Payments and Cryptocurrency
Historically, the primary method of payment has been an ever-evolving landscape. Barter and trade, evolved to gold and silver, then to the adoption of paper currency, moved to checks, and then to electronic payments. The one consistent factor has been change. This begs the question: what is on the horizon for a new form of payment?
Cryptocurrency is lauded as a decentralized form of digital currency that is constructed to be nearly immune to counterfeit or government manipulation. This form of payment is contended to be the most secure payment method one can use online.
This payment method is becoming increasingly more mainstream with the millennial and Gen Z demographics. Many individuals, within these categories, see the rising potential for this new form of payment method. Users of cryptocurrency enjoy the settlement time of funds transfer completion being minutes, if not seconds. Traditional payment methods typically take day(s) between individuals at two different financial institutions. Others may gravitate toward the notion of a globalized payment method, Bitcoin (a type of cryptocurrency) is an accepted form of payment across country lines. Country lines are usually hard or soft barriers for traditional payments like cash, checks, and ACH payments. Cryptocurrency comes with its own set of concerns and risks. Critics point to the decentralization and anonymity of this form of payment as a breeding ground for activity like money laundering and illegal activity. This has led to the US Treasury Department calling for regulatory action for stablecoins (a type of cryptocurrency whose value is tied to external or reference assets).
This movement in payment method places an additional burden on traditional financial institutions to retain their relevancy in a fast-changing landscape. It has led to changes in the financial industry, like Mastercard announcing they will launch a crypto-linked payment card in the Asia-Pacific region. With this card, individuals will be able to initiate payments with their previously held cryptocurrencies. There is an overall shift in major players adopting this new form of currency and payment. Some forecast it will continue to attract business to and through these institutions, as they have become early adopters in a new wave of payments.
How has your bank researched and familiarized yourself with this new age of payments? Does your institution believe the growing demographic of your customer base will continue to write checks and conduct traditional electronic payments 1, 5, or 10 years from now, or will there be a shift? What is your 3rd party card provider saying about their interest level in adopting and integrating cryptocurrency in their potential future product lines? This all leads into the overall consideration of: How do institutions navigate the everchanging landscape of society to retain their successful business strategy?
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