Digital Currencies, Bitcoin, and the Future of eCommercePosted: December 9, 2016
It was just over 10 years ago when online payment processors started popping up – SolidTrust Pay among the very first. In that time, we’ve watched online shopping and eCommerce go from boutique websites facilitating some small number of specialized or custom items, to a full-on emporium; the internet has rapidly become the world’s most popular bazaar. It’s important though to take a step back and realize that we are only right around the middle of this development, with plenty of change yet to come. It’s perfectly reasonable to predict that by the end of all this, the internet could be the only bazaar left.
Below we’re going to look at some of the trends and possible changes you can expect, whether you’re an online merchant or shopper. But first, we want to talk briefly about Bitcoin and where it fits into all of this. Many of our users will be familiar with Bitcoin, but for those who aren’t it’s simply a form of digital currency known as a cryptocurrency. Cryptocurrencies use cryptography to remain anonymous and secure; Bitcoin in particular uses a decentralized system to thwart corruption and certain types of fraud, as well as to maintain anonymity. The reason Bitcoin is important to this discussion is because it’s really the model for future digital currencies, or at least its model (the blockchain) will be the model for future digital currencies, having proven both secure and successful in most aspects. Future currencies will aim to operate like Bitcoin, using systems similar to the blockchain.
So, what constitutes Digital Currency?
Technically most money that is not physical is digital – so even the money stored on the computers at the bank is considered digital currency. However, that’s not quite what we mean when we talk about digital currency. A better example would be Russia’s Yandex.Money, a digital currency and payment processor which emerged in 2002, and has since been 75% purchased by Sberbank, which is in turn owned by Russia’s central bank. Yandex.Money is basically an eWallet where you can deposit funds and receive an amount of digital currency to spend online, and that’s basically what a digital currency is. The difference is that Yandex.Money is rapidly changing from a random digital currency to a national Russian currency, which leads us to our next point.
The Change is already here!
As noted recently by PayPal in their 10-year anniversary blog, “a couple of years ago, roughly 50% of money being exchanged was in the form of either cash or cheques. Today, that number has dropped to 40% and by the end of 2017, it’s predicted to drop even further to 25%. We are witnessing an obvious trend – physical money is digitizing.”
It’s not just online, but everywhere. People are using their debit/credit cards more than cash when they shop, and even Bitcoin is beginning to be accepted widely in ‘the real world’. Beyond 2017, there is no reason to assume this trend will slow down and by 2020 we might be operating almost entirely with digital currency instead of cash.
We mentioned above that Russia is already experimenting with their digital currency, Yandex.Money, but we didn’t mention that 24+ other governments around the world are doing the same thing. Canada, for example, ran simulations this year which explored the possibility of creating a version of its currency on the blockchain, and one third of Denmark already uses their smartphone to buy everything.
What does this mean for eCommerce?
As it’s getting easier to spend your digital currency in the real world, you might be wondering how this will affect eCommerce. You might even be worried that online shopping will decline in the face of Smart Cards and physical Amazon locations. In fact, many physical store locations are making great efforts to revitalize their models – doing things like offering yoga classes and wine menus to create a more fulfilling engagement and obviously increase their volume of customers. We’re here to tell you why, as an online merchant, you don’t need to worry about that – there is a reason they are making such an effort.
Causality is key. An important question to ask: is digital currency driving eCommerce, or is eCommerce driving digital currency? And the answer is undoubtedly neither/both. They are clearly evolving together, and in a non-zero-sum atmosphere, meaning that the success of one drives the success of the other, and vice-versa. We shop online more because it’s easier to do, but we’ve made it easier to do because of how much we love shopping online. It’s a two-way street, and with self-driving cars on the horizon we’re in for a much safer and more efficient experience on the road. Additionally, with new and exciting methods of delivery popping up in the form of drones and self-driving technology to accommodate the eCommerce trend, and to close the gap between purchase and delivery, we think it’s safe to say that the online shopping industry will not only continue to grow, but perhaps one day eclipse and even replace traditional purchase methods altogether.