physical form, it only exists as part of a secure digital ledger in the blockchain.

5 areas where digital currency adoption is beneficial

  • Low fees for international payments – in comparison to electronic fund transfer, or card transactions, cryptocurrency-based payments carry a much lower processing fee. The cost is kept extremely low, because there is no centralised government in play, or any other intermediary institutions. Transaction speeds are must faster than the traditional payment methods we have in place today, as there is no concept of “authorisation”, which can delay transactions. As we see with transfer in bitcoins, the whole process takes place seamlessly and without friction, leading to faster receipt of funds. This way of paying makes it a brilliant option for international travellers, where card companies typically charge 3% for using the card abroad.


  • Accessibility & Financial Inclusion – There’s (approximately) 2 billion people globally, that do not have access to banking or a bank account, but in the main, most of these individuals do own a mobile phone. Here is perhaps one of the most democratizing features of cryptocurrency, in that anyone can send and receive “value” in the form of say bitcoins, because the only thing they need, is access to a smartphone or a laptop. Giving this previously excluded population the ability to use the blockchain technology, to enable financial transacting, which is a vital aspect of enabling prosperity and progression. There is a lot that is taken for granted in banking, and even the fundamentals of opening a current account for everyday use is not an option for nearly 1/7th of the planet, even in 2021
  • Authenticity & Integrity of transactions – under a centralised banking structure, trust comes from knowing the institutions involved in physical money management. As we have already discussed, this is not the case with cryptocurrencies, as trust is a function of the “code”. The view is that blockchain, the underlying technology that powers cryptocurrency, is more secure because of the long audit trail of records, which cannot be tampered with because of enhanced encryption
  • Management of smart contracts – One of the advantages of blockchain is the ability to digitise most assets and incorporate that into the blockchain. Whether these assets are for consumers or for businesses covering real estate, cars, art, yachts or raw materials etc. The ability for these items to be digitised means that they can be traded through smart contracts without the need for a third-party intermediary. Crypto allows all these contract’s to be handled in a fast, secure, and visible way and the application of the technology is wide-reaching. This makes the whole process of trade, and transacting much more cost effective and fully auditable, which makes it ideal for shipment tracking, loans, personal identity for age verification, and even public sector areas such as tax collection or managing elections
  • Retailer Offers & Discounts – one of the newer trends we are seeing, is some retailers now offering customer discounts for paying using crypto (bitcoin), where discounts of up to 35% have been seen, which is a staggering benefit for consumers. Also, some of the more established supply chain, across the business ecosystem, is also showing similar trends, with discounts being offered to procurement for payment in digital currency, simply for the ability to receive value faster

Those are just some of the benefits that become available as digital currency use becomes more widespread. The move by PayPal will perhaps galvanise more institutions to offer similar payment services, as the industry becomes increasingly more cost conscious under the current economic climate… there is now a necessity to look at faster, cheaper, and more secure ways of transacting. This is especially true for the UK market, where recent payment processing price hikes by both Visa and MasterCard have made card-based, cross border transacting, hugely uneconomic through increases in interchange fees.

Other benefits, not called out explicitly but which are noteworthy, are more macroeconomic in nature, as these digital instruments also add an extra layer of options under UK economic policy. As digital currency helps to replace instruments like physical cash (see the Pandemic and Cash Usage, February 2021), this has the effect of lowering interest rates, should below zero levels be required. Additionally, the Bank of England has another mechanism to stimulate demand through distributing digital currency more easily and, pointedly, than cash to better manage inflation.


A cautionary note

All these benefits are well understood, but with great power comes great responsibility. The area of cryptocurrency still lacks a regulatory framework, and any lack of supervision in a financial system can be dangerous and can potentially mask criminal activity more easily. The currencies are still highly volatile, and some of the security issues persist despite significant inroads on the encryption side. It’s a catch 22 situation though… as solving for these challenges requires the framework to operate on a more centralised basis… which kind of defeats the purpose of it existing in the first place…


Parting thoughts

My personal sense of cryptocurrency is, on balance, that it should be seen as a force for good, i.e. driving financial inclusion, making it more cost effective for businesses and consumers to transact internationally, and greater visibility through a better audit trail of where things like our food were sourced. It should also drive more innovation and competition in a market that is littered with copycats, merely improving UI/UX and not solving for larger industry issues…

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