While the emergence of blockchain could be good news for retailers, major payments processors could feel the pain if they don’t keep up with the new technology.
Retailers paid a collective $108 billion last year in transaction fees, and while many companies are working on different payments technology to make buying easier, they aren’t doing much to lower those transaction costs for merchants.
Enter blockchain, which would remove third-party centralization networks for small to medium-size businesses and replace peer-to-peer networks. Some retailers have already jumped on the bandwagon, with major retailers including Crate and Barrel, Nordstrom and Whole Foods revealing last year that they will now accept bitcoin, as well as three other types of digital money, as payment.
The offering is part of a partnership between payments startup Flexa and Gemini, the digital currency company owned by the Winklevoss brothers. To spend crypto on Flexa, consumers send bitcoin or other supported digital assets to the SPEDN wallet and scan the app's barcode at the register. Flexa then converts the digital currency to U.S. dollars in real time for payment to the merchant.
"This is the first real instance of decentralized global retail payments, with the power to make commerce more efficient and accessible for billions of citizens globally," said Tyler Spalding, Co-Founder and CEO of Flexa. "The legacy payment systems are complicated and costly. This solution provides a way for cryptocurrencies to solve these problems and allow merchants to conduct inexpensive and fraud-resistant transactions."
So how does this save the merchant money? Flexa explains that the process simplifies the payment settlement process, while also reducing the chances of fraud, which are two of the most significant operating costs for retailers.
The future of blockchain has also led major banks to get in on the technology. Last year it was reported that JPMorgan Chase was planning to expand its use of blockchain technology to improve the banking industry’s payment system, as well as get FinTechs to experiment on developing the platform, which allows banks to quickly resolve compliance issues that can delay payments by weeks.
PayPal, Square, Mastercard and Visa are also working on their own blockchain projects. And last May, it was revealed that several banks—including UBS, Banco Santander, Bank of New York Mellon, State Street, Credit Suisse Group, Barclays, HSBC and Deutsche Bank--are working jointly on a digital cash system that uses blockchain to settle transactions.