Bitcoin has been blowing up the news lately, mostly with bad press stemming from Mt. Gox’s recent collapse. If you’re a business owner who is considering accepting the digital currency, this may be causing heart palpitations. Despite the temporary market unrest, there are huge opportunities for merchants to benefit from accepting bitcoin—I’ve outlined a few below.
Credit card fees usually run around 2-3%, which can make a considerable dent in the profits of businesses operating on low margins. With bitcoin, you can pay substantially lower fees (~ 1%) without needing a huge volume of transactions as leverage with the credit card company. And that’s only if you transfer your money back into local currency— if you keep in bitcoin, you can essentially avoid fees altogether.
It’s true that as your business scales, you can negotiate lower fees from existing CC companies. But let’s be honest: if you’re an entrepreneur, do you really want to spend your time haggling over a fraction of a percent with a rep in a call center on the other side of the planet? Don’t think so. There’s nothing quaint about it. You’re trying to build a company, and this isn’t a Moroccan spice market.
If you’re using a service like PayPal, you’re generally being charged a fixed rate of $0.30 per transaction, plus a percentage transaction fee based on volume. Bitcoin enables peer to peer (or individual to merchant) transactions at a very small scale, making micropayments much more viable than they previously had been, and transactions can be completed for less than half of the cost.
Let’s take a simple example in which you have a business with an annual revenue of 1M. Your credit card processor currently charges you 2% per transaction, or $20,000. If you switch to a bitcoin payment processor, say Coinbase or Bitpay, you can get very close to 1%. You just cut your bill in half, and saved $10,000 by essentially doing nothing.
I can think of a lot of things I’d like to do with $10,000, and giving it to a credit card company isn’t one of them. If you’re in need of inspiration, here’s a list of particularly fantastic things you can buy for 10k (personally, I think it’s a toss up between the hobbit home and the water thrusting jet bike).
Safety from Exchange Rate Risk
There’s no question that bitcoin has been volatile. It still is, and it would be shocking if it weren’t—very few big ideas reach maturity in a span as short as five years. Personally, I view dips in price as opportunities to buy more, but if the possibility that your money could be worth half as much tomorrow keeps you up at night, that’s understandable. The delightful thing is that you needn’t actually hold any of the bitcoin you receive as payment. Most merchants who currently accept it set prices in their local currency and get paid in their local currency. Voilà! Bitcoin operates as the “payment rails”—it’s the medium through which the transaction takes place, but you don’t have to expose yourself to any exchange risk.
Bitcoin transactions allow you to expand your markets to basically anywhere, so long as you’re willing to ship there (if you’re selling a physical product. You can accept payments from anywhere. Since there’s no intermediary bank, you don’t have to deal with waiting for ~3 days for the transaction to complete. You can also avoid transfer limits and outrageous fees. As they currently stand, international transactions are a hassle, and there’s a great deal of room for bitcoin to help streamline the process (Timothy Lee of the Washington post wrote a good piece on this).
Chargebacks are quite a headache, and dealing with them can sap a considerable amount of time and energy that could be better spent growing your business. Bitcoin transactions are irreversible, which means that you needn’t worry about chargebacks.
It’s still early enough in Bitcoin’s adoption that there are press stories to be written about “the first xxx” to accept bitcoin in a given city or town. Free press—Why not? This shouldn’t be your main rationale for taking bitcoin, but it’s something of an added bonus; leverage the exposure to expand your customer base. These shoppers are also likely to be new customers who may be trying your product or service just because they can pay for it with bitcoin, and that’s your chance to hook them in via a great experience.
Ease of Use
Bitcoin isn’t hard to deal with, and it’s only going to get easier. Please don’t buy into the argument that bitcoin is some complicated, mysterious thing and because you don’t fully understand it, you can’t use it. I would posit that if you polled 1,000 college-educated Americans and asked them to describe in detail how a phone, TV, or refrigerator works, the majority wouldn’t be able to do so. I certainly encourage everyone to become educated on bitcoin before taking the plunge, but a deep technical understanding of cryptographic hashing or how the blockchain works is not necessary.
There are a number of companies that are already making it quite easy for you to accept bitcoin. Two that I have used personally, and therefore feel comfortable recommending, are Shopify and Coinbase. If you use Shopify as a platform for your ecommerce sales, integration is a breeze. You can add it just as simply as you would Paypal or Visa. Coinbase is also super simple to integrate, and offers a solid degree of customization. As an added perk, merchants the first $1,000,000 in transactions free of charge.
There is a myth in circulation that people tend to save bitcoin as an investment or a form of speculation rather than spending it, but there’s increasing evidence that it’s actually being used as a transactional currency. This is not surprising, because as the number of merchants accepting it grows, people have more opportunities to spend it, which then leads more businesses to accept it, and so on. The bottom lefthand section of the infographic below shows an enormous increase in the number of people who spend bitcoin shortly after acquiring it.
People are willing to spend bitcoins — you might as well encourage them to do so at your business.
The number of companies offering B2B services build on the Bitcoin protocol is still fairly small, but there’s already a solid core of reputable, safe ones to choose from. As the network effect widens and more people start accepting bitcoin, you’ll be increasingly able to benefit from the new currency, and even today there’s very little downside and a lot of upside to accepting Bitcoin. And after all, don’t you want to go buy that water thrusting jet bike?