Asian consumers are actively trading cryptocurrency and using them to pay for goods and services.
Asia is leading the world in cryptocurrency investments as Central and Southeast Asia accounted for a third of NFT sales in the $22 billion trade last year. Asian consumers are actively trading cryptocurrency and using them to pay for goods and services, meanwhile retailers are utilizing blockchain in their retail operations. The cryptocurrency transaction value is expected to surpass $16 billion in 2023, prompting 75% of retailers getting ready to accept the new currency.
The spending power and rising income of individuals are expanding in the region. With nearly 700 million residents, Southeast Asia has one of the world’s fastest-growing populations; 440 million people are active internet users and more are going online. The tech-savvy youths are willing to try new things, thus embracing cryptocurrency after witnessing the many incentives to participate – such as Play-to-Earn GameFi schemes. Even for the wealthy, virtual assets including cryptocurrency funds, NFTs and stablecoins now make up to seven percent of an investor’s portfolio, making it the fifth largest asset class. Asian consumers are ravenous for faster, safer, and more hassle-free payment options – something which cryptocurrencies can offer and retailers will have to conform to.
Shopping with Crypto
Cryptocurrency as an alternative payment method are increasingly being accepted by retailers looking … [+]
Today more than 18,000 companies accept cryptocurrency as payment for their product or services. Naturally, cryptocurrency trading has boosted the wealth of young tech-savvy individuals, with brands now paying attention to attract this new group of affluent consumers – and it’s no surprise as 52% of investors in Asia are putting their bets into crypto. Most notable for their Web3 efforts, Gucci has also begun to accept cryptocurrency payments from Bitcoin BTC to Dogecoin DOGE . Customers receive a QR code for payment which they scan to pay through their digital wallet. Fueled by the prevalence of cryptocurrency use, Gucci is now providing cryptocurrency and NFT training to its staff members.
But it’s not just in luxury, cryptocurrency is now beginning to be offered in everyday retail experiences alongside cash and credit. A wide range of retailers from sneakerhead marketplace Novelship, to shoes and handbag label Charles and Kieth and global coffee chain Starbucks SBUX to name a few, are now accepting cryptocurrency for commercial transactions, allowing consumers to pay directly with their digital wallets. Charles & Keith saw Singapore customers make up 70 percent of cryptocurrency transactions on its site. This benefits those who own cryptocurrency and might be seeking additional channels on where they can purchase goods and services using their investments.
Accepting Alternative Payments
Asians adopted digital payments over Covid-19, spurred by contactless payments and consumption vouchers, and have discovered a newfound love for digital payments amongst QR code payments, digital wallets, BNPL (Buy Now Pay Later), and even biometric payments. Retailers favor this for the low commission rates and convenience. A quarter of Asia consumers are cross-border shoppers, whether online or through physical travel; cryptocurrency has enabled a more seamless, global, and interoperable payment solution no matter where they are in the world.
Hong Kong’s largest mall operators such as New World Development’s K11 Musea, Times Square and Harbour City have also been celebrating innovative digital collectibles from showcasing Bored Ape Yacht Club, Moonbirds, and CryptoPunks to Asia’s NFT collection Bunny Warriors and Hertz City in their malls to lure interest and spending from these new cryptocurrency elites. But what direction is the continent heading with its blockchain use within the retail world?
Times Square Hong Kong launches pop-up exhibition with Bunny Warriors NFTs
A new incentive for shopping malls see properties rewarding shoppers with lucrative cashback coupons for their spending, some seen even circulating on second-hand marketplaces such as Carousell. LiberSave, a digital coupon solution software that uses blockchain behind its processes, steps in to connect merchants and buyers. The use of blockchain as the basis for coupon processing allows merchants to apply the best practices for managing digital assets, and keep the history of transactions unchanged in order to increase reliability and security. An innovative approach to cashback, discounts, and promo campaigns are realized through coupon digitalization and optimization of user experience.
Not just used to parade around as a forward-leading early adopter of next-generation financial technology, there are many benefits to accepting crypto, and is also financially rewarding. Traditionally, rates from credit cards take up to two to four percent of transaction fees, whereas cryptocurrency is half of that if any. Cross-border merchants also lose out to unfavorable exchange rates, making cryptocurrency a better option and simplifying cross-border transaction fees. Unlike electronic bank transfers which can take days to process, cryptocurrency payments are transferred in real-time, granting merchants to receive assets on hand and a steady cash flow.
The transparent nature of cryptocurrency payments also helps reduce fraudulent transactions. During the pandemic, a surge in credit card fraud was witnessed where the dollar volume of attempted fraudulent transactions rose to a third in 2020 compared to the previous year. Given so, cryptocurrency is now considered more secure than credit card payments because cryptocurrency does not require third-party verification. Transactions are recorded across the entire public network where both sender and receiver of the payment can access the relevant information of the transaction, and verify when and how a transfer of cryptocurrency was processed.
Phemex, a cryptocurrency exchange and trading platform has also seen an uptick in international buyers. An increase from two million to five million users was observed in one year, with Asia Pacific being one of the top performing countries in traders. Simply offering new ways to pay by opening up cryptocurrency payments also unlock access to new demographic groups, catering to the cutting-edge clientele that values transparency in their transactions. People now earning cryptocurrency wages spur demand for cryptocurrency payment options. The financial asset management platform was led by Morgan Stanley MS executives who had found opportunities for retail traders in the neo-digital economy. Commenting on alternative payments, Nicolas Tang, Internal Communication Director of Phemex shares “Settlement on blockchain networks is far more capital efficient than existing payment networks. Cryptocurrency volatility may prevent some from directly interacting with digital assets, but Web3 is changing finance in ways that modern businesses really can’t avoid.”
The Challenges Ahead
It is arguable that cryptocurrency is volatile and indeed subjected to price swings. Even as an investment, this can also affect revenue streams where in current market conditions, the value of cryptocurrency received today may be worth another. Hence, some retailers take in cryptocurrency purely for their own investment reasons. Okra, a restaurant in Hong Kong, allows diners to pay with cryptocurrency but only so that the business can pay its suppliers and convert rates into fiat.
The use of cryptocurrency for receiving or making payments may be treated as a barter transaction as it is considered a digital asset. Lawmakers are constantly crafting regulations to govern the uncertainty and difficulties, hence ongoing legal and regulatory developments. As more retailers are accepting cryptocurrency, there are still roadblocks that need to be addressed, particularly in the legal sector. Take South Korea, where regulators have introduced stringent requirements for cryptocurrency exchanges such as a certification from the Information Security Management system (ISMS) in the country. In 2021, many exchanges were scrambling at the last minute to become certified to operate, with only a fraction succeeding. Close to a third of the nation’s full-time workers have invested in cryptocurrency – which in comparison, only about 11% of Americans have invested in any cryptocurrency. Then there is China, which has banned cryptocurrencies outright, shutting its population out of the chance to enjoy crypto-focused retail services. Given that China is the most populous nation in Asia, this retail revolution might not be uniform across the board.
Investing in the Future
Asia is an epicenter for innovation, incubating countless blockchain projects contesting traditional financial institutions. The consumer market, especially within Asia, has always been one to change and evolve, and as cryptocurrency becomes even more of a part daily life, the retail experience will follow suit. More brands are accepting cryptocurrency for their products with new avenues for cryptocurrency holders to spend their tokens. If Asian retailers fail to capitalize on this, they may risk being shut out of the market and alienating consumers. Despite the challenges that can be observed within the region, it seems there is no stopping the Asian crypto-retail movement. If the current trajectory of cryptocurrency being used within retail in Asia continues, we could be looking at even greater adoption over the next decade.
