Clarity on Crypto

With Bitcoin and other digital currencies set to take off as everyday payment methods, grocers increasingly need to think about how they’ll incorporate crypto into their existing payment systems — or even whether they’ll need a whole new system. To find out how they should proceed, Progressive Grocer reached out to a couple of experts in the field.

First, though, for any retail executives who may think that actual crypto usage among U.S. consumers is vanishingly small, think again: According to a Q4 2021 survey of more than 2,200 U.S. consumers conducted by Brookfield, Wis.-based financial technology and services firm Fiserv as part of its Carat Insights research, 16% of Americans report having used crypto at least once to pay for goods or a service; 53% of customers who have paid with crypto are age 18-34, and 25% of crypto users cite lack of merchant acceptance as a limitation to increased usage. Those responses indicate that retailers need to grapple with digital currency sooner rather than later, or risk getting left behind as late adopters.

Obstacles Ahead

According to Brad Goad, VP of Carat and digital commerce at Fiserv, the main roadblocks to grocers’ acceptance of crypto are a lack of crypto point-of-sale and e-commerce integrations, a lack of efficiency, and the need for faster, scalable blockchain payment networks. Goad concludes: “Thus far, crypto adoption has been slow due to the risk involved, the requirements for a merchant to receive and hold crypto or establish a crypto wallet, and a transaction process that is slower than those to which consumers are accustomed.”

For his part, David Wilkinson, president and general manager, NCR Retail at Atlanta-based software, managed and professional services, consulting, and technology company NCR, succinctly sums up the problems faced by grocers considering crypto as a payment method: “Cost and headache. Many grocers’ current payments system providers may not support cryptocurrency purchases. Even if they do, it may require an expensive, time-consuming rip-and-replace to get the right technology into the store to facilitate crypto acceptance. Those two things make it difficult for many grocers to process cryptocurrency transactions.”

Finding Solutions

When asked about the best crypto payment solutions for food retailers, Goad advises that “grocers would be wise to employ a graduated deployment strategy …. This means starting with what is most feasible in the near term, which is accepting crypto payments in digital channels, before attempting POS system work. An e-commerce solution is easier to deploy, and there are a growing number of solutions coming to market that will allow a grocer to present their checkout as they normally do, with crypto as an added payment option for the consumer. Settlement will continue to occur for the merchant in fiat, same as always, which will remove the complexity and risk associated with the grocer holding crypto at any point or needing to establish a crypto wallet.”  

“Today’s grocers need a technology partner that can not only make it easy to start accepting crypto today but continue to innovate their software and services to handle the crypto of tomorrow,” counsels Wilkinson.

Asked how long this process might take, he replies, “With the right partner and a flexible, software-driven store environment, these updates can be rolled out in a matter of weeks, not years. The hitch is … getting in with the right vendor who can implement easily on top of existing technology to give its retailers access to digital currency payments across digital and physical channels.”

Is Volatility a Dealbreaker?

The recent precipitous nose-dive in value — reported as up to $1 trillion — of cryptocurrencies Bitcoin and Ethereum may have given already wary food retailers pause, but Goad and Wilkinson don’t believe that this volatility will ultimately prevent crypto’s acceptance in the grocery channel.

“Crypotcurrency is known to be volatile, and this impacts its usefulness as a payment method, for which stability is preferred,” admits Goad. “However, because this volatility is expected, it is unlikely to have a large impact [on] business’ go-forward strategy.”

“Though Bitcoin and other cryptocurrencies operate separately from government-managed assets, they aren’t immune to impacts from the marketplace,” notes Wilkinson “The Bitcoin and Ethereum crashes ... have been correlated to the Federal Reserve’s announcement that the Fed will begin raising rates later in Q1 to combat rising inflation. With big changes like this in a less stable market, investors often move to pull back on risker, alternative investments. However, this isn’t to say that digital currencies have lost momentum.”

In fact, according to Wilkinson, “From countries to powerhouse enterprises like Tesla, the movement towards crypto is continuing to gain steam. A recent Pew Research Center study showed that one in six Americans have invested in, traded or otherwise used cryptocurrency. It’s clear that adoption of cryptocurrency isn’t going away any time soon, and grocers shouldn’t simply look the other way because of recent headlines.”

He adds: “Even if crypto’s value continues to fluctuate compared to cash, digital-savvy consumers will reward grocers who embrace the future. Now is the time to secure early adopters’ loyalty. By the time cryptocurrencies become fully institutionalized, it will be too late in some instances.”

Bitcoin Versus Other Cryptocurrencies

Besides Bitcoin, the original and top-ranked cryptocurrency, there are now literally “thousands of cryptocurrency options and hundreds of crypto exchanges,” observes Wilkinson, who identifies Ethereum as ranking second. “To help narrow the pool, the CoinDesk 20 list is a great resource for grocers looking to see which currencies consumers are interacting with the most,” he suggests. 

“In terms of adoption in the marketplace, most retailers and grocers that are dabbling in cryptocurrencies are accepting Bitcoin, and that is a great place to start,” continues Wilkinson. “Down the line, as consumers are more broadly using them and stores begin to accept them more frequently, there will be a natural expansion to encompass other top crypto options at checkout.”

“It is not a question of Bitcoin versus other digital currencies — the question is which distributed ledgers will emerge to deliver on the attributes of cryptocurrency,” notes Goad. “The network that does so cheaply, safely, quickly and most reliably at scale is the answer. Bitcoin certainly is the largest today, and has a lot of advantages, but there are still a number of questions to be answered” regarding these issues.

Future of Cryptocurrency at Grocery

Since crypto at grocery would seem to be inevitable at this point – “It’s only a matter of time,” asserts Wilkinson – what will adoption look like, and what effect is it likely to have on other methods of payment?

According to Goad: “We see crypto payments most likely experiencing a gradual adoption. Barring an inflection-point event, adoption will be driven by institutional investment, but also needs to be supported by regulation from the Federal Reserve and existing banking system to take hold. The speed at which regulation, structure and support come from these entities will influence the growth of crypto as a payment type.”

Wilkinson points out that retailers and payments vendors are already adding in-store and online capabilities allowing consumers to use Bitcoin and other cryptocurrencies to make purchases.

“As retailers and consumers start to embrace Bitcoin and other forms of cryptocurrency, it just becomes a form of payment at checkout,” he explains. “While it’s unlikely to entirely replace our more traditional forms of payment in the near term ... I think it has the potential to become a normalized alternative payment option in the next few years as more retailers engage with it. Consumer interest and demand in crypto is already strong across the country, and not just major metropolitan cities: The average bitcoin purchase is $800, with sales happening in 45 states.”

While older generations probably aren’t going to jump on the crypto bandwagon right away, retail brands targeting younger generations of shoppers, who are more likely to own Bitcoin than traditional stock, “will be able to capture more of that demographic’s spend by facilitating checkout and loyalty in ways they’re interested in,” predicts Wilkinson. “And as Gen Z and these younger generations enter adulthood and get more of the lion’s share of market spend in grocery, grocers will need to consider ways to create innovative payment and checkout experiences.”