Cryptocurrency Payments: An In-Depth Analysis Of The Industry’s Most Disruptive Solutions

This report offers views on the evolving nature of cryptocurrency payments. The increasing popularity of cryptocurrencies is pushing merchants to accept digital currencies, and payment providers to develop innovative solutions for customers to use their assets on the go. Our report highlights how crypto is turning from disruption intro opportunity in the payments landscape.

An Outlook In Figures

increase in cryptocurrency payments processed in 2017-2018
of respondents believe crypto cards will boost adoption
growth in company turnover after launch of crypto cards
of people are expected to own a debit card worldwide by 2020

Key Takeaways

  • 01.
    More people are trusting cryptocurrencies to pay for goods and services
    Long gone are the days when cryptocurrencies were only perceived as an investment. With more than 34 million wallets out there, bullish market conditions and the appearance of stablecoins, people have started to use cryptocurrencies as a viable payment method. Despite Bitcoin price falling nearly 80 percent in 2018, the cryptocurrency payment industry CAGR expanded by 90 percent year to year. This year’s Bitcoin recovery has boosted the turnover of crypto payments, as seen on data from April and May 2019.
  • 02.
    Cryptocurrency payments popular among high-income nations
    Cryptocurrencies have become an increasingly popular payment method in the United States, United Kingdom, Russia and China. The adoption of this innovative payment alternative is triggered for different reasons depending on jurisdiction. From the desire to maximize efficiency to the need for safe-haven assets against hyperinflation, our research has identified the most common factors behind people’s decision to trust digital currencies for their day-to-day payments.
  • 03.
    Cryptocurrency cards seen as the preferred payment method in this area
    A vast majority of cryptocurrency holders points at crypto-backed payment cards as the preferred solution to pay with digital currencies. Prepaid cards loaded with cryptocurrencies enable customers to use their digital assets without worrying about merchants acceptance. Companies that launched cryptocurrency debit cards have seen their turnover figures increased by 3 times, outlining a big interest and demand for this type of product.

The State Of Cryptocurrency Payments

The cryptocurrency payments landscape is divided into two basic services: integrations allowing merchants to accept payments in digital currencies and mobile-based solutions enabling customers to exchange their assets on the go and pay with fiat money.

In this industry assessment, our analysts have examined the performance of the most prominent cryptocurrency payment providers on the market (BitPay, CoinsBank, CryptoPay, Spectrocoin, Wirex, Xapo) through public data available in the Bitcoin blockchain.

Weathering the crypto-winter

The evolution of this industry’s Compound Annual Growth Rate (CAGR) outlines a prominent future. The CAGR increased 21 percent in the 2014-2015 period, while a whooping 613 percent jump was registered two years later. The sudden rise in popularity is associated to the bullish market conditions at that moment. By the end of 2017, Bitcoin, the world’s leading cryptocurrencies, reached an all-time high of nearly 20,000 U.S. dollars per unit.

Despite the so-called ‘crypto-winter’ triggered a massive year-to-year value loss of nearly 80 percent, the CAGR still reflected a 90 percent increase for the 2017-2018 period.

Renewed excitement in 2019

Following a brief recession in the cryptocurrency payments market, data suggests an upward correction is taking shape in 2019. As seen on the chart, the volume of payments processed in cryptocurrencies is showing a positive development since the start of the present year.

Average payment on the rise

The average value of transactions processed by cryptocurrency payment services has stabilized in the range of 1,000-2,000 U.S. dollars in the wake of Bitcoin’s last year decline.

However, the average payment amount has reached a 7-month high in April 2019, breaking above the channel’s upper limit of 2,000 U.S. dollars. This dynamic is aligned with the above-mentioned revenue metrics, also pointing at market recovery.

Future: Adoption and Bitcoin price

With new cryptocurrency payment players arising in the market, bringing innovative solutions for both merchants and customers, along with Bitcoin’s price recovery, the industry is likely to witness a gradual and sustainable organic growth.

Who Is Using Cryptocurrencies To Pay?

As of the first quarter 2019, there are more than 34 million active blockchain wallets worldwide. The number of wallet addresses has been growing consistently over the past decade, despite multiple market downturns weighing on cryptocurrency prices. Only in the last twelve months, the number of wallets increased by 44 percent.

Identifying who is behind these address is vital to understand the rising demand for cryptocurrency payment solutions. After compiling trading and mining activity indicators from the largest exchanges and mining pools, we’ve shortlisted the 20 countries with the highest interest in cryptocurrencies.

