What it takes to launch crypto payments — and why brands still consider it ‘a must’

From finding the right provider to dealing with fluctuation risks, there’s plenty to consider before jumping on the trend, according to brand executives who have gone there. But many agree that, in the end, it’s worth it.

On the upside, introducing crypto helps retailers gain access to a demographic of younger, trendier shoppers and create exclusive experiences, according to Vadim Grigoryan, partner and chief marketing officer at global cryptocurrency platform Lunu, which recently signed a deal with Farfetch. “[Some] are ready to switch brands if a similar brand offers crypto payments,” he said. 

California-based lifestyle brand Pacsun began accepting web3 currencies as one of the first major retailers last October, intending to connect with its Gen-Z customers. The process involved market research such as gaining practical experience by testing the crypto checkout options of different retailers. “I tried to understand the customer experience and to learn more from what people do,“ said Shirley Gao, chief information officer at Pacsun. 

There are two different ways of enabling crypto payments: hands-on and hands-off, as Deloitte noted in a 2021 report written for corporations considering accepting cryptocurrencies. While tech-savvy businesses aiming to expand cryptocurrency use throughout their operations opt to do everything themselves, most fashion companies choose the hands-off approach, partnering with an external payment provider such as Lunu or BitPay to facilitate transactions through crypto.

“As a fashion retailer, we wanted a quick win and we wanted to provide convenience for customers. We wanted the engagement,” Gao said, emphasizing why Pacsun chose a hands-off setup. Pacsun partnered with crypto platform BitPay to simplify the process and mitigate any financial risks. “It’s a quick turn-on, so we didn’t have to prepare digital wallets, or get all the compliance and legal approval,” she said. 

Companies don’t have to deal directly with crypto at any point if they don’t want to. “The business doesn’t even need to have a crypto wallet. They just need to register with [a provider], just as they would with Visa or with MasterCard or any payment provider,” said Grigoryan. 

Payment gateways can be integrated at the point-of-sale in a retailer’s physical stores or online store, and providers handle transactions from start to finish. “The integration is smooth, with no disruption in the [payment] process,” said Grigoryan of Lunu. The payment provider receives the cryptocurrency from the customer on behalf of the retailer, exchanges it for fiat money for the exchange rate at the time of transaction and then transfers the payment to the retailer in its local currency. The process works like a normal credit card transaction and takes just three seconds. 

The most challenging part of adopting crypto payments is finding the right provider, according to Gao of Pacsun. She had a list of six providers before finally deciding on BitPay after two weeks of evaluation. The three key elements she considered were the partner’s stability and sustainability, the ease of operation and engagement support from their leadership, and the quality of the technical team. “As soon as you find the right partner that has already done the heavy lifting, [and sorted] all the legal aspects and everything else, we just [had to] get it plugged in and tested, and it worked,” Gao said. 

From deciding to start accepting digital currencies to going live takes a matter of weeks — less than eight weeks, in the case of Pacsun. And costs vary. According to recent reports, most retailers spend over $1 million enabling crypto payments.  

But according to Grigoryan, “Mostly, it’s just a little bit of investment, in terms of the time of the [retailer’s] team.” 

He added, “If it‘s an online [store], time is the only cost — maybe several hours of work by the [retailer’s] legal team and several hours of work by the tech team. If it’s offline, they’ll also need to pay for [payment] terminals.”

“There’s not much cost, actually, because this is another payment method,” said Gao, though she declined to elaborate on Pacsun’s investment. “The [cost] depends on what business approach and technical solution you choose to implement.”

With its in-store terminals and widget for online payments, Berlin-based payment provider Lunu delivers an omnichannel crypto solution. Initially, most retailer clients wanted to offer crypto payments online only, but now, more fashion labels are interested in offline integration, according to Lunu. The retailer pays a fee of 1% of each transaction, whether online or offline, which is less than the take of most credit card companies.

Pacsun now accepts eleven forms of crypto, including Bitcoin, Ethereum and Dogecoin, as well as several different crypto wallets. According to Grigoryan, 90-95% of sales are made with just two coins: Bitcoin and Ethereum. 

Cryptocurrencies undergo constant fluctuations and have recently experienced the biggest downfall in their history. Although the prices of the leading web3 currencies Bitcoin and Ethereum have recently gone up again, the values of the cryptocurrencies have fallen by a total of around 70% since their all-time high in November of 2021. Given rising inflation and unpredictable volatility, investing in crypto can be risky.

For the vendor, however, the financial risk remains low when working with a payment provider. “The retailer doesn’t deal with crypto, so that means that they don’t get exposed to the fluctuation because there is an automatic exchange from cryptos to fiat money at the moment of the purchase,” Grigoryan said. In sum, the volatility risk is carried by customers.

In the case of a return, a customer will receive less or more money depending on the exchange rate situation. “We thoroughly talked through that during the evaluation time, because as a brand, we deeply care about customers,” Gao of Pacsun said. 

However, customers playing in this space are well aware of the risks they are taking. “The fun part is there’s no guarantee, so they don’t mind and they accept this general process,” she said.

For now, the community of people willing to shop with digital currencies is very small. In 2021, the majority of adults in the U.S. using cryptocurrencies did so for investment purposes. Only 2% of respondents said they had used crypto for purchases or payments during the previous year, according to a survey by the U.S. Federal Reserve Board. For Pacsun, the number of shoppers paying with crypto is currently only a fraction of general customers. Representatives declined to elaborate. 

Those numbers are growing slowly, however, and experts agree that the future of payments will be digital. “Brands need to start understanding, accepting and training with [crypto],” Grigoryan said. “We are just at the beginning of the development of this technology, which will greatly change not only the way we buy and sell, but also the way we record and store information and protect rights.”

Gao added, “All the CIOs have this consensus that accepting cryptocurrency is a must to-do. It’s just a matter of when you can.”