Should You Allow Your Customers to Pay In Bitcoins?


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Bitcoins have come a long way since they were introduced as a decentralized virtual currency system in 2009. In pure value terms, a bitcoin today is valued at close to $4,000. The cryptocurrency has also seen immense growth in usage and it is estimated that there are nearly 13 million bitcoin wallets in existence today.

Despite these staggering adoption figures, the number of businesses accepting bitcoins is still abysmally low, but nevertheless growing. One study projects the number of merchants accepting bitcoins to be in the range of 150,000 worldwide. In comparison, there are more than 27 million businesses in the US alone.

This presents business owners with a terrific opportunity. By accepting bitcoin payments, you are in a position to carve out a niche of loyal customers who do not have too many alternate avenues to expend their virtual currency.

At the same time, bitcoins are volatile by nature and this is presents businesses with an uncertainty. The bitcoins you received from your customer may have well dropped in value by the time you encash it. This problem is exacerbated for businesses with low margins and low working capital. Such businesses may not have sufficient margins to resist volatility. At the same time, low working capital would mean that these businesses may not be in a position to hoard their virtual currencies until their value goes up.

So how does one go about it? One of the most popular ways to do this is by using bitcoin processing partners. Businesses like Dell, Microsoft, Expedia and PayPal have today tied up with bitcoin exchanges like Coinbase and BitPay to process bitcoin payments. In other words, when you use bitcoins to make a purchase over Dell or Microsoft, you are in fact transacting with Coinbase. These processing partners convert bitcoins into USD which is then transferred to the merchant account. This option has become so popular that a number of leading payment processing companies like Global Payments too have partnered with bitcoin processors like BitPay to process bitcoin payments for their merchants. Other services like Cryptopay, an old player in the cryptocurrency niche and a digital wallet also allows users issue a bitcoin debit card which can be used just like any Visa card. The company is expected to launch an ICO which is essentially a means to raise funding (in the form of bitcoins) in exchange for valuable and usable tokens.

Besides the marketing angle discussed earlier, there are several other reasons why offering bitcoins to customers makes business sense. Firstly, the payment processing fee on bitcoins are pretty low compared credit card processing fee. For perspective, the processing fee on Coinbase is zero for up to one million dollars in payments. The equivalent fee on Visa or Mastercard is routinely in the range of 2-2.5% per transaction.

Secondly, cryptocurrencies are secure in that they do not make customers prone to identity thefts. Also, businesses that face a high number of chargebacks on their card payments would benefit from bitcoins since there is no scope for a payment to be reversed. Finally, online businesses that serve globally benefit from a virtual currency that is not subject to cross-border conversion fee.

Bitcoin payments over third party processors provide businesses with the best of both worlds – not only are merchants now in a position to carve a niche by offering bitcoin payment options to customers, they are also able to enjoy all the added benefits that bitcoins provide without exposing their business to the vagaries of the cryptocurrency market. What are your thoughts?


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