What is cryptocurrency?
Cryptocurrency is a digital asset that has “limited entries in a database no one can change without fulfilling specific conditions”. Basically, it’s a digital asset that cannot be altered or changed to create counterfeits that are not created by any government. The most popular cryptocurrency in the market is Bitcoin, followed by Litecoin and Ethereum. A very select few businesses are accepting a select few cryptocurrencies including Subway, Overstock.com, WordPress, and Microsoft.
Does this mean your business should accept cryptocurrency? The answer is: if you’re willing to take the risks.
The biggest risks, especially for Bitcoin, is volatility. “Bitcoin was first valued in pennies when introduced in 2009, but rose to $1,200 in December of 2013. After hitting that peak, bitcoin’s value plummeted to $600.” It hit a high of almost $20,000 in December of 2017, then quickly fell down to below $14,000 that same month. While cryptocurrency as an industry has been increasing in popularity in 2017, the issue of volatility for each individual currency can be an issue for small businesses. Businesses must be able to adapt to these changes for each of their products and services. Your business must be able to watch these different cryptocurrencies and know when to sell each cryptocurrency for actual currency to pay for business expenses.
The second biggest issue is regulations or lack thereof. Currently, there are five countries that outlaw Bitcoin: Bangladesh, Bolivia, Ecuador, Kyrgyzstan, and Nepal. Lawmakers are currently looking at ways to regulate it. “Sovereign governments and central banks are still unsure exactly what type of legislation they should pass surrounding cryptocurrency. With cryptocurrency currently unregulated by governments and taxation, your small businesses must be willing to adapt to whatever comes next.
Even with these risks, there are many positives that can come from accepting cryptocurrency as a form of payment for your small business.
The biggest positive for your business in accepting cryptocurrency is smaller transactional fees. Businesses accepting credit cards often have a transaction fee ranging from 2% – 4% of the purchase. There could be a swipe fee as well around 25 cents. Transactional fee do not apply when it comes to cryptocurrency. There are two main 3rd party service companies that will help you accept Bitcoin and other cryptocurrencies: Coinbase and BitPay. These two services “enables you to receive Bitcoin payments and transform them into bank withdrawals for a 1% fee” (a2hosting link). Transactions can also be performed manually by generating a bitcoin address for each sale you make. Invoicing and billing are on your own, however. Having no transactional fees can dramatically increase the profits you make per sale without increased prices.
Cryptocurrency has many other positives. It’s very secure. It works like cash. There is no third party system can reverse charges and all sales are final. Either the customer has it to spend or they don’t. Cryptocurrency is international. If your business has international customers, it’s a great way to avoid foreign transactional fees.
Finally, accepting cryptocurrency as a form of payment is a great way to obtain new customers. Additional methods of payment mean more customers you’ll be able to attract and promote in a marketing plan. One study showed “more than a quarter (28%) abandoned a purchase if their preferred payment method was not available. Among younger shoppers (18-24) that figure rises to 32%”.
In conclusion, if you believe your particular business would benefit from accepting cryptocurrency, I would highly recommend it. If you believe that your business would not do any better or the risks are too high, do not accept it as a form of payment. Look at who your customers are. They will tell you what decision you should make.
Category: Social Media Marketing 201