The buzzword of the year in 2017 has been "bitcoin" and merchants are asking the question - should we accept it? Bitcoin, the cryptocurrency making waves in the news, has its advantages and disadvantages, so it's important to understand how it works.
The person-to-person money system cuts out banks, financial institutions and government bodies, leaving the digital currency in your "wallet." With the technology system, blockchain, bitcoin is able to keep your money secure and safe from fraud. Currently, one bitcoin equals $16,769 (at the time of writing) and more of that money stays yours because bitcoin is cheaper and easier to use, so no more processing payments. Bitcoin is growing in popularity because of it's ease of use, but also because people are paranoid about data breaches and hackers growing more and more sophisticated. As President and GM of NCR Silver, Chris Poelma, said in Business News Daily, "Consumers [are] looking for a safer way to do business."
Bitcoin is primarily used in online transactions, but brick-and-mortar stores, restaurants and other businesses are beginning to accept them. Known companies like Overstock and Virgin Galactic accept bitcoin now. Of course there are pros and cons to accepting this form of payment, and any business will need to weigh these carefully in order to fully understand and be prepared.
Pros to accepting bitcoin
Lower or no transaction fees. That's right, bitcoin transactions cost between 1 to 0 percent, so those merchant transaction fees won't be draining your accounts anymore. Since bitcoin doesn't need a bank to verify every transaction, you keep that money instead of forking it over to a financial institution.
Quick transactions. Because there is no financial institution for your money to through before it hits your bank account, your wait time is cut dramatically.
Easier transactions mean increased sales. You now can easily expand your business by accepting a decentralized form of currency. If you are selling products or services, accepting bitcoin to international buyers makes the previously inaccessible customer immediately accessible.
Marketing and fundraising. Being one of the industry leaders to accept bitcoin could help put your company on the map. Businesses could easily build a marketing program around accepting bitcoin and how the technology puts their business into the future. And along those same lines, bitcoin has been great for the nonprofit industry. Non-profits have used the acceptance of bitcoin to raise awareness for their causes in the tech community, and across the globe. And even an Olympic team used digital currency. No kidding, the Olympic Jamaican Bobsledding team used crowdsourcing and a bitcoin-like currency to fund their trip to Sochi.
Cons to accepting bitcoin
Volatile. This was obviously going to be the first con mentioned, as it is regularly the main hinderance discussed on the subject. Bitcoin's value is extremely unpredictable. When it was first introduced in 2009, bitcoin was worth pennies, but rose to $1,200 in December 2013. It then quickly plummeted to $600 and just this year, it hit $14,000, and now over $16,000. However, there are businesses to ensure your digital currency is translated back into your currency such as BitPay or Coinbase (however, as of this writing, Coinbase has halted bitcoin cash transactions.) These companies immediately exchange bitcoin payments in real time.
It's unregulated. Yes, one of the pros (no middle man) causes a con. Bitcoin's lack of government support may scare some people away. Although, the U.S. government does recognize bitcoin as a valid commodity, but other countries have restricted or banned its use. Lawmakers are working to craft regulations to govern it, which would cause changes in the future. Businesses that decide to accept bitcoin will need to be adaptable and prepared to make changes once laws are in place.
Security is uncertain. Although many see the benefits of a decentralized currency, some may interpret the likelihood of cyber criminals to target bitcoin as high. Since cryptocurrencies are not insured, this could cause major damage if it happens. Obviously, protecting your accounts with multi-factor authentication and regularly backing up your data will help prevent this from happening.
Planning for the future. How will those with bitcoin plan financial statements, figure out their taxes come April or determine prices of products? The constantly fluctuating value of the bitcoin would make it incredibly difficult to know how much to accept one day to the next. You would need to be dedicated to continue understanding the bitcoin and its value in the market on a daily basis.
Many people are not looking to spend. Customers who have access to bitcoin are holding onto it, trying to make more money from it rather than spending it on goods and services. Small purchases are usually taxed with high fees because it's not yet an easy currency to accept.
Lack of demand. Consumer's aren't demanding merchants allow the use of bitcoin, so there isn't much of an incentive for them to invest in the infrastructure required to accept it. Not to mention there is little support or effort in increasing the acceptance network.
It does seem like right now, bitcoin is more aimed as an asset rather than a currency. Trading and investing of bitcoin will continue at a much higher rate than using it as a payment method. However, accepting bitcoins won't make or break your business, as less than 1% of the population uses it. Bitcoin users are growing every day, so investing in the new cryptocurrency could put your business on the map and set you up for substantial future opportunities. Take the time to consider what your business could look like if bitcoin was an accepted currency and how that could affect your growth. If anything, it doesn't hurt to ask.