Bitcoin and your small business: a guide to cryptocurrency
Should your small business accept Bitcoin? That’s a question only you can answer but this guide can help.
Bitcoin has been in the news lately due to its volatility. The cryptocurrency that in late 2017 peaked in price at more than $19,000 per coin has dropped significantly. While economists debate the future of cryptocurrency, the realities of your business may mean Bitcoin and other crypto coins could still be worth the risk.
What is Bitcoin?
Understanding exactly what Bitcoin is and how it works is not necessary for most potential users. However, in a nutshell, Bitcoin is a decentralized cryptocurrency that is exchanged on peer-to-peer marketplaces and is powered by blockchain technology.
If that sounds like gibberish here’s a simpler explanation:
Bitcoin are digital pieces of property that people exchange between themselves and all the transactions are recorded and shared between these users. You can also exchange fractions of Bitcoin to equal the amount in dollars you want to spend. Since all of the transactions are shared and public, no one needs to oversee the process. The price of Bitcoin is determined similarly to stocks – it’s worth what people are willing to pay.
Risky business
The risk to accepting Bitcoin as payment lies in its market volatility and the fact that you must convert the currency into dollars before depositing it. This makes accepting Bitcoin similar to accepting foreign currency as payment, but with added risk since the price can fluctuate wildly on any given day.
If you are considering accepting Bitcoin as payment, embracing this risk is a necessity. What was worth $30 today could be worth $35 or $25 tomorrow depending on which way the Bitcoin market swings.
Many people have taken the risk on Bitcoin and won, and many have lost. But if you’re willing to risk it and hang on to the Bitcoin you receive as payment, you could stand to make a lot more money that just $5.
However, there are ways to mitigate this risk. There are platforms called wallets that allow you to convert Bitcoin into dollars that are deposited in your accounts. They do charge a fee, but this means you can quickly convert your cryptocurrency payment into cash.
Borderless benefits
The cryptocurrency industry touts the benefits of doing business in Bitcoin as follows:
- Lower transaction fees – you could pay a significantly lower percentage on Bitcoin payments than standard credit card merchant fees
- Protection against fraud – customer’s data is not attached to Bitcoin, so hackers can’t steal their information
- Chargeback protection – once the customer pays in Bitcoin, you now own that property outright
- Faster payouts – Bitcoin wallets can increase cash flow by depositing funds in days rather than weeks
- Easily accept international payments – no foreign transaction fees
While all of these may be compelling for your small business, the international payment benefits could be the most lucrative. Many small businesses are unable to sell internationally because the transaction fees are cost prohibitive. Accepting Bitcoin as payment for international transactions could save your business and your customers up to 8 percent. Bitcoin could, potentially, open up a whole new world of customers for your business.
While accepting Bitcoin as payment can be risky, think carefully before you dismiss it. The benefits for businesses looking to expand into the global economy, particularly in e-commerce, could see big benefits.
For more small business tips, check out our other small business articles.