Purely speaking from the merchant’s perspective, it feels like a long shot at its current state.

by Philip Lee Abdullah

Can Crypto Become a Mainstream Payment Solution? From the Merchant’s Perspective.

The term “Digitalization of Payments” is no longer foreign in most developed and some developing countries. This is all thanks to the advancement of technologies, internet and mobile phones. Roughly about fifteen years ago when the first smartphone was launched, it was envisioned that the general public are no longer required to carry their physical bulky wallet that contains cash, debit card, credit card and cheque books (for some, we have seen it, don’t deny it) to purchase goods and services. Fast forward to about ten years later, due to the boom of crypto-currency, the word on the street is that, we don’t even need to use cash “fiat currency” because crypto-currency is the way to go.

Although, such tune was not adopted by the government and the administrators of various countries yet mostly due to its decentralised and pseudo-anonymous characteristic. In terms of developmental stages, cash term payments first shifted to card, then to online payments and now has evolved to payments via e-wallet on mobile phones. Some countries missed the card phase altogether – such as China, where the public shifted from cash terms payments to e-wallet payments overnight.  In other words, in China, the majority of the public has already been converted to e-wallet before someone who is born in the year 2000 has even managed to apply for his or her first credit card!

Now from the perspective of a merchant in Malaysia, would all this shifting of payment methods make any commercial sense? Especially when we talk about accepting payments in cryptocurrencies. Well, one only need to link fiat payment terms with generic words such as centralised, highly regulated and backed by governmental agencies and most important of all, accepted as legal tender worldwide. These are the total opposite of cryptocurrency, where it is decentralised, exist in thousands of types (whilst there are only 193 countries), not ‘officially’ backed by any government, difficult to regulate due to its characteristic and not accepted as legal tender (not officially recognised as mode of payments by various governments).

Therefore, just comparing it briefly without looking into the technologies and securities behind it, let’s look at it from the perspective of a mom and pop store, barber shop in your neighbourhood, hawker stalls, warungs, mamaks etc. Would adopting cryptocurrency as a payment solution (e-wallet) bring any advantages to them? Or would the investors (crypto-traders) and crypto companies have more to gain? Assuming cash payment is version 1.0, card payment is 2.0, fiat e-wallet is 3.0, can cryptocurrency e-wallet payment solution become 4.0? Let’s see shall we?



The cryptocurrency system is a decentralised system, neither controlled by any government nor regulated by any of its financial or securities agencies.  It’s definitely not controlled by the good ol’ brick and mortar trusted banks or giant corporations that control the mass merchants (you know which companies I am pointing finger to).

For as far as we know, the “issuer company” (the company that issues the cryptocurrency) may be managed by a university dropout with powerful videos and marketing slides who is “ex communicado” by the real world without any financial institutions or investors backing him up. We have already seen quite a handful of local projects that promised to “revolutionise payment with blockchain” and raising money via ICOs (initial coin offerings).

What exactly can merchants gain from here? First off my head is that the merchant may not truly appreciate the benefits of decentralisation, and the risk trade-off that goes along with it. They could be unintentionally facilitating the movement of tokens that may be illegal, have full privacy of transactions without reporting them, become the conduit for tax evasion, as well as the possibility of being labelled as money launderer / financier of terrorism.

The question is, “Do merchants know what kind of exposure they are potentially getting themselves into? Put another way, are these features really what common merchants are looking for?” Decentralisation doesn’t matter to them unless it is supposedly faster, better and cheaper. But is it?


Fast and Convenient

The definition of fast is really over-rated. “One just needs to scan, insert the amount to transact, approve, deducted, voila the transaction has been completed.” But then wait, when exactly will the merchant get the money? Because in reality, what happened was just that the figure has been deducted from the payer’s e-wallet and the same amount reappears on the merchant’s e-wallet. It isn’t tangible yet (in the conventional sense) and not to mention that it is very volatile. The merchant, though technically having received the payment in the form of cryptocurrency electronically, the money or the fiat value as we can call it, still has not been transferred to the merchant.

Therefore, that is not the end of the “transaction” strictly speaking, because the merchant would still have to convert these “payments” into fiat currency for them to restock goods, pay their suppliers, sub-contractors, employees, rents and other over-head costs, in cash (unless the aforementioned parties are open to accept cryptocurrency as well). But hey! Even the issuer may suddenly be no longer accepting currency that they issued! The issuer might by then prefer cash over crypto!

In another scenario, the rate of exchange when the cryptocurrency was converted into fiat with the issuer is different than when it was first transacted. Just food for thought. I am not saying this happens to all, but it might happen, this is just a risk that you can’t shake off. The merchant is considered lucky if the cryptocurrency can be exchanged into fiat at all. That’s all I am saying.

Some might say these merchants can always go to any Digital Asset Exchange (“DAX”) to convert it. Does this really work for them though? Common merchants, who are mostly barely tech savvy, might encounter difficulties to login onto a sophisticated exchange platform (with fees),to slowly make trades (with fees), to withdraw (with fees) and then finally convert the value into fiat (with fees).

In Malaysia (also we can say generally around the world) DAX is not exactly common as compared to Foreign Currency Exchange counter that is available and accessible in almost every mall. Also, there is this risk factor involved where exchange rate changes every minute. Just my two cents – it’s not exactly convenient and hassle-free. In fact, with the constant fluctuations in price, it could turn out to be much more expensive.

Furthermore, the settlement would most probably not be as fast as normal banking accounts using fiat. And with the trend of banks closing down accounts that deal in crypto or holding back the transfer of crypto, this adds uncertainty and unnecessary delay to the settlement process. There is also the suggestion of using stablecoins based on Ringgit Malaysia but this gives rise to other regulatory issues.

Therefore, I can conclude that it is neither exactly ‘fast’ nor ‘convenient’ for merchants operating under and relying heavily on fiat liquidity / cash flow. There are simply too many risk factors involved that they need to consider and mitigate. The questions to ask would be, ‘Are these really what common merchants are looking for? Is this what your business is looking for’?

Click here for Part 2.