By Fred Brothers, president and co-founder, Cion Digital
Bitcoin is a digital currency that was invented in 2008 and has come a long way in terms of its utility. However, the majority of consumers still do not use Bitcoin and other cryptocurrencies to pay for goods and services on a daily basis, including large purchases such as automobiles. What will it take for widespread adoption to occur?
First, let’s address the elephant in the room. The cryptocurrency market can be volatile, which tends to scare both consumers and merchants away from crypto adoption. When crypto prices are down, as they have been recently, many consumers don’t want to sell their crypto because it means they will take a loss on their original investment.
Merchants view the volatility as risky, because they believe if they take crypto as payment, the value of that crypto might plummet after a payment is received, and thus they will lose money. However, merchants should be aware that accepting crypto as payment does not mean they have to receive crypto as payment. Crypto can be converted into dollars during a transaction, which means the merchant gets paid in U.S. dollars. This eliminates any risk associated with volatility.
The reality is, every asset has risks. Stock markets experience periods of extreme volatility, yet consumers and merchants transact every day, even when their portfolios are down 40-50% from previous highs. The housing market goes through cycles, but people don’t stop buying things because the value of their house drops.
The good news is that regulation for cryptocurrencies is coming down the pipe, which means that large financial institutions will soon be investing in the crypto market. This will help to alleviate some of the volatility.
One-third of small U.S. business owners say their companies accept cryptocurrencies, according to a recent survey by Skynova. That percentage is far less among auto dealerships, and yet many dealerships have had customers inquire whether they can use crypto to either purchase an automobile, or to help finance an automobile.
Many dealerships have turned away customers who wanted to pay for a vehicle using crypto, because they did not have a way to accept crypto as payment. Fortunately, there are turnkey crypto payment and loan platforms designed to integrate into existing dealership workflows. These platforms allow dealerships to accept crypto as payment and make it easy for F&I managers to shop for crypto-secured loans.
The more customers demand to pay with crypto, the more dealerships will offer the option.
Approximately 23% of U.S. consumers, or nearly 59.6 million people, owned at least one cryptocurrency in 2021, according to a recent survey by PYMNTS and BitPay; and nearly one-third of those consumers used a digital currency to make a payment.
I recently asked the general manager of a dealership if any of his customers had ever asked to use cryptocurrency to pay for, or finance, a vehicle. The general manager did not believe so, but when I asked the F&I manager the same question, the F&I manager confirmed that yes, indeed, quite a few customers have asked whether the dealership could accept cryptocurrency.
Consumer demand exists and will continue to rise as crypto becomes more mainstream.
As vehicle prices and interest rates continue to rise, financial institutions will see both the volume of auto loans and loan approval rates decline. Being able to offer crypto-secured loans is a great way to gain access to a new set of customers who not only own cryptocurrencies, but are willing to use their crypto assets as collateral.
Cryptocurrency is here to stay, but it still has several hurdles to overcome to reach its potential as digital currency. As crypto markets stabilize, and adoption among consumers and merchants continues to increase, financial institutions will play a key role in providing access to crypto-secured loans.
Fred Brothers is president and co-founder of Cion Digital, developers of a crypto payment and marketplace lending platform connecting consumers, merchants and lenders with new payment and loan options. Prior to co-founding Cion Digital, Fred served as the executive vice president and chief innovation officer at FIS, a Fortune 500 provider of financial technology.