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