Understand what cryptocurrency is, why it’s growing in popularity, and the pros and cons behind accepting it as payment for your business.
What is cryptocurrency?
Just like traditional forms of currency, cryptocurrency is a digital asset that can be used to pay for goods and services. However, that’s about the only thing it has in common with traditional currency.
That’s because cryptocurrency was created to accomplish much more than its traditional counterpart. It uses a technology called “blockchain”, which is a type of database that records and distributes information, such as transactions. This is actually a security feature, acting as a tamper-proof digital leger that can verify the validity of a transaction.
Why are some businesses accepting crypto?
To put it simply: businesses are accepting them because they’re growing in popularity. And they’re popular because they have advantages over traditional currency. While there’s a number of reasons more and more businesses are accepting cryptocurrencies, we’ll just focus on two main reasons.
The first has to do with the weaknesses of traditional (fiat) currency that are controlled by an agency. For example, a government can decide to print off however much money it wants. However, this can lead to swings in the value of a currency due to inflation.
Contrast that with how cryptocurrency is decentralized. This makes it immune from problems such as a government deciding to inject cash into a market and causing the value of that currency to drop.
Along with that, many cryptos such as Bitcoin have a fixed supply. That means as a traditional currency prints more money, Bitcoin’s value theoretically remains steady, or even increases over time. Thus, many view it as a safe-haven from inflation during times of economic uncertainty and as a better store of value.
The second reason many businesses are accepting them is related to an advantage over traditional banking transactions. The fact is, it’s often slow and expensive to transfer money. Ask anyone who wires money, and they’ll gripe about the long wait and high fees, along with complications if they’re converting to another currency.
Because cryptocurrency uses blockchain technology, however, these problems aren’t an issue. The transaction takes place in minutes or even seconds, and with only a fraction of the fees compared with traditional financing. And because it’s decentralized, the cryptocurrency is the same in every country. Add on the advantage of reduced risk of fraud (thanks to all transactions taking place on a public leger), and the crypto advantages are clear.
What makes cryptocurrency important?
Thanks to cryptocurrency’s many advantages over traditional currency, more and more people are opening up to the idea that it may be a better way to pay. The more people embrace crypto, the more businesses are accepting crypto.
The fact that these new forms of payment are becoming more accepted is proving that crypto, which many initially felt had no real value, is successfully working as a usable currency. Thus, many start to view cryptocurrency as the future of money.
What are the benefits of your business accepting crypto?
Aside from the advantages of cryptocurrency itself listed above, there are numerous reasons for a business to accept crypto.
- Diverse payment options
Customers and clients likely have a preferred form of payment. And as cryptocurrency continues to grow in popularity, allowing your customers to pay in this way may garner more sales.
- Drawing a younger market
According to a recent report, the average crypto owner is almost ten years younger in comparison to average stock market investors. By accepting crypto as payment, your business may be able to attract a younger market than who you’re currently servicing.
- Increased revenue
With a more cutting-edge clientele comes customers or clients who embrace crypto for its advantages over traditional currency. When they find a business that accepts crypto, they have been shown to spend more over those who use credit cards. One recent study showed a 40% increase in purchase amounts compared to customers who used traditional payment forms.
- Potential for increased value
It’s no secret that many cryptos have exploded in value in the past few years, with some currencies growing thousands of percent in under a year. That means any payments received can actually be worth more by the time you exchange it for cash (if you choose to do so).
- Cross-border payments
As we covered in our article on international payments, more and more businesses are doing business across borders. That means there’s transfer fees, delays in payments, and currencies that need to be converted–if traditional methods are used. Many cryptocurrencies excel at simplifying or eliminating all three of these problems.
What disadvantages come from crypto payments?
Up until now, we have only mentioned how cryptocurrency works, why it matters, and some of the benefits of it to help explain why it is becoming popular. The fact is, however, there are a lot of downsides to crypto in general, including using it with your business.
Some of the biggest disadvantages of accepting cryptocurrency payments include:
- Lack of reversibility
Like it or not, once a crypto transaction goes through, it’s done. There’s no reversing it. That means that there’s no refunds, unless the receiving party chooses to not accept the transaction. Depending on the type of business you have, this can prove to be either be a blessing or a curse.
- Value volatility
Every hour of every day, the value of crypto is constantly changing. While it has seen a meteoric rise in recent years, it has also seen plenty of huge falls as well–which can happen in a matter of hours. That means the payment you received in the morning will be worth significantly less that evening.
- Negative public opinion
Even though some laud it as the future of money, others still associate it with criminals or money launderers. This is because some people first heard of it when they were the victim of hackers who held their stolen information hostage in exchange for Bitcoin.
Others, though, have a bad taste in their mouth from crypto being labeled as bad for the environment. This is because it’s mined using a great deal of electricity, which is often powered by greenhouse-gas emitting fossil fuels such as coal.
- Multi-currency complications
Accepting different forms of traditional payments and keeping them organized can be enough of a headache for some businesses. To add an entirely new system of accepting and managing digital currency will make for even more work and prove to be overwhelming to some business owners.
Cryptocurrency can offer a number of exciting prospects and advantages for a business. It can save them money on payment fees, complete international payments faster and cheaper, and can attract entire new markets.
However, crypto is still very new. It presents real risks and dangers, such as volatility, devaluation, and lack of reversibility in transactions. These drawbacks need to be carefully weighed with the advantages before a business should begin accepting cryptocurrency payments.
Progressive Payment Solutions wants your business to move forward, and that’s why we inform you of what you need to know to make the best decisions. Take a look at our blog to gain a clear understanding of everything payment-related for your business.