In this changing financial and economic environment, people are being forced to switch to cashless payments. Although most prefer to use traditional banking cards, some people prefer alternative means such as cryptocurrency. In fact, the interest in the latter is steadily growing, making users speculate it might replace bank cards over time.
Indeed, we are seeing a mass adoption of Bitcoin and other digital currencies. According to a survey conducted last year, in the United States alone, about 8% of American adults (over 20.3 million of the adult populace) own and use digital currencies especially BTC. The crypto exchange Coinbase also reported over 13 million users. About 17% of millennials globally prefer cryptocurrencies over fiat money.
On the other hand, as per the US Census Bureau, general-purpose cards like Visa, Swift, MasterCard, American Express and Discover can be found in more than 70% of all American family circles. The Census Bureau approximates over 184 million Americans hold and use credit cards.
Credit cards such as Visa, a giant international payment system, are accepted for payment in about 200 nations globally, offering numerous advantages to their users. It’s not only about payments. When using cards, people might deposit funds to earn interest or get a loan from the banks.
Another benefit of traditional payment giants is the speed of transactions. For instance, Visa has the capacity to conduct more than 24k transactions per second and over 150 mln transactions daily. To compare with, a Bitcoin transaction can take up to 10 minutes, and that of Ethereum can take up to 15 seconds. This means that credit card systems have the ability to process more transactions within a short period of time than cryptocurrencies.
Besides, cryptocurrency transactions are irreversible, unlike those conducted with a card. So if a user sends money by mistake, one can cancel the remittance instantly using online banking. With cryptocurrency, the only way to receive the money back is if the addressee is honest enough to send it back.
At the same time, cards are backed by physical savings one has on one’s bank account, which make this payment method secure and stable. Fiat currencies are much less volatile than digital ones, and therefore it is more convenient to use them for payments, while cryptocurrencies suit better for storing and multiplying savings.
Among the biggest advantages offered by cryptocurrency is its ability to penetrate the regions excluded from traditional banking systems. The chance for being included in the financial system is very important for unbanked people, especially in Africa, Asia and other developing countries. For instance, people from developing countries who work overseas and want to send money to their families, friends, or employees that don’t hold bank accounts now use cryptocurrencies to make any kind of payment.
Several platforms including DLT-powered ones help people to collect capital for developing their business through crowdfunding. Also, in 2018, the World Food Program (WFP) successfully sent money via crypto to over 500k refugees who never had bank accounts. During the Coronavirus crisis where people have been advised to stay and work from home, most people in the Philippines have actually switched to doing their activities online including trading cryptoassets. Coronavirus has accelerated remittances thanks to digital currencies, as coinidol.com, a world blockchain news outlet, reported.
The other benefit offered by cryptocurrency is lower transaction fees. Credit card fees are high (0.13% on transactions above $1000) compared to cryptocurrency fees (e.g. BTC, it is just 0.3% of any size of the transaction) – some coins don’t charge anything at all. There is also no charge-back for crypto merchants. For crypto merchants, payments made using cryptocurrency save considerable sums on processing charges and help them to avoid the risk of charge-backs.
In addition, cryptocurrency is often chosen by those wishing to avoid bureaucracy and ensure the anonymity of transactions. Shoppers choosing cryptos find much simplicity in making or placing a transaction, as it is cheap, transparent, unaffected by third-parties, and offers user anonymity.
There are still some issues that stop the widespread use of cryptocurrency, namely the regulatory uncertainty. Many countries are cautious about it, which results in scrutiny faced by those wishing to use cryptos in their business or daily life. There are even countries where Bitcoin and other digital currencies are deemed illegal. Such countries include Ecuador, Qatar, Afghanistan, Macedonia, Bangladesh, Morocco and Vietnam.
However, the technology is still very fresh and young, so people might simply need time to learn and adopt it. Be that as it may, benefits offered by cryptocurrencies and banking cards are different, so both instruments will probably have their users even in years.
Probably, if cryptocurrency developers manage to fix the existing flows, enhance blockchain scalability and offer even more security, the number of crypto users will grow further. On the other hand, traditional payments also evolve, offering new features and benefits. Besides, the differences between these payment instruments enable the possibility to use both simultaneously, which, in fact, most people do, depending on their needs.