Different countries, different reasons

A number of additional qualitative and quantitative factors were analysed in order to further understand why people are opting to pay in cryptocurrencies against traditional methods, such as cash, debit/credit cards or digital payment processors.

To that end, we’ve looked at the percentage of shadow economy, gross domestic product per capita, debit and credit card ownership, mobile phone ownership and internet accessibility.

Blockchain-based currencies unlock private, faster and more affordable payment options than those running on fiat money. By analysing factors with potential impact on the decision to choose crypto over traditional payment methods and matching data against countries where crypto activity is high, we’ve identified the key drivers behind digital currencies popularity and group them in three categories.

  • United StatesUnited States
  • GermanyGermany
  • South KoreaSouth Korea
  • EnglandEngland
  • CanadaCanada
  • FranceFrance
  • JapanJapan
  • NetherlandsNetherlands
  • ItalyItaly
  • SpainSpain
  • RussiaRussia
  • BrazilBrazil
  • PolandPoland
  • ChinaChina
  • TurkeyTurkey
  • VietnamVietnam
  • IndiaIndia
  • IranIran
  • VenezuelaVenezuela
  • South AfricaSouth Africa

Innovators: efficiency in mind

In these countries, the penetration of banking and digital financial services is high. A vast majority of people have access to mobile phones and a stable internet connection. These territories also come on top when measured in terms of income. For merchants in this category, accepting cryptocurrencies represent an opportunity to capitalize the increasing adoption.

Shadows: ‘unconventional’ works best

The countries in this category feature medium-low incomes, average banking and digital services penetration, as well as mobile and internet access. The population in these jurisdictions have been exposed to a series of deep economic recessions, hurting trust in government-regulated institutions, local currencies and the traditional banking system. In this sense, digital currencies are perceived as a viable alternative to execute payments and generate additional income through active trading or building and holding.

Survivors: in the lack of everything

Low salaries, poor access to the banking system, but still mobile phones and internet. People in this category are affected by strong economic downturns and (sometimes) hyperinflation. Cryptocurrencies help them overcome the challenging economic conditions by offering alternative ways to store value through stablecoins, earn with speculative investments and transfer money instantly without bearing the high costs of traditional systems.

Crypto Cards: The New ‘Kid’ On The Block

Cryptocurrency cards are prepaid payment cards that can be loaded with digital assets. These cards are typically linked to a mobile-based wallet, allowing holders to use their existing cryptocurrency balances to top them up. Digital currencies are automatically converted into fiat money, ready to purchase both online and offline, and withdraw in ATMs.

While there is evidence that the number of merchants accepting cryptocurrency payments is growing, there is still a long way to go in terms of massive business adoption. Cryptocurrency cards, also known as Bitcoin cards, eliminate this obstacle by letting clients use digital currencies and merchants to get paid in local currencies at the same time.

With crypto-backed cards, merchants have no interaction with cryptocurrencies. The financial intermediary is responsible to exchange those digital assets and load the client’s card with fiat money. To date, there are six major players in the market:

Wirex Card
Wirex Card
Wirex Card
European Economic Area
Coinbase Card
United Kingdom
BitPay Card
BitPay Card
CryptoPay Card
CryptoPay Card
MCO Card
MCO Card
Crypterium Card
Crypterium Card

Cryptocurrency cards launch boost turnover 3X

The demand for cryptocurrency cards is strong. By examining turnover data from different companies offering this type of product, we were able to recognize a correlation between the launch of crypto cards and a prominent increase in their overall turnover. In the following chart, the bars in blue correspond to the pre-launch stage of cryptocurrency cards, while the orange ones represent post-launch data. After companies launched cryptocurrency cards, their average monthly turnover increased by 3 times.

Higher prices, higher interest

The interest in crypto debit cards is also evident by the rising number of related internet searches. We have tracked various keywords associated to this particular product.

Data outlines a correlation between market downturns and the popularity of cryptocurrency cards. After a period of tepid results, following Bitcoin’s latest price crash, the amount of searches for Bitcoin cards has reached a 12-month high in May 2019.

70% of responders say cards are needed for crypto adoption

In Crypterium’s 2018 Customer Survey, we’ve asked more than 400,000 users about the payment instruments required to achieve mass cryptocurrency adoption. Nearly 70% of responders indicated that cryptocurrency cards are the best alternative.

69% of people will own
a debit card by 2020

Card ownership is rapidly growing on a global scale, according to World Bank data. Debit card ownership is expected to double in less than a decade, with the 2020 forecast standing at 69 percent. With this figure in mind, our view is that cryptocurrency cards will become increasingly popular as the digital currency market continues to develop.