One of the most sensitive issues for small businesses is managing their finance and accounting, because making a significant error can devastate the entire company. As a consequence, many businesses have been slow to adopt new technologies and developments in the payments world. Some, however, such as Bitcoin, offer such promise, that business owners should get over their hesitancy and consider allowing customers to pay via Bitcoin.
Bitcoin is a fairly new type of electronic payment. Established in 2008, the ‘cryptocurrency’ works by distributing Bitcoins until a set number have been created. The process uses computing power offered by ‘miners’ in order to record and execute transactions with Bitcoin. These miners are then paid in Bitcoin and free to spend them however they want.
Should businesses consider accepting Bitcoin payments? Of course! But certain industries are better suited to benefit from offering Bitcoin than others. Taking a look at the potential benefits of accepting Bitcoin will help businesses determine whether it is right for them.
Why Businesses Should Start Accepting Bitcoin Payments
Technology has revolutionized many aspects of conducting business but payments has largely remained unchanged over the last two decades. Though credit cards and smartphones have introduced some new ways to pay for goods and services, the process is still largely the same. Bitcoin and other cryptocurrencies are an entirely new way to pay for anything electronically. This remarkable new technology offers a lot of opportunity to businesses who are early adopters of this new currency.
New and Fervent Customer Base
Accepting Bitcoin as a form of payment is something of a statement for business owners. The cryptocurrency is little understood or utilized by most businesses. When a company decides to accept Bitcoin, an entire community of active users become aware of that organization’s involvement. Websites, blogs, and forums routinely update what businesses accept Bitcoin. Thus, at the very minimum, accepting Bitcoin or other cryptocurrencies leads to substantial free marketing. More than just free advertising, however, you also gain a significant new customer base, who are passionate about bitcoins. Many bitcoin users are, in some respects, investors in the success of the product because bitcoin’s value against the dollar fluctuates, so they will frequently intentionally patron businesses that accept the currency in order to promote it.
Lower Transaction Fees
The specific transaction fee a company pays for accepting Bitcoin is going to depend on their transaction process. If a business decides to directly handle Bitcoin, transaction fees will results when trying to convert the digital currency into a physical one. Another option is to use a portal that specializes in Bitcoin, such as Coinbase. This allows merchants to accept Bitcoin and receive daily payments for their products in almost any real world currency. Regardless which option a business chooses, the transaction fees associated with Bitcoin are much less than credit cards.
One of the more frustrating issues online businesses encounter are credit card chargebacks. In a credit card chargeback situation, the business has provided the good or service but not only receives no payment, they also face additional fees from their payment processor, and a high chargeback rate can cost a business their credit card processing provider. Although chargebacks also happen to traditional brick and mortar retailers, they are more common with eCommerce. They occur when the customer calls their credit card issuer, or bank and disputes the charge. In those instances, major credit card brands, like Visa and Mastercard, will usually refund any money disputed by a customer and “chargeback” the business owner. Cryptocurrency transactions avoid this issue entirely by leaving issues relating to refunds or dissatisfaction to the customer and company.
Industry Leader Status
Bitcoin has yet to be adopted by large number of industries. In total, less than one percent of the global population has ever used or held Bitcoin. Adoption and mainstream acceptance is still being developed, but the popularity of the cryptocurrency is growing quickly. By offering to accept Bitcoins at your business, you identify your business as on the leading edge of customer service and technology.
Business owners are generally hesitant to make significant changes in financial aspects of their business, because of the devastating consequences if things go wrong. Despite that, however, the potential benefits to becoming an early adopter of Bitcoins are so substantial, in the form of reputation, free marketing, increased customers, lowered transaction costs, and lowered chargeback rates, that it is worth the hassle and risk.
Andrew Egan is a Texas-based writer focusing on high risk credit card processing and other business finance related topics.