Politics and Business
Should You Accept Payments In Crypto? The Pros And Cons
Many businesses are experimenting with the idea of accepting payment in cryptocurrency. Digital tokens appear to offer so many advantages. And given how popular they are among consumers, it seems like a no-brainer.
But as examples, such as Tesla, have made clear, actually making crypto work as a payments scheme is more challenging than many brands realize when they first start. It requires a lot of planning, preparation and technical know-how to pull it off.
Despite that, not all firms are backtracking on crypto payments. There are still a bunch of outlets that offer the ability to buy in Bitcoin and others, suggesting that the way we pay for goods, at least online, could be changing in the future.
If you own a business and are wondering whether to accept cryptocurrency or not, this post is for you. We take a look at the pros and cons of launching such a scheme and whether you should get involved. Here’s what you need to know:
The following is a list of benefits your business could enjoy if you start accepting payments in cryptocurrency:
It’s Way Easier To Get International Customers
The internet is global. But many businesses that sell online wind up only selling to people who use the local currency. The reasons for this are complex. One is that consumers don’t like paying for goods in foreign currencies. They know transaction fees are high and they’ll wind up paying more than the ticket price. Another reason is that banks make it difficult for merchants to accept funds from all over the world. Fintech solutions exist, but they tend to be quite niche and only usually work in specific countries.
But with Bitcoin, borders mean nothing. The currency is perfectly international and stands outside of the traditional banking system. As long as you have a Bitcoin wallet with valid tokens inside it, you’re good to go.
There’s also a trust element for international customers. They’re less concerned about banks transferring and changing their money. Cryptocurrency just makes their lives easier.
It can take days for international payments to go through. And while there are now some fintech alternatives to traditional bank clearing, most international customers don’t have access to them. (They tend to only be available in countries with highly developed financial sectors, such as the UK and USA).
But with Bitcoin, slow payment times disappear. Paying for goods across borders usually only takes a few seconds or minutes, instead of hours or days. In fact, the speed of payment depends on the load on the network at any particular time. That differs from conventional banking where valid payments are made following clearing.
Crypto Support Is Improving
As articles like How to Buy, Sell, and Trade Dogecoin: Helpful Tips point out, the level of support available for crypto-using businesses is higher than ever, even for firms accepting niche tokens. Exchanges are integrating with payments systems, enabling vendors to quickly convert payments into fiat, exchange them for other currencies, and manage fluctuating prices in real time. Such systems did not exist even three years ago.
Lastly, when firms use crypto, they avoid the problem of pesky chargebacks. When a customer sends a payment in Bitcoin, they rarely take it back. In fact, the system usually prevents this. And there aren’t any merchant banking managers monitoring your account, threatening to shut it down if another disgruntled customer comes your way.
The fact that there are no chargebacks also reduces fraud risk. Customers can’t buy goods, then claim that they no longer want them, all while keeping them. This makes the entire system radically more efficient, slashing the risk of companies losing out.
Of course, there are some serious downsides to accepting crypto as a payment method:
Highly Volatile Prices
The price of virtually every cryptocurrency is highly volatile, including those claiming to be “stablecoins,” as Luna’s collapse revealed. The USD or GBP value of a token can vary dramatically from one day to the next, making it hard for retailers to offer stable prices. And while there are ways around this, it’s difficult to do. Firms need explicit crypto expertise to make it work.
Then there are the well-known trust problems. Given the ups and downs in prices, a lot of consumers simply aren’t willing to use crypto, no matter how much purchasing power it gives them. They would much prefer to stick with regular cash: something they know and trust.
Consumers Require A Knowledge Of How Crypto Works
Then there are educational issues. Crypto is a radically new type of exchange, and most consumers still don’t know how to use it.
For instance, many don’t understand how to buy crypto. They don’t understand that they need to go on an exchange, create an account, and then purchase it with real fiat.
Many also don’t understand crypto wallets. Most believe that their wallet is their account on one of the major trading platforms. But that’s not true.
There’s also the need for extra hardware, such as physical “cold storage” wallets that keep tokens perfectly safe while offline. QR codes are also sometimes required, adding to the complexity for customers.
Then there are the tax problems. While governments don’t tax cash (except through inflation), most treat crypto as capital. In other words, if the value goes up, you have to pay tax on that when you come to sell it, just like stock or a bond. If you receive crypto, you’ll also need to count it as fair value income, meaning that you need to pay tax on the price you received it at, not the price that it was ultimately worth.
So, is accepting crypto a good idea? Well, it depends. If you have the infrastructure to make it work and a lot of your customers are from overseas, then there is probably a good chance that you can make it work. However, if you are targeting the domestic market, then there aren’t many incentives to use it.