The world of cryptocurrencies has been met with an equal amount of enthusiasm and skepticism as many decipher how this innovative technology could impact their businesses and lives in general. When considering the impact of cryptocurrencies on corporate payments, the focus needs to shift from the currencies themselves and to the underlying technology, blockchain, and the benefits it can bring to organizations across the globe.
Should we trust crypto-technology for corporate payments?
The simple answer is yes! Blockchain is the shared public cryptocurrency network that records all exchanges of ownership of each coin and is the underlying technology of cryptocurrencies like Bitcoin. It replaces much of the human element of banking, helping to improve efficiency and reducing instances of human error.
One critical element required to boost the credibility of cryptocurrency is improved transparency, as this will encourage larger institutions and wealthy individuals to invest in cryptocurrencies. There are already signs that this acceptance is growing. George Soros is preparing his family office to start trading cryptocurrencies, he is one of the most famous investors in the world so this creates optimism. Goldman Sachs have hired Justin Schmidt as VP of digital asset markets. Finally, the SEC and the FCA are talking about cryptocurrency regulation in the very near future. All of this activity services to further legitimize cryptocurrencies and shows that institutional investment is coming to the table shortly.
Will cryptocurrency cause the intermediary to disappear?
Although currently cryptocurrency is not recognized internationally as legal tender, in the long term predictions are that due to blockchain’s reliance on technology and machines, middle parties purpose such as banks will be lost. This has caused a slight backlash in the industry as many wonder whether we should trust the technology completely before taking the plunge.
Recently, Barclays announced it is launching a cryptocurrency dealing desk, reinforcing the view that financial institutions are keen to explore how the technology can enhance their function, rather than viewing it as a direct threat.
What are the risks involved?
Cryptocurrency has encountered price fluctuations but this is normal for any currency in its introductory stage as the digital currency matures and grows the risks of such fluctuations will fall. Moreover, cryptocurrency is a heavily regulated and very secure method of payment as a result of the intricate algorithms providing the foundations for blockchain databases. These algorithms significantly reduce the chances of corporate payments being made through cryptocurrency of becoming a victim of cyber attacks. As more and more companies explore the viability of accepting cryptocurrency as an alternative to conventional corporate methods of payments such as credit cards, and with the consistent introduction of new cryptocurrencies similar to the successful coin Bitcoin, like Ethereum and Litecoin, cryptocurrency is predicted to be likely to move towards the norm in corporate payments, infiltrating regular payment behaviours and reducing the unsubstantiated concerns that this is a riskier method of payment.
What is the future?
In 2018 “The Sharing Economy” has bloomed, you just need to look at the growth in organizations such as Airbnb and Uber to see how this has impacted on society. Cryptocurrency can easily have a role in these types of corporate payments with Blockchain providing easy access to peer-to-peer transactions. As aforementioned, the transparency of cryptocurrency will be a key driver for cryptocurrency having a future in corporate payments.
For example within supply chain management, Blockchain gives the opportunity for a transparent process in what has previously been a complex and “murky” business. With many suppliers claiming to source high-quality materials from certain locations, prior to Blockchain there was little opportunity for customers to establish if such claims are true. However, with the innovation Blockchain this information, such as manufacturing location, can all be found simply on one database increasing trust in this industry.
In summary, it would be ignorant to dismiss the potential of cryptocurrency for corporate payments, yes there may be a few teething problems in its introduction. Once settled, however, digital currency provides a plethora of unprecedented benefits for corporate payments that should not be ignored, with the most important benefit being transparency. Whilst there is much progress to be made in this area, for those responsible for corporate payments, this is certainly one to watch.