Cryptocurrency as a form of e-commerce payment has been around for a handful of years, but its recent extreme volatility — exemplified by Bitcoin’s skyrocketing transaction fees in late 2017 and early 2018 — makes this an interesting time for e-commerce store owners wondering if they should accept cryptocurrency. Here’s your (palatable) introduction to e-commerce and cryptocurrency.
What Is a Cryptocurrency?
Cryptocurrency is a secure alternative to money that isn’t tied to any centralized entity like a bank or government. Instead of this money being issued by a bank, cryptocurrency is issued by an algorithm, which supplies the money in a predetermined rate. Like buying or selling a stock, cryptocurrency can be purchased with standard currencies for its current market price. When a purchase is made with a cryptocurrency, a digital ledger of the transaction—called blockchain—confirms the transaction and ensures it happens securely.
Why Should E-Commerce Store Owners Care?
With companies like Coinbase making it easier than ever to purchase cryptocurrencies, it’s becoming increasingly common for consumers to carry it around. Coinbase alone recorded 1.2 million users in 2017 and a global cryptocurrency benchmarking study reported the number of active bitcoin wallet users was between 2.9 million and 5.8 million.
Additionally, we’re starting to see more large companies opening up to cryptocurrencies, further proliferating them. As the use of cryptocurrencies becomes more mainstream, merchants will need to offer crypto-friendly ways for consumers to pay for their products. Outside of meeting future demand, accepting cryptocurrency offers e-merchants immediate benefits:
No online transaction is free of fees. However, most e-commerce stores pay around 3 percent per transaction, plus additional fees. Meanwhile, cryptocurrency fees are generally under a dollar and can be controlled. For example, at the time of this writing, Bitcoin transaction fees are twice as much (50 cents) for a 10-minute transaction time than for a one-hour rate (25 cents).
Having control of transaction fee prices and transaction speed are nice advantages. Depending upon order size and importance of processing, it might make sense to pay more for an expedited transaction, or wait a little longer for it. This is completely contrary to the world of credit card transactions that never have more affordable fees and take days to process.
If you run an e-commerce business, you probably have a dedicated report tracking charge backs. One of the best things about cryptocurrency and blockchain technology is transactions are irreversible. This too, is contrary to the nature of credit card transactions that put the burden on the merchant.
Wider Customer Net
If you sell internationally, accepting cryptocurrencies is a must. It avoids costly fees, lengthy transaction times and the fraud potential that come with cross-border interactions. It also saves you from converting between multiple currencies, which costs additional money and consumes even more time.
Complement Your Brand
Regardless of its volatility, accepting cryptocurrency may just make plain sense depending on your store’s offering. For example, let’s say you sell electronics. Your target customer automatically skews towards tech-savvy, so by offering cryptocurrency as a payment option, you’re opening yourself up to the early crypto adopters. These customers are by nature interested in electronics products. Even if hardly anyone ends up paying in cryptocurrency, merely accepting it lends your brand some cutting-edge cred and could be the difference in a customer buying from you and some other electronics site.
While many consider the early adopter period to be over from a Bitcoin ownership perspective, we’re still in a relatively young age for merchant adoption. Many companies accept cryptocurrency, but by and large most companies don’t. Making the decision to accept cryptocurrency now gives your e-commerce company a competitive advantage.
Crypto-Asset Not Currency
Despite years of progress toward becoming regular digital tender, cryptocurrency is still too volatile to be trusted in everyday transactions. As a result, it is still viewed by most as an asset not a currency. Then there’s its inherent speculative nature. When’s the right time to spend it? Consumers never really know, either fearing its value to be too low to be worthy of a purchase, or too high to surrender potential additional gains.
However, store owners can consider the above and think of accepting crypto as opening a small high-risk investment account. Since cryptocurrency will not be a large percentage of order or revenue volume, it’s volatility likely will not hurt enough to affect business, and its upsides could provide a nice surprise.
Add- Ons Needed for E-Stores to Accept Cryptocurrency
To be able to accept cryptocurrency as payment in your e-commerce store, you’ll either need to create a manual payment wallet, use a third-party cryptocurrency gateway or look at hosted platforms that already include a gateway.
While setting up a manual payment wallet is the hardest route, it makes sense for stores operating independently as it provides the best transaction margins. Plenty of third-party providers exist, with Bit pay, Coinbase and Coin Gate being some of the most popular options. Stores operating on a hosted platforms might already have the functionality available to them, but at the most would require a plugin to be up and running. Be advised on plugins though; they’re not of the same quality and with something as important as payment, there isn’t a lot of room for error.
Though extreme volatility has caused large companies like Microsoft and Stripe to stop accepting cryptocurrency as payment, for the majority of e-retailers, it still makes sense as a way to provide faster, cheaper, more secure transactions in addition to the competitive advantage, wider customer reach and brand awareness it can yield. And who knows, you could be a crypto boom away from doubling your business.