Jan 2024#Opinion

Crypto Payments MarketChallenges and Opportunities

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Authors

Marat Gizatullin

Analyst, R&D

Lana Izrina

Market Researcher

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6 min

 

The rise in the BTC exchange rate is generating a certain optimism: market participants anticipate the beginning of a bullish phase. The positive dynamics will impact not only BTC itself but also all sectors of the cryptocurrency market, including the crypto-processing business. Investor trust is increasing against the backdrop of overall economic growth and is likely to drive further price increases.

READ ‘THE CRYPTOCURRENCY MARKET AND TRUST: A NEW APPROACH TO PROJECT EVALUATION

At the moment, positive sentiments are explained by several significant factors.

  • Interest in the cryptocurrency market from regulators is increasing, with new frameworks being developed (EU), and policies towards cryptocurrencies are becoming stricter (USAUK).
  • The cryptocurrency market maintains its stability, as indicated by the data from the Binance Research report (for the first half of 2023). Contrary to the downward trend in 2023, the market showed resilience, maintaining a stable pace of venture deals and investments. A significant portion of this stable growth can be attributed to gaming and infrastructure projects. In the first week of December, the price of Bitcoin increased by 14.95%, surpassing the $43,000 mark.
  • In the optimistic scenario, analysts predicted Bitcoin's growth to $45,000 by the end of 2023 and the continuation of the positive trend until spring 2024 (at the time of writing, the Bitcoin price was $41,150). Experts believe that the catalyst for growth in the crypto market could be the upcoming Bitcoin halving and the factual launch of spot Bitcoin ETFs.


Discussions surrounding the recognition of cryptocurrency as a means of payment are generating increased interest in the crypto payments market. This article is the result of an analysis of cryptocurrency market trends from the perspective of its professional participants (C-level Tier-1/2 crypto payment processors).

We’ve conducted a series of interviews with leading experts in the payment service provider market and share insights and opinions on trends in 2024.

PSP Market Current State

According to the McKinsey 2023 Global Payments Report, the total annual volume of all tranches of cross-border flows in 2022 is estimated at $150 trillion. Meanwhile, the overall revenue for all key players in the market is estimated at $2.3 trillion (McKinsey 2023 Global Payments Report). The expected revenue for cryptocurrency payment providers is assessed at $338 billion with an annual revenue growth of 10.3% (Crypto Payments Industry Research Report).

The Asia-Pacific regional market is the largest in terms of the overall revenue collected for processed payments, accounting for up to 45% of the total revenue from payment traffic in 2022.

Regional distribution of total income. 

Values from 2017 to 2021 and from 2023 to 2027 were modeled based on the expected dynamics of markets at the time of the report of the report

The annual growth of the entire market is estimated at 6-7%. The fastest-growing region is Latin America (11-14%). 

From 2023 to 2027, analysts predict active growth in digital payments, with an expected growth rate of 25%. Additionally, a significant increase in the proportion of transfers made using digital methods is anticipated. This implies the growth of payments in the alternative payment methods segment, including cryptocurrencies.

Positive trends in cryptocurrency penetration are observed in the economies of Latin America (Brazil, Argentina, Mexico), the Middle East (Turkey, Pakistan, Iran), as well as in Africa (Nigeria, Morocco, Kenya).


Global distribution of cryptocurrency traffic, Interactive map

2024 Trends: Challenges and Growth Areas

It is important to consider exchange sentiments in long-term strategy, but the cryptocurrency payment processing industry is less dependent on the volatility of the Bitcoin price. Calculations are primarily conducted using stablecoins. Moreover, the operation of the payment business is based on providing financial services, and the incentive to conduct cryptocurrency payments is not as strongly tied to its current price, as shown in the example of Confirmo.

Crypto-processing businesses regularly face challenges not only due to changes in market economic phases. Many companies encounter various barriers to quickly enter an interesting market or the most promising niche.

An effective combination of fiat and cryptocurrencies is the processing businesses’ main focus

Experts claim that the current main challenge for the crypto processing business is to create synergy between cryptocurrency and traditional payment methods. The primary issue lies in the ability to universally provide on/off-ramp solutions for businesses with integrated cryptocurrency payment functionality. Typically, this requires significant investments in product development, strengthening the partner network, and addressing legal risks.


The issue requires a complex approach:

  • the creation of technical capabilities for integrating necessary functions for businesses;
  • establishing partnerships with local financial institutions (banks, aggregators, etc.);
  • forming a strong compliance team that actively monitors changes in cryptocurrency regulations in various geographies.

There are several legal risks, mostly associated with changing regulations in the digital economy and, in particular, the cryptocurrency market in different countries. Experts note that the implementation of unified legislation within the European Union will allow companies to expand their presence in new European markets, where regulation was previously quite strict.

The market becomes more competitive

In the crypto-processing business, large companies like BitPay in the USA previously dominated, but now more and more companies are seeking to enter the market, observing a successful and profitable business model. 

The overall strategy of businesses looks as follows: old players aim to maintain a high-quality product and retain markets, while new ones strive for dynamic growth. The main recommendation from experts, well put by the CEO of Finectum, is as follows:


Building high-quality online and offline network is the key growth driver

The main challenge is to establish partnerships with large well-known organizations that need to be convinced that using cryptocurrencies is beneficial. The solution becomes a strong compliance narrative: providing a legal opinion and operational support from legal consultants for all emerging issues.  

Processing businesses are interested in local markets

There is a trend towards transitioning from a global development strategy for processors (working with different countries worldwide) to targeted work within specific macro-regions (prioritizing the onboarding of merchants from selected regions). According to experts, the most promising markets are the Asian, African, Latin American, European, and Turkish markets. This strategy includes partnerships with payment aggregators, local banks, and regional payment systems.

How to grow a processing business? Recommendations from the industry leaders

Cryptocurrencies possess a range of useful features (cross-border transfers, a simpler mechanism for large transactions compared to fiat, etc.). The processing business’ job is to find merchants for whom these beneficial qualities of cryptocurrencies make their merchant business more efficient, as the Head of Marketing & PR at CoinsPaid believes. 

Cryptocurrencies are often associated with taboo business practices in the mass perception. Therefore, according to the Head of Strategic Sales at Coinify, it is crucial for processing providers to work on building brand trust. Recognizability is a key factor when a merchant is searching for a processing solution, so one needs to quickly catch the merchant's eye with a trustworthy association.



This is facilitated by collaborations with well-known brands from traditional mass-market sectors, the CEO of Whitepay claims.


As per Alchemy Pay’s Ecosystem Lead, the most successful cryptocurrency processors will be those that can combine high product quality with an excellent level of service and attractive collaboration terms.

In the full version, you will be able to look through the following sections and receive more valuable recommendations:

  • PRO Crypto+Fiat
  • PRO Regulation
  • PRO Competition 
  • PRO Partnerships
  • PRO GEO
  • PRO Merchants 

And also receive comprehensive recommendations for crypto-processing business on attracting and retaining merchants from our experts. Fill out the registration form and get the full version for free.

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