The rise of cryptocurrency took the world by storm in 2017, with individual cryptocoins accumulating tens of thousands of pounds in value. The popularity of crypto is no surprise given how easy it now is to buy and sell various types of cryptocurrency. But can these coins be used in everyday applications? And is there any benefit to accepting them at your business?
Whether or not accepting cryptocurrency is an effective business strategy is an ongoing debate, especially among small businesses. Because of the volatile nature of crypto, it may come as a surprise that so many businesses have made the decision to accept it as payment, especially bigger names such as Etsy and Microsoft.
But what about small businesses? What can cryptocurrency offer you, and what are the risks of accepting it?
What Are the Benefits of Accepting Cryptocurrency Payments?
The online world has already opened small businesses up to international currencies with payment systems such as PayPal and other quick-and-easy conversion systems. This has allowed companies to accept orders from all over the world, and expanded opportunities for thousands of small businesses. Could cryptocurrency do the same?
There are always risks and benefits associated with accepting digital currency, and it’s integral to consider them before making the decision to carry crypto. So what are the benefits of accepting cryptocurrency as a form of payment?
- Wider Customer Base: Accepting cryptocurrency opens your business to buyers looking to spend their cryptocoins. This will attract both potential customers browsing for shops, and existing customers who are willing to spend more in cryptocurrency than they would in traditional money.
- Fraud Protection: Cryptocurrency has no system to reclaim spent money, which can reduce cases of fraudulent chargebacks. Banks and third parties such as PayPal make it easy for buyers to reclaim money without consulting the seller when paying online with traditional currency.
- Reduced Fees: The inability of third parties to carry and handle crypto transactions means that transaction fees are drastically reduced when accepting cryptocurrency payments. This can reduce the need for minimum spending limits on payments incurring third party fees.
- No Inflation Risk: Due to its decentralised nature, cryptocurrency is disconnected from inflation rates and will not lose value when other currencies do. This can help to preserve value for your business during inflationary periods.
What Are the Risks of Accepting Cryptocurrency Payments?
Something that keeps many businesses from accepting cryptocurrency payments are the risks involved with a decentralised currency. Weighing up crypto’s benefits compared to the risks associated with using, accepting and owning cryptocurrency is an important step, especially for a small business. So what are the risks?
- Inconsistent Value: Crypto’s decentralised nature makes its value liable to crash, and the value of cryptocurrency changes by the hour. Accepting cryptocurrency payments means that any crypto in your possession could end up carrying less worth than the item it was used to pay for. To reduce this risk, crypto should be converted to national currency as quickly as possible after the transaction is completed.
- Theft Risk: Cryptocurrency is unable to be insured, and wallet theft is a known issue. The storage of cryptocurrencies online opens them to cybertheft and puts your company at risk of losing funds.
- Changing Landscape: Cryptocurrency escaped regulation during its boost in popularity, but the crypto landscape is due to change with new regulations in future. This means that your business will have to stay up-to-date with crypto laws in order to meet legal requirements.
Should I Accept Cryptocurrency as a Small Business?
There are now so many useful resources out there on how to start accepting crypto as a business, how to buy Bitcoin in the UK and how to trade using various types of digital currencies.
Whether your company should accept cryptocurrency should be decided on a case-by-case basis, considering both your target market and a cost-benefit analysis. If you choose to accept cryptocurrency as a form of payment, it’s important to keep the risks in mind and work to mitigate them to avoid changing value, legislation and theft affecting your business.
Image credit: https://cryptowallet.com/
