How Accepting Bitcoin Can Help Your Business Grow

In letter

  • Bitcoin was designed as an “electronic cash” system.
  • A growing number of merchants are accepting payments in Bitcoin and other cryptocurrencies.
  • The most popular method is a hybrid model, in which crypto transfers are processed with the help of an appropriate processor.

Although it is often referred to as “digital gold”, Bitcoin was originally called “Peer-to-Peer E-Cash System”. As recently as February 2020, according to a survey by the Economist Intelligence Unit, more people said the main purpose was online payments rather than investments.

With PayPal now allowing its users to buy Bitcoin and pay merchants with crypto, the general use of cryptocurrency for online transactions seems to be only increasing. What’s in it for companies?

Direct bitcoin payments

When you hear the phrase “crypto payments”, perhaps the most logical picture comes to mind: “A customer gives Bitcoin directly to a merchant and receives goods or services in return.”

Although it’s popular with some crypto-focused companies like the Bitcoin sock company MtSocksThis is currently the least common method of implementing crypto transfers at merchants.

Speak with DecryptQuantum Economics analyst Jason Deane said the traditional finance industry is not ready to let go of fiat currencies and take full advantage of crypto on its own. While there is definitely positive PR for a company announcing their support for BTC, Bitcoin is only suitable for the most forward-thinking companies right now.

“The reality is that Bitcoin in its original form is still difficult to accept at the point of sale and systems still have a long way to go to make this smooth and seamless. This also creates a number of accounting issues, both at the point of sale and in relation to accounting, ”Deane noted.

He added that most people get around this by assigning a fiat value at the time of a transaction. However, this is not ideal and can create additional tax liabilities if Bitcoin is stored and converted back into fiat at a later date. These problems, combined with the wild price swings Bitcoin is known for, make matters even more difficult.

“So right now, Bitcoin is suitable for the most forward-thinking ‘cool’ companies that are more independent than a chain (retail) or publicly owned (corporate) with media exposure and PR perspective,” concluded Deane.

However, widespread adoption by local residents is inevitable. “It could well be that these past adopters, while suffering the pain of volatility and clunky payment systems, will ultimately be seen as market leaders and pioneers.”

Bitcoin-fiat hybrid payments

In recent years, another form of crypto payments has emerged – crypto transfers, which are processed with the help of an appropriate processor. This method enables merchants to accept digital assets from their customers but ultimately get fiat for their goods and services.

With this method, a customer pays with crypto, but these coins do not go directly to a merchant. Instead, a payment processor receives them, converts them to fiat, and then sends those funds to their customer. In this way, a company can get its money without worrying about the underlying processes, although the payments can still be viewed as “crypto”. In particular, PayPal offers its merchants exactly this scheme – to the ire of some crypto diehards. At the same time, implementing crypto payments today is as easy as embedding an API in a website.

According to Max Krupyshev, CEO of the crypto processing service Coinspaid, this hybrid model is preferred by the vast majority of mainstream merchants who want to integrate crypto payments on their platforms. While this isn’t a magical elixir that can increase a company’s profits overnight, accepting Bitcoin can really be beneficial for companies – some far more than others.

The benefits of accepting Bitcoin

While traditional payment networks such as Visa or Mastercard are widely used around the world, these systems are heavily controlled and regulated. This means that merchants can run into unforeseen bumps and restrictions when setting up their payment channels. Not so with Bitcoin, which offers much more freedom and problem-free operation compared to conventional financing.

That being said, the transaction fees for crypto are often lower. Traditional payment processors save an average of 2% on every sale (this number can of course vary). For crypto payments, this fee is reduced by at least half – to an average of 1%, according to Krupyshev.

However, the main benefit of digital assets from a trader’s perspective is that “crypto gets things done,” he explained. That means that a large established company – like Amazon, for example – is unlikely to be supporting cryptocurrencies in the near future because things are working as well as they are. On the other hand, Bitcoin can do very well to help solve at least some of these if a company is having problems with their current payment systems.

In particular, so-called “high-risk companies” – companies that are not illegal per se, but are colloquially classified as ethically a bit gray – can benefit greatly from the use of crypto payments, explained Krupyshev. Services that serve adult videos, live streams, or even gambling and dating websites can often fall victim to bulk chargebacks – even if customers are actually getting what they paid for. In September 2020 in particular, adult website PornHub added Bitcoin payment options to their website, fulfilling a forecast made by Bitcoin creator Satoshi Nakamoto in 2010.

Companies with chargebacks greater than 2% may also be penalized by their traditional payment processors – not so much with crypto. Since blockchain transactions are immutable, companies can be assured that shady actors are not trying to take advantage of the system. While this may not sound beneficial to customers, reputable companies usually offer some sort of refund system that involves mutual agreements – but not unilateral and sometimes fraudulent chargebacks.

Think globally

Another great benefit of implementing crypto payments is that digital assets are essentially limitless. Traditional financial solutions can vary widely from region to region, so merchants must set up their payment infrastructure individually in each locale. In contrast, Bitcoin can be paid for and accepted equally easily in any part of the world.

“As a company, you cannot think geographically, but in user groups. For example, if you are an online company and sell some services over the internet, it doesn’t matter if your customers are from India, Latin America or Russia, ”Krupyshev told Decrypt, adding,“ If you accept crypto, you can Do not target your marketing to a specific region where you have already defined payment methods, but to specific customers – regardless of where they are from. “

He also echoed Deane’s opinion, noting that crypto payments are still “hyped”, especially among younger generations, to deserve additional attention for that fact alone. All a company needs to set up a store is a dedicated API and website translated into the required language.

Are these “real” crypto payments?

Since most of the merchants who accept crypto end up doing it through fiat (in part because they don’t know how to or how to manage digital assets), isn’t that one of Bitcoin’s primary purposes – removing intermediaries? To some extent, Deane explained.

“It’s interesting because I would have argued earlier that this is not a ‘proper’ introduction of Bitcoin, but my stance has softened a bit since then,” he said. “After all, the value of this transaction came from the Bitcoin behind it; the Fiat switch is just a means to simplify this transaction.”

In this way a customer still wants to spend his bitcoin and this because his wallet balance is going down, the seller wants to be paid in fiat – and they are paid in fiat, a payment processor then takes the transaction off as usual and is the only party that Bitcoin collects.

“Everything still works. No reason, in truth it has to be a hard and fast native transaction. Best part? This can happen now and now, ”concluded Deane.