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02 Dec 2021

02 Dec 2021

Opportunities for the corporate mid-market

Opportunities for the corporate mid-market

Opportunities for the corporate mid-market

How the most underserved market could become the biggest benefactors

How the most underserved market could become the biggest benefactors

How the most underserved market could become the biggest benefactors

Crypto has been polarised. On the one side you have consumer retail, on the other you have large institutions like MicroStrategy holding $7.26 billion USD in BTC. This can be typical of any new payment method or disruptive technology — you have the early adopters (a combination of tech fans and underbanked), and giant behemoths with resources to explore and dip into new technologies (think Microsoft, Tesla).

But the crypto ecosystem is maturing. Increasingly it is being accepted as a new, significant player in financial services. One that is mature enough to provide significant value accretion if integrated into a corporate’s cash management process.

Companies such as Square, are proving this trend, already holding $16 billion USD worth of BTC between them. While they are large enough to have dedicated teams to manage this asset class — the ecosystem is becoming mature enough to also provide value to the mid-market.

There are a number of ways that mid-market corporates can leverage crypto:

Payments and receipts

Adopting crypto as a payment method can enable businesses to unlock a new demographic, and create an incremental uplift in their users, volume, or basket size. Payment methods often create their own network effect — where increased usage and acceptance creates more users and adoption. So accepting a new payment method can come with an already established customer base that has whole heartedly adopted this method as its preferred, or in some cases, only payment type.

As a society, we’re largely moving online. By 2022, ecommerce will be responsible for 17% of all sales, while one-third of the global population (or 1.92 billion people) will shop online. With increased online shopping, comes an increase in potential for chargebacks. Chargebacks are a notorious problem for businesses across all verticals — one that has only been increasing in severity over the years.

In 2018, Kount and Chargeback 911’s “State of Chargebacks” report found that 18% of people surveyed estimated their chargeback rate was between 0.6% — 1%. 13% of respondents estimated their chargeback rate was between 1% — 2%. The findings from Kount’s survey on “Digital Payments in 2021” suggests that some companies have experienced huge changes.

More than half of the respondents to the survey said that their chargeback rate had increased since March 2020, when asked how their company’s chargeback rate has changed.

Among all respondents, 47% estimate their company’s current chargeback rate is between 0.6% — 1%. While 33% estimate their company’s current chargeback rate exceeds 1%.

Amongst the total amount of illegitimate chargebacks, only 18% of the 80% of merchants that file disputes actually win. This isn’t an issue that is going to go away — and the true cost of fraud is often underestimated. It’s not just the cost of the transaction, but also logistical costs like packaging and shipping, payment fees such as interchange and chargeback fees, as well as time and resources poured into the process. According to a study released by Juniper Research, eCommerce merchants stand to lose roughly $20 billion in 2021 due to eCommerce fraud; an 18% increase over the $17.5 billion lost in 2020.

This indicates that the rate at which the cost of online fraud grows is accelerating. Criminal activity is going to be more of a problem than ever for merchants over the next several years.

Accepting payment via crypto virtually eliminates the possibility of chargebacks for businesses. Chargebacks were implemented around 40 years ago as a consumer protection scheme by the card schemes. By nature, the card issuer often returns the consumer’s money prior to actually reviewing the merchant’s side of the case. With crypto, it’s decentralised — so there is no government or card scheme to control the rails, and therefore enforce rules on merchants. The sale is final unless the business decides otherwise.

Treasury

By diversifying their portfolio into crypto businesses can be exposed to better risk-adjusted returns. Companies such as Square, Tesla, and MicroStrategy are already reaping the benefits of crypto’s store of value properties. And it’s not just them — as per BuyBitcoinWorldwide, more than 40 corporates, including 34 publicly listed companies, have direct exposure to Bitcoin on their balance sheets with cumulative holdings of more than $16 billion USD.

Additionally, wth inflation seemingly rising, and no near term increase in central bank interest rates, it is almost essential for businesses to optimise how they hold and invest their cash. Those who don’t could not just miss returns — but also lose money by not doing it. For example, 5% inflation would mean that £100k of assets held at 0% would actually cost businesses £5k per year.

Cross border transfers

Integrating crypto into the corporate cash cycle can operationally benefit businesses. Accepting payments globally comes with challenges that impact the speed, cost, and geographic footprint of your business. Card payments or bank transfers can take days to process — squeezing your working capital. Relying on convoluted legacy processes involving multiple schemes and banks results in exploding costs. And wide ranging currency and geographic factors can impact your ability to enter or grow new markets.

Comparatively, crypto cross-border transfers are fast, cost effective and secure. Regardless of where you are in the world, or where you’re sending money to, all transactions have the same fees and settlement times. Stablecoins such as Tether or USD Coin have proven particularly effective in this area.

Large players such as PayPal have shown increased support for crypto cross-border payments. The company recently launched a version of this, making it possible for US customers to pay merchants around the world in a number of cryptocurrencies, which are then converted into local currency during the transaction.

Dan Schulman, CEO and president of PayPal, told Reuters, “We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and/ or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants.”

Schulman is confident about the solution’s prospects, predicting that it will achieve $200m transaction volume within the first few months.

The case for crypto adoption is clear

BVNK is eliminating the need for in-depth knowledge of the crypto space, time, resource, and technical expertise, that has traditionally prevented fast-growth businesses and financial service providers from realising the benefits of cryptocurrencies. By transforming the experience, making it more accessible so that non-experts can enjoy the benefits of digital asset-based financial services, BVNK are unlocking untold possibilities for businesses. Get in touch today to establish how you can begin your crypto journey.

Crypto banking news, events and updates

Crypto banking news, events and updates

Crypto banking news, events and updates

Our blog is dedicated to bringing you the latest industry news in crypto, banking, treasury management and investments.

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Get started

Get in touch with us today to find out how BVNK™ can make running your business simpler.

Open a Business Account

Contact Sales

Get started

Get in touch with us today to find out how BVNK™ can make running your business simpler.

Open a Business Account

Contact Sales