Should you accept Bitcoin as a payment option?
Bitcoin’s meteoric rise from $2 in 2011, to a staggering $17,000 as of Dec. 12, 2017, has brought an equally astounding influx of users and speculators. However, as with any time a new technology begins to experience wide adoption, business owners must carefully weigh how it will impact their current operations, the value it will deliver and how it will continue to evolve in the marketplace. Not sure what Bitcoin is or how it works? You can read this bitcoin overview for a primer.
This is no easy task, since it requires a blend of technical knowledge and business savvy as well as a deep understanding of what your clients want. Before deciding to accept bitcoin – or any cryptocurrency – business leaders should take into consideration the issues with going crypto.
It’s all so final
Bitcoin (which is managed through a public blockchain) is not like a credit card – and it is not really cash, either. There is a variable charge for processing a bitcoin transaction it varies, and since each transaction needs to be verified by bitcoin miners, the processing time could be up to 10 minutes long (though it is usually much less).
Returns and exchanges are a part of doing business, and chargebacks are an unfortunate part of corporate life. But since a bitcoin is virtual money, any payments your customers make cannot be challenged by a third-party (ie charged back). For one, there is no phone number to call to request a chargeback. While this may be an initial benefit for a business, you will certainly end up with a few dissatisfied clients. So customers would have to be absolutely confident they are doing business with a reputable business. (making your online rating even more important, see our guest blog on Nextopia)
The rise of the digital transaction
There is a wide array of cryptocurrencies available besides bitcoin. These other types of cryptocurrency (sometimes referred to as “altcoins”) include heavyweights like Etherium (seen by some as serious competition to bitcoin) and smaller players like Ripple, Dash and LiteCoin. While bitcoin is the clear winner in terms of market capitalization, what really matters to you is what your clients want – and what the future holds.
While bitcoin is popular now, it may not be the currency of choice in the future. There are many more cryptocurrencies (and, of course, digital ledgers) being currently used or created to revolutionize the way merchants, organizations and governments do business, including payments, voting, legal agreements and other types of transactions typically handled by legal offices and banking institutions. For example, Maersk has used blockchain to manage its shipments, an approach that involved several big players besides the company, including the US Department of Homeland Security.
Rest assured one of the altcoin cryptocurrencies will in the future be specifically designed to fit for eCommerce, with things like chargeback, and shipping verification built into the blockchain. For example, if you offer 30 day money back policy, and when the product arrives back at your shipping location it could trigger the refund right in the blockchain. Or when a customer receives the shipment and signs for it. (This is basically the basis of an Etherum smart contract).
While the “distant” future certainly belongs to digital transactions, the immediate reality is not quite so clear. Implementing the necessary technology for managing cryptocurrency transactions at your business will involve a serious resource commitment. You should be sure that a strong percentage of your clients want this payment option before entering the cryptocurrency market. (Incidentally, while bitcoin is riding high, it’s important to note that not many businesses are actually making regular transactions with it. Much of the currency’s value comes from traders who are bidding up the price.) Though we have found a Magento Extension that accepts bitcoin at coingate.com.
Can we exchange numbers?
Cryptocurrencies’ value is derived from its users. As long as everyone using the cryptocurrency agrees that it has a specific value, it does. However, the value of a cryptocurrency can vary significantly from day to day – and even hour to hour. For your business, this could result in dramatic losses or gains depending on how quickly you can execute a transaction or exchange the cryptocurrency for actual cash. There are several services that help mitigate this issue. If you are considering taking this sort of payment its likely a must.
Deciding to accept a cryptocurrency at your business needs to incorporate research about your company’s clients and your overall strategy in the marketplace. Cryptocurrencies are still in their infancy, and there is not enough support for any one currency to really drive most businesses to accept it.
Some analysts also believe that bitcoin is reaching the stage where its bubble will burst – with unfortunate side effects. However, as the technology develops and additional infrastructure is created to manage issues with payments, different currencies, and fluctuations in the exchange rate, you should expect to hear from more clients asking to use this payment method.
Checkout out what other industries are doing, here is a law firm discussing bitcoin.
If you are wondering if a cryptocurrency payment option may be right for your business or have other concerns about how technology can help you achieve your business goals, please contact a representative at Xumulus.