They offer a secure, fast and decentralised method of processing transactions
Crypto payments have revolutionised the finance industry, improving payments and remittances, and furthering efforts toward financial inclusion. While finance is one of the biggest beneficiaries, several other sectors have benefited from crypto and blockchain. For instance, blockchain is used in supply chain management to verify the origin of products and track their movement. Cryptocurrencies are also used in the online gambling industry, where players can visit one of several South Africa Bitcoin casinos to place bets using digital assets to enjoy online casino gameplay. Cryptocurrencies have also improved luxury trades, making these goods and services more accessible.
Some of the world’s largest luxury companies accept cryptocurrency payments from customers. For instance, Ferrari announced support for crypto in 2023. The luxury car manufacturer launched the option in the US, and expanded BTC, Ether (ETH), and USDC support to Europe in July. Other popular names, including Balenciaga, Gucci and Hublot have also explored crypto support, with supported assets including BTC, ETH, and even meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB).
In South Africa, several businesses accept crypto payments from customers. For instance, Takelot.com, easily the largest e-commerce company, announced Bitcoin payments back in 2014. Pick n Pay also began accepting crypto payments and now records R1 million in monthly BTC sales, with four times more monthly customers making payments using crypto QR codes at hundreds of stores. With Bitcoin Lightning, Binance, VALR, or Luno, customers can pay at Pick n Pay branches using the current exchange rate at the time of payment. While these are not luxury brands, accepting crypto exposes them to the same benefits as any other business.
The interest in cryptocurrency payments from luxury brands is more than just the growing popularity of digital assets or a fear of missing out (FOMO). In many cases, luxury brands begin to accept crypto payments because of heavy customer demand. The new generation of wealthy customers who are likely to patronise luxury brands are familiar with crypto and sometimes prefer spending digital assets to fiat currencies. However, apart from demand, there are several other motivations.
Crypto payments make luxury goods much more accessible than fiat payments. Digital assets on a blockchain are essentially borderless and can be sent and received between trading parties regardless of the seller or buyer’s geographical location. This exposes luxury brands to a global audience, as nearly anyone can buy an item and have it shipped. These cross-border trades are seamless and cheap, since crypto transactions bypass intermediaries that may increase transaction charges.
Another point in favour of accessibility through cryptocurrencies is fractional ownership. Luxury goods are expensive and unintentionally restricted to a select group of people because of their high prices. However, blockchain technology can help producers and manufacturers convert real-world assets (RWAs) into digital tokens to democratise access. In addition, tokenization supports fractional ownership, which allows multiple buyers to own percentages of a luxury item.
Fractional ownership is a growing investment strategy that allows individuals of varying economic strengths to benefit from high-value investments in art, fashion items or luxury vintage cars. Instead of worrying about an outright purchase, anyone can buy a fraction and jointly own the item with other buyers.
The accessibility obtainable via digital assets is further simplified through non-fungible tokens (NFTs). A unique digital asset issued on a blockchain, an NFT can only be transferred and not duplicated, divided or exchanged. Issuers of tokens representing RWAs can mint a token representing a fraction of the item and issue this to each buyer. NFTs also improve liquidity in the luxury market since anyone can sell their fraction.
Cryptocurrencies also offer the luxury market a higher level of privacy and security, which helps build trust. This premise is also applied in industries like crypto gambling, where some players prefer to enjoy gameplay under the radar. By transacting on the blockchain, buyers and sellers of luxury items no longer have to worry about trusting the purchase and delivery process, since everything can be initiated and processed on the blockchain. A high level of trust for any process will likely attract more consumers who will transact freely and rest assured of protection against theft or fraud. In addition, crypto transactions are attractive to luxury buyers who prioritise anonymity.
According to a report from brand agency Overskies, luxury brands are gradually shifting to the online market as they pay more attention to the internet audience. The luxury market is changing because it must maintain relevance with modern customers and widen its reach. Although some struggle with blending modern and traditional approaches, these brands realise that the online market cannot be ignored.
McKinsey wrote in a post that luxury shoppers are now younger and more digitally savvy. The post notes: “The typical luxury shopper now has a mixture of online and offline interactions with the brand, seeks advice from peers on social media or looks for suggestions from trusted bloggers before entering a store.”
Catering to this new crop of consumers requires getting used to modern business methods, including supporting popular cryptocurrencies. Crypto payments offer a secure, fast and decentralised method of processing transactions that appeals to tech-savvy customers, which could boost reach, acceptance and sales for luxury brands.