As the Bitcoin network nears its tenth anniversary, the great majority of merchants are unsure about whether they will accept digital currency for payments.
Acceptance of digital currency remains largely off the agenda for the great majority of Australian merchants, a new report says.
Researcher East & Partners has released details of its latest Merchants Payments Report, which reveals that only 4.6 per cent of merchants plan to accept digital currency by 2020.
Among the rest, 83.3 per cent are unsure and 12.1 per cent say they have no plans to accept digital currency.
The proportion of merchants who say they plan to accept digital currency has actually fallen – from 5.2 per cent earlier this year.
“Eight out of 10 merchants are arguably open to accepting cryptocurrency in the near future if the benefits and drawbacks can be spelled out clearly,” the report says.
“Key decision makers demand tangible revenue and cost saving benefits before investing in acceptance of yet another new payment channel on top of the ever-increasing range of debit, credit, online, mobile, wearable and biometric payment methods.
“Factors that may hasten uptake include enhanced security arrangements. Security and fraud prevention have always been pressing factors in the adoption of new technology.”
Merchants who favour the use of digital currency for payments cite a number of perceived advantages, including lower cross-border costs, lower transaction fees and, oddly, improved fraud prevention.
Open banking, which are being developed here and overseas, will push the payments system towards broader adoption of digital payments.
However, wider adoption will also depend on whether cryptocurrency market participants can scale up their systems to accommodate mass payments. In a paper published earlier this year, the Bank for International Settlements analysed cryptocurrency’s potential for use in day-to-day transactions.
It found a number of problems that would have to be overcome before digital currencies could play such a role.
“A key limitation in terms of efficiency is the enormous cost of generating decentralised trust. Individual facilities operated by miners can host computing power equivalent to that of millions of personal computers,” the BIS says.
Cryptocurrencies do not scale like sovereign moneys. To live up to their promise of decentralised trust, each and every user must download and verify the history of all transactions ever made. To keep the ledger’s size manageable cryptocurrencies have limits on the throughput of transactions.
With capacity capped, fees soar whenever transaction demand reaches the capacity limit. And transactions have at times remained in a queue for several hours, interrupting the payment process.
“This limits cryptocurrencies’ usefulness for day-to-day transactions, such as paying for a cup of coffee. The more people use a cryptocurrecy, the more cumbersome payments become,” the report says
East & Partners says cryptocurrency will achieve its “light bulb” moment when the disparate payment channels achieve greater integration.