More small businesses plan to start accepting cryptocurrency this year. Accepting crypto is a significant shift in how firms approach payments, likely due to the increasing popularity of Bitcoin and other forms of cryptocurrencies as well as the increasing numbers of other firms that allow payments using crypto. By accepting crypto, these businesses are able to tap into a new market of consumers who look for ways to spend their digital currency. So why are so many small businesses making the switch? Let’s take a look.
What is cryptocurrency?
So, we all know what money is. Money exists as both a physical product (bills and coins) and a digital product (exchanging money through banking transactions like checks and credit cards). Most of us got comfortable with the digital exchange of money during the pandemic as we left our homes rarely and, even then, often only to do curbside pickup for things we already purchased online. Money is authorized by a government, usually a country, and gains value because users trust that government and agree about the value of the money. In essence, money gains its value based on the purchasing value of the money, or what you can get in exchange for money. In the early days, governments backed their money with gold to secure its value (hence why there’s a large cache of gold held at Ft. Knox). Today, governments rely on trust to support the value of their money.
In contrast, cryptocurrency has only a virtual existence. It isn’t backed by a government but obtains value in much the same way as modern money — people agree on what a Bitcoin or other cryptocurrency is worth in exchange. Rather than existing in banks, crypto relies on heavily encrypted blockchains as a means to store (in online wallets( and exchange currency with others, including businesses. While this may sound unsafe or confusing, crypto gains its value in the same way stocks do — what someone is willing to exchange for it.
Unlike the stock market where new shares are created by companies and, at least in theory, a share indicates ownership of a piece of the business, crypto is mined by using powerful computers to solve complex mathematical problems to receive coins. Since running such computers requires a lot of electricity, mining often happens across shared networks. For instance, universities often pay the electrical fee when they offer students unlimited computer power from their network. Once mined, the coins are exchanged through a bidding process similar to the way stocks are exchanged on the market. However, since the price is a function of supply and demand more so than stocks (which rely on the underlying value of the company), the crypto value fluctuates widely leading to intense speculation to increase a user’s investment. These fluctuations may accepting crypto riskier than accepting cash or credit.
Why accepting cryptocurrency makes sense
Accepting crypto opens up new markets for your products and more companies accept crypto every year. The list includes tech leaders like Microsoft, luxury goods like Rolex, and even conservative businesses like Premier Shield Insurance. Even industry giants like Amazon and Starbucks accept crypto. Plus, from a psychological perspective, people find it easier to spend crypto (as well as non-cash equivalents like points or miles) than parting with cash due to the different perceived value of the items.
There is a growing demand for crypto coins
As the popularity of Bitcoin and other cryptocurrencies continues to grow, the demand for businesses to accept crypto payments increases. It is especially true among young people and early adopters of digital currency, who are likelier to have a crypto wallet they want to spend to acquire the things they need. Many people are interested in using Bitcoin and other cryptocurrencies and are more likely to make a purchase from a business that accepts them. After all, beyond speculation, what other value lies in crypto?
Crypto payments are fast and easy
Crypto payments are faster and easier than traditional credit cards or bank transfers because intermediaries like banks or payment processors aren’t involved in the process. Instead, transactions proceed directly between two parties using cryptocurrency wallets. Thus, it makes crypto payments ideal for small businesses, that often operate on tight margins and cannot afford to wait days or weeks for payments to clear. Furthermore, since it’s easier than ever to earn crypto from your home, many customers will look for businesses that accept crypto, so getting on board as soon as possible will only benefit you.
Crypto payments are secure and reliable
Another advantage of crypto payments is that they are very secure and reliable. Unlike credit cards, which are the subject of fraud and chargebacks, cryptocurrency payments are irreversible and are immune to manipulation by third parties. That makes them a safer option for small businesses, which online criminals often target.
However, crypto represents some security risk for consumers. For instance, fraudulent websites might dupe consumers into spending crypto without getting the product in exchange. Storing crypto wallets offline, while protecting consumers from hacking (which can happen), leaves them subject to physical theft of their storage devices and their crypto. Finally, the recent collapse of several crypto trading platforms suggests it’s a good policy to transfer payments into your regular bank soon after you receive the payment from customers.
Growing Popularity
Cryptocurrencies are more popular every day, especially among younger and more tech-savvy consumers, and we’ll likely see this trend continue in the years ahead. Small businesses can tap into this growing market and benefit from the increased demand by accepting crypto payments.
As the popularity of Bitcoin and other cryptocurrencies continues to grow, more and more small businesses accept them as payments so, if you don’t choose to accept crypto, you may lose sales to other businesses that do accept this currency. Crypto represents a significant shift in how firms approach fees, and it is likely due to the many advantages that crypto payments have over traditional methods.
Fees associated with traditional payment processors are increasingly expensive
The fees associated with traditional payment processors, like credit cards and PayPal, are increasingly expensive. That’s especially problematic for small businesses, which are often required to pay higher fees to accept payments based on their lower volume. By accepting crypto payments, companies can avoid these fees and save money.
Attract more customers
As the popularity of Bitcoin and other cryptocurrencies continues to grow, many people want ways to spend the digital currency they mined or profits from investing in the currencies. By accepting crypto payments, businesses can tap into this growing market and benefit from the increased demand.
Accepting crypto payments is a great way to attract more customers. Many people are interested in using Bitcoin and other cryptocurrencies and are more likely to make a purchase from a business that accepts them.
Hassle-free transactions
Cryptocurrencies are perfect for making hassle-free transactions. There is no need for intermediaries like banks or payment processors to approve or process the payments. Instead, transactions are direct between two parties using cryptocurrency wallets. All you need is a crypto wallet to send and receive payments. For consumers, making a purchase with crypto means you don’t overspend your budget with high-interest rates on credit cards.
Conclusion
There are many reasons why small businesses should start accepting crypto payments. Not only are crypto transactions faster and more secure than traditional methods, but they are also becoming increasingly popular. Companies can save money on fees and attract more customers by accepting crypto payments.
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