Should Your Business Accept Cryptocurrency as a Payment Option?
Crypto has become a hot topic this year, and reports show that global adoption has increased 881% in the last twelve months. Most of the attention centered around cryptocurrencies involves holding them as investments. However, some people want to pay for goods and services using crypto. Despite this and the rising adoption rate, analysis has revealed that while more clients and vendors want to transact in crypto, only about 2,300 businesses in the US accept cryptocurrency.
If you want to stand out from the crowd and better serve your clientele, offering crypto as a payment option could be wise.
There are a host of advantages to allowing customers to pay with cryptocurrency. But there are also a few essential considerations to think about.
Ready to get wise as to whether your business should start accepting crypto? Read on to find out all of the pros and cons.
Reasons To Accept Cryptocurrency As A Payment Option
As we said, a few advantages exist to accepting cryptocurrency business payments. These include low transaction fees, fast transfer times, and the ability to avoid chargebacks.
Transaction Charges Are Low
One of the attractive advantages businesses can enjoy if they accept cryptocurrency payments is low transaction charges. Exact transaction fees differ between cryptocurrencies. For instance, Bitcoin’s transaction fees are relatively high compared to transferring Ethereum, which costs less than a penny– far below the standard transaction charges you have to pay as a merchant when someone pays your business via credit card.
Whether on a tiered, flat rate, or interchange fee structure, you’re probably paying hundreds of dollars in merchant fees.
Moreover, the person making the transaction is responsible for the fee with cryptocurrency. As a merchant, you won’t need to foot the transaction fees when customers pay with crypto.
That said, there are still some fees you must cover, depending on your method of accepting crypto. For instance, if you use a third-party payment processing platform to accept crypto, such as Paypal, you will need to pay their fees.
Paypal charges a standard fee on all of their transactions of 4% (and sometimes more). As a seller, this fee falls on you to pay. However, even after additional payment processing fees, you will still be paying less than the merchant fees on card transactions. Finally, if you accept peer-to-peer crypto payments, your costs to receive crypto will be zero.
Transaction Times Are Fast
Another benefit of crypto as a payment option is that the transaction times are speedy compared to traditional payments, which is especially advantageous if you deal in cross-border payments. Or are often anxiously waiting for a large customer payment to come in. The transaction is practically instant if you allow customers to pay with cryptocurrency. In contrast, credit card payments can take 3-5 business days to hit your bank. If you’re considered a high-risk business, payments can take up to 7 working days to appear in your account.
You Don't Have To Worry About Chargebacks
One of the most prominent advantages merchants enjoy when they accept cryptocurrency is no chargebacks. Suppose you have been accepting credit card payments at your business. In that case, you’re probably aware of the dangers of credit card chargebacks.
When a customer makes a credit card payment to your business, they can reverse the payment at any point through a chargeback. In many cases, they get their money back and keep the purchased product.
You lose money and stock this way. For example, suppose you get too many chargebacks within a certain period. In that case, your credit card processing company might also penalize you with fines.
Chargebacks have always been a problem for merchants. But the pandemic has triggered an increase in chargeback fraud levels. Moreover, there aren’t enough regulations protecting small business owners from this fraud.
When your customers pay with cryptocurrency, you don’t have to worry about chargebacks in any way. Cryptocurrency transactions are irreversible.
The only way the transactions can be “reversed” is by actively refunding your customers. Unfortunately, there is no outside party that can do this.
You Might Attract New Customers
Besides protecting you from chargebacks, high fees, and slow processing times, offering crypto as a payment option can also allow you to attract new customers.
Customers and vendors who want to transact in crypto are often actively looking for businesses that accept cryptocurrency payments. Therefore, you can attract a new clientele by advertising that you accept crypto payments.
According to a recent study, 40% of customers who pay with crypto are new companies’ customers. The study also revealed that their purchase amounts are roughly twice that of credit card users. Besides drawing in new customers, accepting crypto payments can also shift your customer demographics. Currently, millennials dominate crypto ownership and adoption. Accepting crypto business payments can be a smart move if you are trying to attract this demographic. Not only will this draw in new customers who want to pay in crypto, but their use of your business will likely attract peers in their demographic.
It's A Good Look For Your Brand
Along with drawing in new customers, this is also likely suitable for your branding if you accept cryptocurrency. As mentioned above, crypto is a hot topic, and there’s a good chance some of your customers are talking about it. If they see that your business accepts crypto payments, this can bring them closer to you and make them feel like your business aligns with the times.
Embracing crypto as a payment option shows customers that your business is forward-thinking and innovative. It can also gain you special favor with customers who believe in cryptocurrencies as an asset class and a movement. Cryptocurrencies and decentralized finance are primarily associated with financial freedom and independence from centralized groups that dictate how and where you can use your money. This idea appealed to many people and was a significant driver behind crypto’s rise to popularity, especially in the earlier days of adoptions.
