The Top 6 Questions to Ask Before You Decide
With the value of Bitcoin, Ethereum, Ripple, and other cryptocurrencies skyrocketing in late 2017, you might be curious about the prospect of accepting these coins in your store. Here’s what you should know before you take that step, though.
1. What is Cryptocurrency?
All the different forms of cryptocurrency are digital-only assets; they are regarded by the US government as commodities, like gold or silver, rather than as a currency. Many people trade and speculate on their short-term value, while others make more long-term investments or use the as a store of value. The underlying technology that makes these coins work is referred to as a blockchain, which has applications for many industries like banking, medicine, retail, and more.
2. Can Cryptocurrencies Benefit Your Business?
Yes; accepting digital currencies can offer multiple benefits for your eCommerce business:
- Accepting digital currencies can open your business to a wider consumer base.
- Cryptocurrency acceptance gives your company a savvy, forward-thinking image.
- Storing sales in cryptocurrency means your revenue increases if the coin’s value increases.
- No added fees for international processing; transactions costs are the same.
3. How Do Chargebacks Work with Blockchain?
It is theoretically possible to reverse a blockchain transaction. However, this would require a majority of nodes in the entire system—each of the individual computers across the entire world—to arrive at a consensus. Thus, we can regard it as more or less impossible; these transactions are effectively “chargeback-proof.” Given that most chargebacks are friendly fraud, this is a huge perk to entice curious merchants.
4. Is it Easy to Accept Cryptocurrency?
Accepting multiple cryptocurrencies is very easy for card-present merchants; businesses can transact directly with customers via an exchange with the help of any device capable of scanning QR codes. It’s a bit more complicated for eCommerce businesses, but cryptocurrency-focused processors can still integrate with existing systems with relative ease.
5. What if a Coin’s Value Drops Suddenly?
One factor mentioned as a perk up above—the potential for rapid increases in value—can also be a huge drawback.
Unlike other commodities, digital coins have no intrinsic value; the value is based entirely on what speculators are willing to pay for them. That means the that value can go bust just as quickly as it booms if something suddenly shakes investor confidence. For example, if you store value in Bitcoin rather than exchanging them for fiat currency, and the value of Bitcoin suddenly drops by 20%, you would be down all that revenue.
6. Are There Other Downsides to Accepting Cryptocurrency?
As great as it would be to never deal with another chargeback, cryptocurrencies do have drawbacks beyond volatility.
Trading cryptocurrency for fiat currency like Dollars or Euros takes place on an exchange…and exchanges aren’t free. You’ll typically pay between 1-3% of the total to trade your coins for a more tangible fiat currency. In addition, the volatility of digital currencies can cause errors in recordkeeping and other inconsistencies. Accounting for the added complexity means more time and manpower, which will cost more money.
It’s Your Call
Accepting cryptocurrency is a mixed bag. There are some great benefits—no chargebacks, possible increases in value after the transaction—as well as some significant challenges. You need to come up with a strategy that works for you before making a final decision.
Click below if you have additional questions about the role of chargebacks in a crypto-enabled business.