Consumers and blockchain: lots of promise, many hurdles

Blockchain is the talk of the town right now with new and exciting applications and opportunities in the horizon, but when it comes to consumer acceptance and adoption, it will be a while until we see its true value—and face

the word
Thinkstock

Blockchain is making headway into finance as banks are looking to implement their own blockchain projects and many startups leverage new blockchain platforms to power their offerings. Even investing and venture capital are under some scrutiny as token sales and initial coin offerings (ICOs) might prove to be rewarding alternatives to traditional funding for startups.

However, despite this roaring buzz in the industry, blockchain has yet to achieve wider acceptance by average consumers. In payments, for example, most consumers still gravitate towards traditional and established methods to perform transactions. Blockchain still has that sheen of novelty and complexity that deter casual users to fully embrace the technology. Admittedly, very few have ever even heard of blockhain.

To overcome this, consumers must be able to enjoy a superior customer experience using blockchain services. In addition, what would further legitimize it are established regulations and market acceptance. Blockchain would have a fighting chance hitting the mainstream when countries and economic and political unions, such as the EU, establish a regulatory framework.

Proof of concept

Consumers are becoming more discerning and often wait and see if something actually works before they adopt a service. Blockchain must prove that it can work even for a particular vertical. Among blockchain’s growing number of applications, it’s in payments that blockchain can readily make some headway. Bitcoin’s acceptance as payment method for eCommerce is growing and there are an increasing number of payment services that can serve as models that the technology works. Established companies such as WordPress and Microsoft now support bitcoin.

User experience

Among the barriers to cryptocurrency adoption is its complexity. Most users aren’t familiar with the process and its jargon compared to other cashless payment methods. While users can draw parallels in terms of experience, blockchain has nuances (like how a “wallet” and an “address” are technically different). Blockchain payment services address this by offering complete platforms to allow users to send, receive, and manage their bitcoin. UK bitcoin platform CryptoPay, for example, offers a debit card that is linked to a user’s bitcoin wallet effectively bridging bitcoin and blockchain and the familiar payment methods.

Regulation

Consumers are wary of adopting anything that might fall in legal gray areas. Fortunately for bitcoin, a growing number of countries have legalized its use. Japan, for instance, made bitcoin an official payment method prompting thousands of retailers to accept the cryptocurrency. Other governments are also putting forth regulations to enable blockchain to be used for payments. These regulations seek to include security and protection for all stakeholders. In Europe for example, blockchain services can be subject to regulations such as know-your-customer (KYC) and anti-money laundering (AML) rules. According to CryptoPay CEO George Basiladze, “all around Europe there are common KYC and AML requirements for issuing debit cards.”

Blockchain startups are also being founded at a quick rate and their use of ICOs for funding has allowed them to secure sizable capital. Scores of startups are now either holding or are set to hold their token sales. Even existing players like CryptoPay will be holding its ICO for expansion. 

Market preference

Blockchain services must also make an effort to become a preferred method for their markets. While not a blockchain technology, Stockholm-based fintech startup Trustly enables merchants to receive payments from customers’ bank accounts. Trustly works great for the European market due to the prevalence and importance of the bank account in the region.

By putting the bank account at the core of its service, Trustly is able to cover 29 countries which all share this preference.

Trustly’s example could be a blueprint for bitcoin platforms looking to grow fast. If people—in this case, companies—are willing to forgo one payment, why not bank on their willingness to do so in the future? Many traditional, or non-blockhain, startups in finance are expanding their customers bases and pushing regulators to go on with the program. Same scenario could be applicable to blockchain.

Indeed, blockchain services could seek out regions where they can cater to market needs. Today, it is showing promise in developing countries as a cheaper means for remittance. Traditional remittance and money transfers have to go through several institutions such as banks and clearing houses to complete.

As such, services often charge sizable transaction fees. In contrast, blockchain services only need to charge minimal fees for facilitating transactions thanks to the distributed and decentralized nature of blockchain so cheaper remittance and money transfers are actually possible over the technology.

Exciting applications

While payments offer ready opportunities for blockchain, other applications must also start showcasing their proofs-of-concept. Among the promising uses of blockchain is to allow transactions of real-world assets such as real estate and other financial instruments to be conducted using the technology.

One blockchain startup LAToken is set to offer an investment platform that allows real-world asset owners to tokenize their assets and offer them to investors. The platform targets investors who may want to gain fractional ownership of these assets while providing owners access to quicker liquidity. Such uses are shaping up to be game-changing and should provide consumers lower barriers to investing and liquidity - and as the following illustrates, humility isn’t a virtue in the world of blockchain.

“My dream is to make NASDAQ on blockchain with a wider range of tradable assets and a dramatic reduction of listing costs, settlement time, and transaction costs,” said LAToken CEO Valentin Preobrazhenskiy.

Acceptance

Blockchain must further develop to achieve wider acceptance among regular consumers. Blockchain ventures must endeavor to offer superior customer experiences. These services must prove viable alternatives to the status quo. Most average consumers care more about issues such as costs, ease of use, and security so services must be able to deliver these.

Governments must also be able to adapt and establish regulations that would allow blockchain technologies to be used across territories. In addition, these regulations must also create protection for consumers. Regulation would enable blockchain to be perceived as a safe and secure means to perform digital transactions.

Ultimately, wider adoption by consumers is hinged upon reaching critical mass in blockchain’s use for routine transactions

This article is published as part of the IDG Contributor Network. Want to Join?

Related: