SMEs find niche role for crypto payments

CRYPTO investor Terence Ho believes so much in the future of digital currencies that he convinced his company's management to start accepting them as payment.

Now, A Wellness Holdings customers can foot chiropractic treatment bills with Bitcoin or settle the payment for a facial package in Ethereum. The homegrown health, beauty and wellness group set up its own digital wallet and began taking crypto payments in April, across its 10 brands' 23 stores.

The group does not plan to convert its takings to fiat currency, either. It wants to accumulate as much of these assets as possible, as it is building a million-dollar Web3 platform that will allow customers to "integrate cryptocurrency into their daily lives".

Digital currency volatility does not seem to bother the company much. "We see the future in this, which is why we're willing to take the risk of fluctuations. The market still has a very big potential," said Ho, the group's director of marketing and business development.

Still, it took management about 5 months to evaluate Ho's proposal before giving it the green light. Said Arich Tan, A Wellness Holdings' group chief executive officer (CEO): "We didn't want to blindly follow a trend. But after looking at our financial position, we decided we were ready for this, and had sufficient cashflow to withstand any risks."

Around 5 per cent of A Wellness Holdings' customers have paid in crypto so far, and Ho has projected the group's total crypto transactions for the first 3 months to hit between S$300,000 to S$400,000.

More embracing alternative payments

Singapore's small and medium-sized enterprises (SMEs) have largely shunned cryptocurrencies, which are not regulated by the government. Still, their meteoric rise and entry into the mainstream has been hard to ignore. The price of Bitcoin, the world's largest cryptocurrency, is up more than 4 times since the pandemic began.

Yet while most local SMEs eye digital currencies with wariness, more are starting to accept such payments. Some of these changes are driven by early crypto investors such as A Wellness Holdings' Ho, while others see an opportunity to attract new customers: affluent millennial crypto investors.

Last month, Charles & Keith became the first homegrown fashion retailer to launch cryptocurrency as a payment mode on its e-commerce website. A number of luxury brands are following suit.

Another Singapore company, Korean fusion restaurant Joo Bar, has accepted Bitcoin via its own payment gateway since late-2018. It even has an incentive programme: customers who pay in Bitcoin get a 15 per cent discount off their total bill, and can earn up to 5 per cent cashback in Bitcoin, subject to a minimum spend.

Yet Bitcoin transactions have made up less than 0.1 per cent of total payments received by Joo Bar since then. The restaurant's owner, Jamie Lim, believes merchants who start accepting crypto payments in order to increase sales should be realistic about their prospects.

"Most customers rather pay with a credit card for convenience day-to-day. If you're a merchant accepting crypto payments without operating your own payment processor or offering discounts, you don't understand the value proposition of Bitcoin. It shouldn't be treated just like regular money," he said.

Lim has kept up with his restaurant's Bitcoin incentive programmes as he wants to help build what he calls a "circular economy", where people can earn, save and trade Bitcoin for goods and services.

Like A Wellness Holdings, Joo Bar is keeping its Bitcoin instead of converting it to fiat currency. Lim has also chosen to accept Bitcoin payments natively, to avoid being subjected to transaction fees and potentially unfavourable conversion rates that arise from using third-party gateway providers.

Licensed gateway providers see higher take-up

But for merchants who are unfamiliar with the crypto space, the services of licensed crypto gateway providers have lowered the barriers to entry for accepting digital currencies as payment.

Crypto payment provider TripleA said it has seen a 32 per cent increase in take-up rate for its solution among Singapore merchants since securing its digital payment token (DPT) licence by the Monetary Authority of Singapore (MAS) last November.

On top of supporting luxury and digital goods merchants, the firm has seen an uptick in business-to-business crypto payments, particularly due to a demand for crypto payouts, said CEO Eric Barbier.

He noted that TripleA has been receiving more requests from local business owners whose freelancers wish to be paid in crypto for their services. It also recently collaborated with a Singapore law firm who had clients that wanted to pay their legal fees in crypto.

Another 3 DPT licences were granted by MAS last year, to Singapore-based fintech firm Fomo Pay, Australian cryptocurrency exchange Independent Reserve, and local bank DBS' brokerage arm DBS Vickers.

Ben Charoenwong, assistant professor of the department of finance at the National University of Singapore Business School, said Singapore may expect to see smaller and newer merchants offering crypto as a payment option, as they can afford to take "more risks".

The costs of using what later is revealed to be a bad payment method is high for established merchants, but smaller merchants may be more willing to experiment with new payment methods in order to induce or facilitate more sales," Prof Charoenwong said.

To reduce the risks associated with the asset's high volatility, 99 per cent of TripleA's merchants here have opted to convert and receive their crypto transactions in fiat currency, said Barbier.

"Many merchants, by far, don't want to touch crypto. Most accounting software also do not account for crypto, so a lot of complexity is created if merchants receive crypto on their books," Barbier said. A minimum threshold of US$1,000 is required for same-day withdrawal when using TripleA.

Crypto payments: Hope or hype?

For Benjamin Seelos, founder of bespoke luxury travel agency The Wander Clan, partnering TripleA since last December has been a "win-win" situation.

He finds crypto transactions more secure and efficient than bank transfers, which may take a longer time to process, while the option to withdraw crypto in any fiat currency helps the firm sustain its operating cash flow.

About 2 per cent of its customers have purchased staycation and travel packages using crypto, with an estimated S$30,000 to S$40,000 in such transactions to date.

Seelos said: "We need to be smart. I don't want to hold the crypto because half an hour later, it can suddenly lose 20 per cent of its value. But the Four Seasons Resort in the Maldives still expects my US$50,000 in payment."

Prof Charoenwong noted that merchants and consumers would be more willing to use such alternative currencies in a society that does not have a viable national currency. He cited the example of El Salvador, which last September became the first country in the world to adopt bitcoin as legal tender.

"Although the future is promising for decentralised finance and cryptocurrencies generally, its use as a widespread currency for transactions is probably not viable. In a country like Singapore where the existing currency is already relatively stable in value, there is probably less incentive for widespread adoption," he said.