Staying competitive in your small business means looking for creative solutions to increase revenues. One way to stand out— and potentially get more sales— is to accept cryptocurrency.
Allowing customers to pay using bitcoin, ethereum or other forms of crypto may mean you bring in customers who don’t use traditional financial services. Setting up a cryptocurrency payment system early on can also help create a crypto ecosystem that will in the future embrace using blockchain technology for things like rewards.
Likewise, paying vendors with cryptocurrency can also help your small business. The business could make extra money off crypto if the values go up, and your business can move away from traditional banks and the fees they charge.
But it’s not without hassles or risks. Here’s how to understand whether cryptocurrency is good for your business.
Why Cryptocurrency Is Attractive To Some Small Businesses
There are a numerous reasons why a small business owner may find crypto attractive:
- Lower or no transactions fees
- Accept crypto & potentially convert it to USD or other fiat currency
- May bring in new customers
- Get ahead of the competition
In particular, crypto can be very appealing to a business that wants to go global or reach untapped markets. Crypto can allow your business to accept payments from customers around the world without the hassles of wire transfers or other more traditional payment methods.
And since a central bank isn’t associated with crypto, those that have historically been disenfranchised, such as the unbanked, may be more open to paying via cryptocurrency transactions. Crypto transactions don’t need to go through a middleman, they are just digital wallet to digital wallet.
Should Your Business Accept Cryptocurrency?
Perhaps one of the biggest benefits of accepting cryptocurrency as a payment method is the low transaction fees. Credit card payments typically have processing fees between 1.5% and 3.5%. Many crypto payments have no or at least lower transaction fees.
Setting up cryptocurrency as a payment option is relatively easy, the transaction takes place in real-time, and depending on how you accept crypto, you can receive payment in specific forms of crypto or in US dollars.
BitPay and Coinbase are two main cryptocurrency platforms that are payment processors of sorts, and which offer straightforward platforms for businesses that want to dive into crypto. They can also help manage price volatility and can eliminate chargebacks.
BitPay advertises payments buttons, a hosted checkout, and embeddable invoices for your website. It is also flexible and able to integrate with numerous plugins.
Coinbase also advertises quick set up, easy conversion to cash or USD, coin, and access to global payments. E-commerce integrations are available through Shopify and WooCommerce.
PayPal also allows you to buy, sell or accept crypto through its app.
Should Your Business Pay Using Cryptocurrency
Paying with cryptocurrency also can also be positive or negative. One major point to consider is that the value of crypto fluctuates, and it can often be very volatile. These fluctuations in value may mean you wind up paying more (or less) than you expected, depending on timing.
Also keep in mind that both personal and business credit cards offer the ability to dispute a purchase (called a “chargeback”) if you don’t receive what you ordered. But with crypto you don’t have the ability to dispute a purchase. Any refunds must come from the person or business you paid. If someone on your finance team accidentally pays a bill that should have been disputed, you are no longer in a good position to negotiate or get your money back.
Yet another point to consider when it comes to paying using cryptocurrency is that it may just not be worth it yet. Due to the difficulty surrounding digital asset taxes, setting up cryptocurrency payment processing, and many more factors, some businesses may just not want to dive into it until they feel the demand for them to accept these payments is higher.
There aren’t strong regulatory bodies or rules around crypto which means you can be in ‘murky waters’ quickly.
Know The Facts: How Can Businesses Benefit And Get Burned
In addition to those warnings, cryptocurrency scams can also hurt your businesses.
First, keep in mind that digital currency may be stolen by hackers. Just like with any online account, hackers can steal your information and use it to take your cryptocurrency. Businesses that want to get into accepting and paying with crypto should make sure their digital wallet is secure and they have robust cybersecurity measures in place.
It may also be a good idea to have multiple digital wallets, so not all your crypto is one spot. Also, unlike with a regular bank account your deposits aren’t FDIC insured.
Individuals with crypto have been scammed from a wide range of ruses, such as thinking they were transferring funds to business partners, to paying fake Coinbase reporters for favorable media coverage.
The last thing anyone wants is to be scammed out of money. This is why it is important to make sure you take precautions.
Those precautions may include researching other examples of scams to make sure you’re not falling for a common one, trying to talk to someone in person or over video to verify what they are telling you, only using reputable apps and implementing strong security protocols. Above all, keep the adage in mind that if it sounds too good to be true it probably is.
Additional Pros And Cons Of Accepting Cryptocurrency
It is important to remember that the benefits and negatives of accepting cryptocurrency in your business (or paying with crypto) are going to be different for each small business. As cryptocurrency becomes more popular, both success stories and horror stories will become more common.
So if you choose this method stay up to date with what is and isn’t working for other entrepreneurs.
- Low or no transaction fees when accepting crypto
- May attract new customers
- Great for global transactions
- No chargebacks
- Cryptocurrency can be volatile
- Fees associated with selling cryptocurrency
- Keys can be deleted, causing you to lose your digital currencies
- Must educate employees and set up controls
- Can’t dispute transactions your business makes
Crypto won’t replace traditional banking most for U.S. businesses anytime soon. You’ll still need a business checking account, a business credit cards (or debit card), and you may even need small business loans to grow your business. But crypto may open intriguing new possibilities for your business that could potentially lead to higher sales. Just proceed with caution as it still carries a great deal of risk.
This article was originally written on July 29, 2022.