Crypto Solves A Lot Of International Payment Headaches
As we said above, crypto payments are an ideal workaround for many problems associated with international payments. These include high fees and long transfer periods.
Are you operating an e-commerce shop and want to accept payments from around the world? If so, crypto can win you a broader customer base and cut down on your costs related to business payments. International transactions are manageable these days, thanks to companies like Paypal and Stripe. However, not all countries support these processors. Therefore, you might have potential customers in areas of the world who’d love to do business with you but can’t. Offering crypto as a payment option can allow you to serve a broader customer base and secure more business.
Cryptocurrency Can Act As A hedge Against Inflation
A final advantage you can enjoy if you accept cryptocurrency payments is inflation hedging. If you choose to hold on to the crypto you receive, this can act as a strong hedge against inflation and the devaluation of your cash holdings.
Cryptocurrency has been making headlines as an inflation-hedging asset class. For example, Virgin Galactic chairman Chamath Palihapitiya has recently said that Bitcoin has replaced gold, the classic inflation hedge holding. Inflation is an insidious problem for many businesses, especially those with seasonal revenue fluctuations. For instance, let’s say you own a successful restaurant in a holiday destination. Chances are, you make most of your money during peak season, a portion of which you have to set aside to cover overheads during slower periods of the year. The problem with this is that the profits you hold onto to pay expenses in slower months are probably devaluing. After six months, prices have gone up, and your money won’t go as far as when you received it. Because of this, some businesses convert a portion of their excess profits into an inflation-hedging asset.
Things To Consider Before You Accept Crypto Payments
As you can see, there are many tremendous advantages to accepting crypto as a payment option for your business. However, there are also a few things to keep in mind before you get started. These include security, taxes, and volatility.
Security
Security is the first thing to consider when planning to include crypto in your business finances. Crypto wallets and transactions are highly secure, but you must practice due diligence around your wallet keys.
If you are holding crypto in a wallet and forget the key, no third party can retrieve it. Therefore, you need to be sure to back up all your wallet keys and passphrases so that they will never be lost and nobody unwanted can access them.
Taxes
Another thing to think about when incorporating crypto into your company finances is its tax implications. Cryptocurrency assets are taxed as capital gains (or losses). If you sell cryptocurrencies after holding them for a year, you will most likely be taxed at the long-term capital gains rate. If you sell after holding for less than a year, the proceeds will attract short-term capital gains tax, the same rate as income tax.
These truths can present promising planning tax opportunities. However, it also means you must keep a tight record of what cryptos you received on what date and their fiat currency or dollar value. One perk of receiving crypto as business payments is that the IRS taxes this as regular income, reducing recordkeeping work. However, keeping an accurate book of what you receive and its value at the time of payment would be best. When you sell the crypto for fiat money, you’ll need to work out any profit or loss you incur on the sale and include that on your tax return.
If you want to avoid this entirely, you can also work with a third-party payment processor that pays you in dollars. They accept and convert the crypto, meaning you don’t have to worry about the tax side. Instead, you report the money received as regular earnings.
Market Volatility
Before accepting cryptocurrency business payments, it’s also important to remember that the crypto markets are volatile. The crypto market’s volatility can be both a good and bad thing. For instance, if you receive $2,000 in BTC and the price skyrockets, as experts predict, you could realize a handsome gain.
On the other hand, what if the price drops between the time you receive a crypto payment and when you want to convert it into dollars? If this happens, you’ll lose out.
The key to protecting yourself from market volatility is ensuring you never have to cash out a crypto payment if the markets are dipping. On the other hand, if your business’s cash flow is healthy, you can choose when and if you want to swap your crypto payments for dollars. If you have flexibility like this, you can time the market.
Not Sure You Want To Accept Cryptocurrency Payments?
Bitcoin ATMs Are Another Alternative You Can Consider.
Offering crypto as a payment option can win new customers, boost your brand, and more. But what if you’re still unsure about integrating crypto into your business finances? If you’re concerned about security, price volatility, or tax reporting, you can also consider hosting a Bitcoin ATM.
Hosting a crypto ATM at your place of business will win you many of the same advantages you’d get if you accepted cryptocurrency payments. While this won’t allow customers to pay in crypto, it will likely attract new feet, modernize your brand image, and gain you a passive income stream.
Are you interested in hosting a crypto ATM? Byte Federal has an extensive network of ATMs and is always looking for new hosts.
We offer no-cost installations, far above-average compensation, rock-solid compliance, and 24/7 support. If you want to attract extra customers and earn passive income, contact us today to start hosting your cryptocurrency ATM at no cost to you.
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