Call Our Currency Exchange Broker Now on +44 207 4594107

Currency Converter

Pros and Cons for a Business to Accept Cryptocurrency

Payments and Fintech are revolutionising businesses especially in 2018. This is not about adding PayPal or Apple Pay to the point of sale (POS), it’s a lot more revolutionary than that. Adding cryptocurrency is more along the lines of adding a range of foreign currencies as payment. It’s not without fault but with every sector of every industry competitive, a business needs to give its chance every chance of taking and increasing revenue into the business – and crypto could be the way of standing out and diversifying market share.

Pros and Cons for a Business to Accept Cryptocurrency

The pros – why your company should accept cryptocurrency

Virtual currency wallet. Bitcoin gold coin and printed encrypted money with QR code. Cryptocurrency concept.
Image credit: © REDPIXEL – stock.adobe.com

It’s quicker, cheaper and more efficient

Crypto enables cheap and borderless near-instantaneous transactions with mainly peer-peer transactions within a network. This enables potential customers all over the world — even those without access to traditional banks like outer India or Africa (very much emerging countries), to purchase your company’s services or products. Thanks to blockchain and ripple technology a large payment of say £400,000 worth which would have historically taken several days to clear, via crypto would become virtually instantaneous. Seconds rather than day’s means you can guarantee when a payment has been made if at all allowing more efficiency as a large sale of an asset e.g. a house can occur in hours not weeks.

On the cost side, cryptocurrency payments are peer-to-peer without an intermediary – buyers send funds directly from their wallet to the merchant’s wallet. The fact that there are no intermediaries means that there are lower transaction costs in cryptocurrency payments. To give a frame of reference, credit card payment processors usually charge a flat fee plus up to 4% of the total transaction fee. In comparison, cryptocurrency payments are usually a fraction of this and some cryptocurrency protocols are experimenting with zero.

Raise investment and broaden demographic

Another benefit of cryptocurrency it makes it easier for many people to contribute to a single purchase because everything goes to a smart public ledger, which can be trusted. This makes crowdsourcing the perfect industry to pair with cryptocurrency. If a (generally smaller) company needs to crowdsource to raise funds to grow, the start-up can raise a large pool of money, internationally from investors. This also opens up to new types of investors – the millennial. A wider, more diverse pool of investors and contributors thanks to cryptocurrency can become very powerful.

Related:  All You Need to Know About IOTA and IOTA Price Prediction

Transactional benefits aside, Josh Reif of Reif Ventures, LLC, adds that “accepting cryptocurrency can help you attract a younger demographic of people who prefer the simplicity and anonymity of crypto transactions.”

It’s safer (for both parties) and reduces the chance of fraud

One of the key benefits of accepting cryptocurrency payments is that they offer unparalleled levels of merchant protection by guarding against fraudulent chargebacks. In 2016, Retailers lost as much as $7 billion to chargebacks in 2016 and this could be as high as $31 billion by the year 2020.

Carmen Mastro Pierro, the owner of three digital magazines and an e-commerce website which accepted cryptocurrency, concurs: “I believe accepting cryptocurrency as a payment is wise for many businesses. Just offering several payment options has always been linked to higher conversion rates. In addition, some customers feel safer paying with crypto as compared to PayPal or credit cards.”

If you hate GDPR, which most people do, crucially because transactions are anonymous and the data is encrypted before storage you are not storing customer’s details and therefore dramatically reducing the chance of fraud and identity theft.

Broader their market and demographic for their product or service

Being open to accepting cryptocurrency payments could open the door of opportunities for vendors to sell their products/services to buyers in foreign markets they couldn’t previously reach or knew existed. Cryptocurrency payments are borderless so you don’t have to worry about whether your bank has a corresponding bank through which it will wire your payments. Going forward, cryptocurrencies could also power microtransactions so that you can sell to buyers that had previously been unserved or underserved by traditional financial institutions. Outer parts of Africa and the emerging Tier two world comes to mind where the internet is there but sub-industries can’t grow or thrive due to the lack of microfinance.

