Can Crypto Transform The Payment Landscape in 2021?
By Julia Chambers, Research Director, Financial Services | December 3, 2020
Remember when Bitcoin was launched, and the appeal it had when it first emerged in the shadow of the Great Recession? Most people probably don’t. It has taken over a decade to reach base awareness, but at the time, financial trust was at a low point and the opportunity for a decentralized currency emerged. Now, in the midst of a pandemic and the hugely volatile economic indicators in major economies, the appeal of investing in cryptocurrency becomes easier for the everyday American to understand. The one difference this time is – awareness.
According to Maru and the nearly 10,000 interviews about payments innovation in our MoneyScreen platform, there is an increased understanding of digital currencies and greater usage of cryptocurrency transactions marking the beginning of a breakthrough for this payment type. Our original research uniquely taps into people’s emotions which shows how people actually feel and think about cryptocurrency vs. traditional payments.
MoneyScreen leverages System 1 tools to uncover how consumers truly feel and think about a concept, such as Bitcoin, in addition to how the adoption of the concept would change their financial behaviors.
Awareness of cryptocurrency on the rise
Back in the early 2010s, while consumers may not have been able to clearly see how cryptocurrencies would meet a need, subconsciously, the desire to feel secure, in control and stable was prevalent. Bitcoin and other types of cryptocurrencies created an opportunity for consumers to manage their assets directly, without the involvement of a financial institution. Bitcoin brought about a transparent new finance structure, that’s value would be linked to supply and demand, nothing more.
At a high level, this seems straightforward, but predicting the demand was (and remains) incredibly challenging. It took years for awareness and interest to grow.
According to our MoneyScreen study results from August of this year, nearly three-quarters of Americans have some awareness of cryptocurrencies. In 2020, As everyday people are feeling the devastating financial consequences of prolonged shutdowns due to the pandemic, will buying cryptocurrency become even more appealing?
Mark DiMichael, a Partner at Citrin Cooperman, who focuses on cryptocurrencies and digital assets says “I would expect to see more individuals trading cryptocurrency for investment purposes. Bitcoin is often referred to as ‘digital gold’ and is seen as a hedge against inflation of fiat currency. With governments around the world spending trillions on COVID-19 relief, inflation fears may be a reason that Bitcoin is outperforming stocks this year.”
Jacob Eliosoff, Calibrated Markets, explained further, “The most obvious effect of 2020 economic volatility on crypto markets is that the Federal Reserve response to heightened economic uncertainty results in:
Asset prices rising in general (including cryptocoins)
Fears of potential inflation causing some to hedge with crypto.
In short, uncertainty causing an aggressive response from Federal Reserve ends up being good for crypto prices.”
While many people think of Bitcoin as an investment, especially following the price spikes in 2018, how will it become more ingrained the daily lives of consumers?
We see announcements from many tech players, that they are integrating crypto into their digital payment platforms, like Square’s Cash App facilitating the purchase of shares of Bitcoin (BTC), or PayPal announcement that Venmo will become a BTC wallet. I also regularly come across machines to buy crypto in local stores. But when will the curve really shift to using crypto like Bitcoin for everyday transactions and peer-to-peer payments?
According to MoneyScreen data, people who already own crypto, have been gradually increasing their use to make P2P transfers over the last four quarters, but more often than not, crypto users are buying and holding crypto, or trading them for other coins/tokens. Security concerns and high transaction fees can often get in the way of smaller, more frequent transactions, especially for Bitcoin. DiMichael says, “I haven’t seen much of a change regarding use of cryptocurrency for P2P transactions. It’s still not widely adopted as a payment method at all. And I haven’t seen much evidence of that changing”.
Eliosoff agrees, “Effects of 2020 on crypto adoption/behavior is harder to pin down. For the most part, crypto is still a bunch of rapidly evolving technologies following their own idiosyncratic trends. Apart from inflation and especially hyperinflation, the effects of traditional economic/market activity on crypto, if any, seem quite unpredictable.”
Uncovering new financial behaviors
What we do know, is that the payments innovation space is constantly evolving and the unpredictability of 2020, may lead to new and untold consumer behaviors. For now, we don’t expect to see crypto drive major changes in the payment landscape in the short-run, but in the next three-to-five years, we will inevitably see radical innovation in the space and its products and services. That’s why MoneyScreen will continue to track awareness, adoption profiles and usage behavior every quarter, making sure you can get ahead of consumer shifts.
Contact our team today to learn more about our research and how it can streamline your innovation process.