What are the benefits and drawbacks of using crypto for payments?

In this video, I’m going to talk about the benefits and drawbacks of using distributed ledger technology - or DLT - for payments.

One of the main reasons payment teams use DLT is speedy settlement. Moving money quickly across borders is difficult to do.

Depending on the number of banks involved, it can take up to 5 days using Swift. By using stablecoins, you can move money faster. Even if you want to settle into fiat currencies like Euros. Times vary by provider, but as an example, it’s around 3-4x times faster to move money from South East Asia to Europe using DLT, compared to Swift.

Closely related to speed is availability. Banks aren’t always open when you need them, with daily cut-off times and downtime for weekends. Since DLT doesn’t need banks, you can make payments 24 hours a day, 365 days a year.

DLT can also reduce your costs. Blockchains remove intermediaries, meaning you could save up to 80% on foreign exchange fees. If you’re converting in and out of fiat currencies, there are additional costs. But you can still find savings, depending on the provider and currencies involved.

Blockchain ledgers are also highly transparent. Each transaction has a unique reference, which is permanent and trackable, so you can always tell what’s happening with a payment –  which is also a big benefit for compliance teams.  

And finally, accepting customer payments in crypto can help you tap into new markets. There are around 420 million owners of crypto globally. Demand to use crypto is particularly strong in countries where people don’t have access to traditional financial services.

Now let’s cover some of the drawbacks.

First up: volatility. If you’re holding digital assets on your balance sheet, fluctuating prices can be a problem.

But in reality, most businesses who accept crypto don’t hold on to it. Instead they work with partners who collect it on their behalf, and settle them into fiat. Most of our customers at BVNK also use stablecoins, which don’t suffer from the same volatility problem.

Next up: the knowledge gap. A third of Fortune 500 executives say that a lack of understanding is a blocker to adopting DLT…

The technology is fairly new and still evolving, so those who use it need to invest in constant learning. Choosing a payment partner with an experienced team can help here.

Lastly, inconsistent regulation around digital assets can be a challenge. At BVNK, we believe that in time, digital assets will be integrated into the mainstream financial system. We’re already starting to see this, as governments around the world recognise stablecoins as a legitimate way to pay.