Related:  How Cryptocurrencies Are Changing the Future of Payments

In conjunction, cryptocurrencies are not bound by a specific country’s exchange rate: rather, they are universally recognized, which makes them more attractive for many businesses. For international e-commerce companies, in particular, these advantages can be significant.

The cons – reasons for many businesses not yet accepting cryptocurrency

Bitcoin price going down
Image credit: © BillionPhotos.com – stock.adobe.com

One of the biggest and understandable reasons many businesses are wary of accepting cryptocurrency payments are the numerous and continuing media reports of hacks and lost user funds. Just this week another hack occurred on a Japanese exchange to the value of nearly $60 million. The exchanges are generally very secure but it doesn’t instil confidence on a business owner as a bank does now. Decentralised exchanges with so-called “unhackable blockchains” are increasing but it will take time.

The second factor delaying the transactional use of cryptocurrency is the incredible level of volatility that cryptocurrencies suffer. We’ve mentioned this before in an example with Starbucks partnership with Microsoft. The price of a cryptocurrency could rise/fall as much as 20% in a matter of hours and crucially unlike the price of goods normally where the fiat value is set i.e. a coffee will always be valued at £2 regardless of the Sterling rate of exchange, when using Bitcoin the price of goods could fluctuate by 20%. However, many business owners will be incredibly worried if the value of their money in the bank suddenly declines by as much as 10% overnight.

A third issue is a process for accepting cryptocurrency payment still requires a great deal of technical expertise beyond the capability of the average business owner. Starting with setting up a specific wallet which suits their needs, understanding smart contracts, hedging volatility and this is before tax and accounting. The accepting and managing payments are still a large part of small business admin and there is always a human error or technical mishaps. Cryptocurrency payments are however immutable, and they can’t be taken back; payments made with cryptocurrency to merchants are final and cannot be undone. To reverse a payment, could be for the average vendor, too much in a busy shop for example.

Related:  10 Cryptocurrency Terms and Definitions You Need to Know

In general – What are the risks involved in accepting cryptocurrency?

There primary risks of accepting crypto:

  1. Keeping your cryptocurrency safe.
  2. Volatility – Prices move too much in comparison to fiat.
  3. The regulatory and tax schemes are confusing subject to your jurisdiction.

Other risks include transaction fees, liquidity concerns and counter-party risks associated with using crypto exchanges, which act as the processors for businesses that do not directly accept crypto. Exchanges let you convert crypto to “fiat” — e.g., government-backed cash — but leaving money in exchanges leaves the crypto coins vulnerable to theft. It’s very different to banks that are answerable to regulation and greater powers. Exchanges aren’t. To address this issue, those who have any significant money in cryptocurrency usually move it to a “hard wallet” offline.

How could your business accept cryptocurrency?

In order to accept crypto as a form of tender for products or services, your business needs either a digital mobile “wallet” or a Point of Sale (PoS) machine. While the two processes are essentially the same, having designated equipment and accompanying software and support enables a more seamless experience for your customer and your business. A QR code for the amount of the transaction is generated on the business end, which is then scanned by the customer to pay and complete the transaction. Different PoS machines have various benefits, but most charge a fee for this service.

To start the process of accepting cryptocurrency, an account with a service such as Binance or Coinbase which has plug-ins that you simply install automatically into your system. These gateways integrate with major e-commerce platforms. Customers will be able to check out using crypto, which is then deposited to your digital wallet or deposited as a local currency.

Like any new technology, software or service a business is intending to use its worth researching heavily, asking experts in the field and understanding every aspect of the benefits and risks before the integration occurs. This could be the beginning of a new future for payments and business transactions as we know it.

Foreign Exchange Live
Foreign Exchange Live
FOREIGN EXCHANGE LIVE
icon-angle icon-bars icon-times