Change isn't easy, especially when it involves something that could affect the change in your cash register. Yet business owners should be aware of the latest innovation in payments. Today you can get paid in cryptocurrency, also known as virtual money, instead of credit cards or cold hard cash.
There are reasons to be nervous about getting paid in digital dollars. But if you're thinking of accepting cryptocurrency from your customers, there are some good arguments for getting on the bandwagon—and some good arguments for continuing to take the wait-and-see mode.
So let's tackle some of cryptocurrency's pros and cons.
1. Pro: Forget about chargebacks.
Christopher Franko is the CEO of Borderless Corp., a cryptocurrency development firm in Washington, North Carolina.
He understands your concerns about receiving money in cryptocurrencies with funny names like Bitcoin, Ethereum and Ripple. But Franko says that being paid with cryptocurrencies can reduce your chances of being defrauded, because "cryptocurrency does not allow chargebacks."
A chargeback is when an identity thief gets hold of somebody's card, buys a bunch of stuff and sticks the cardholder with the bill. Some people may use their own card to buy a lot of stuff, dispute the charge and get money returned to them without returning the merchandise, Franko says.
If you accept credit card payments, you may end up being on the receiving end of a chargeback. But cryptocurrency reduces those chances because federal law hasn't caught up with it. Federal law limits what someone can lose when their credit card has been stolen. If a consumer feels that their cryptocurrency was spent to buy something they didn't actually purchase, they're out of luck.
2. Pro: Pay internationally more easily.
Mary Clare Bland owns Bespoke Digital Solutions, a digital marketing and content creation agency based out of Madrid, Spain. She has a global clientele with clients in the United States, South America, Australia and Europe, among other places.
“Because it can be difficult and expensive to make bank transfers across different regions—for example, making transactions between US-based and European SEPA accounts can be tricky, with high transaction costs faced by both parties—I started accepting cryptocurrency payments last year," she says. “I accept payments in Bitcoin and Ethereum."
Bland has a prediction, in terms of where cryptocurrency is going.
“I think cryptocurrency adoption will be like mobile phone technology," she says. "Countries that had very poor fixed-line networks or were late adopters of mobile, today have the most sophisticated mobile networks and higher smartphone penetration rates. I believe, and my experience has shown this to be true, that countries with less developed banking systems or unstable fiat exchange regimes will be the first to adopt cryptocurrencies and use them as payment mediums."
3. Con: Expect cryptocurrency confusion.
Many consumers and business owners find working with cryptocurrencies baffling. After all, you can't just put on your website, “I accept Bitcoin." You have to have your website set up to actually receive it.
Bland concedes that while cryptocurrencies can make international payments easier, it would be even easier if the practice were more mainstream.
“Most of my customers don't have the faintest idea how to buy currency, setup a wallet, [use] ShapeShift [where you can buy cryptocurrency] or send money to another person's wallet," she says. “The only clients that pay me in cryptocurrency are based in Dubai and India. For them, it is easier and cheaper to pay me this way."
But Franko says that it isn't actually difficult to set your business up with cryptocurrency. Although you can do it on your own if you know what you're doing, he says, “there are a ton of services to help your business accept cryptocurrency."
He says you may want to try using a third-party service like Coinbase, Coinpayments or Bitpay.
“These third-party services have a wide range of merchant and shopping cart tools you can put in place alongside your PoS systems," he says.
4. Con: Know that your cryptocurrency may be worth less tomorrow.
Cryptocurrency trading has been increasingly popular in recent years.
According to Bloomberg, an investment of $1 in Bitcoin in 2010 would be valued at more than $1.4 million today while the same dollar invested in the S&P 500 stock index during the same period would now be worth less than $4.
But what goes up can come down, and there's been plenty of criticism and skepticism of cryptocurrencies and all the attention investors lavish on it.
Fed Chair Janet Yellen told reporters that Bitcoin isn't stable in value in December 2017.
"Undoubtedly there are individuals who could lose a lot of money if Bitcoin were to fall in price," she warned.
Jeff Neal, a resident of East Prospect, Pennsylvania, has a website, The Critter Depot, which sells worms and crickets. (If you're a pet owner of a lizard who likes crickets, you can understand the appeal.)
Neal recently began accepting Bitcoin, and admits to having some concerns about accepting cryptocurrencies.
“As of now, there hasn't been any cons, but that's only because Bitcoin's value keeps going up and up and up. However, one nerve-racking caveat is that Bitcoin is so volatile," he says. "So let's say I accept some Bitcoin for a $20 order of crickets. But then the next day, Bitcoin's value goes down by 25 percent, which is very plausible. At that point, I'm only receiving $15 worth of Bitcoin for what is actually $20 worth of crickets."
But Franko has a counter to that concern.
“Merchants, if they so choose, have the option to cash out their cryptocurrency immediately upon receiving it into their fiat currency of choice. Merchants won't have to risk slippage or devaluation of currency due to volatility," he says.
Of course, if you don't mind the risk and like the idea of investing in cryptocurrency, you could delay cashing out your cryptocurrency and see if the market goes up (or down). Maybe you'll wind up with $30 when you sold $20 worth of merchandise.
On the other hand, not exchanging your cryptocurrency for cash may be lousy advice. The digital money you receive from customers is kept in a digital wallet, and these wallets are sometimes vulnerable to hacking.
5. Pro: Offer customers more choices when it comes to paying.
The customer is always right, as the saying goes. (They aren't always, of course, but let's go with that premise for now.)
If you set up your business to receive cryptocurrency, you're arguably making it easier for your customers to pay you, which could be a good thing for them—and you.
If you do start accepting cryptocurrency, consider proceeding cautiously and slowly since digital money isn't yet mainstream. There could be plenty of pros or cons with cryptocurrency that haven't been realized yet. You also probably don't want to invest too much time and money into a new form of revenue. Cryptocurrency hasn't proven to be as durable as paying with cash, credit or even checks.
But for what it's worth, Franko says, “Cryptocurrency enthusiasts are eager to spend their cryptocurrency. They love finding new places and sharing their cryptocurrency purchases with the crypto community."
While cryptocurrency isn't in the mainstream, if you do join the still-sparsely populated parade, you're giving customers another reason to spend money on your products and services rather than with the competitor who doesn't accept cryptocurrency. That's what business owners like Neal hope, anyway.
Read more articles on industry trends.
Photo: Getty Images
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