Bitcoin is a cryptocurrency for making payments. Because Bitcoin is much loved by anarchists, drug dealers, and fraudsters, it is too easily dismissed as an unsavory sideshow. However, as Bitcoin and its emerging competitors gain momentum, they will be a disruptive force to the familiar financial system that has grown and matured over centuries. Perhaps it’s time to consider if your business will benefit from accepting Bitcoin.
What is Bitcoin?
Bitcoin is the first and best known example of a cryptocurrency, a system that uses the blockchain concept and cryptography to facilitate exchanging value without a middleman such as a government or a bank. Bitcoin’s bumpy history may cause some to dismiss it as a fascinating experiment that will soon be forgotten.
Bitcoin is a terrific solution for making purchases you don’t want to see on your credit card statement such as donations to controversial organizations. Bitcoin is an effective mechanism for making money untraceable.
Who uses Bitcoin?
A wide variety of companies including Dell, DISH Network, Expedia, Microsoft, Newegg.com, OkCupid, Overstock.com, Time, Inc., Virgin Galactic, 1-800-Flowers, and thousands of other companies accept Bitcoin as payment. Uniquely, eGifter allows customers to buy gift cards in Bitcoin that can be spent at major retailers including Home Depot, Kmart, and CVS.
Many of the businesses mentioned above only sort-of accept Bitcoin. More correctly, they partner with a middleman, typically Coinbase or BitPay who receives a business’s Bitcoin, and converts it into cash. They then deposit the cash in the business’s bank account. The middlemen make money on transaction fees, in the case of Coinbase, or by licensing their software and selling services in the case of BitPay.
What are the benefits of offering Bitcoin as payment?
These are the major business benefits of offering Bitcoin as a payment option:
- Lower transaction fees. The per-transaction fees for accepting Bitcoin are generally significantly lower than the fees businesses are charged for credit and debit card purchases by their bank. Coinbase charges about a 1 percent per-transaction fee compared to double or triple that for credit card transactions.
- Fraud prevention. Because people can pay businesses using Bitcoin without divulging personal identification information, they enjoy a level of identity-theft protection that credit cards can’t offer.
- No chargebacks to businesses. Bitcoin purchases are final. There are no chargebacks and no return transactions like those associated with credit cards.
- Quick payment to businesses. Bitcoin payments to businesses arrive in bank accounts typically in only two business days. This elapsed time is longer for credit card transactions.
- Ease of accepting international payments. Bitcoin is world-wide. There is no concept of country. This feature relieves the steep cost of going global with credit cards by making cross-border payments easier, faster and cheaper.
When should I offer Bitcoin?
Consider offering Bitcoin as a payment option if you think it will increase your sales or customer loyalty. If it simply causes some of your existing customers to change how they pay, Bitcoin will only add complexity and cost to your business for no real benefit.
Sometimes offering Bitcoin as a payment option will increase the appeal of your business with your competitor’s customers or in a new geographic area. That appeal will increase your sales.
How do I start using Bitcoin?
Using a middleman to help you implement Bitcoin is a low-cost, low-risk way to build familiarity and confidence if you want to experiment with Bitcoin as an acceptable currency to purchase goods and services from your business. Learn more here.
What issues would you be concerned about before you’d adopt Bitcoin for your business? Share your thoughts below!