Cryptocurrencies may still be a novelty to a number of people across the world. As a new and rapidly evolving technology, people without much active interest in them may quickly lose track of their developments. Until they stabilize in such a way we can predict what next, the confusion is quite understandable. However, even without knowledge of the nitty gritty of happenings in the crypto space, there are legitimate indicators that point out the basics.
Today, a few merchants accept cryptocurrencies as a means of payment. Low adoption may partly be contributed by incomplete infrastructures in the crypto world with the main setback being in governmental interference through bans and several undefined compliance requirements which hinder ease in adoption. Even so, adoption by global business giants such as Tesla, Lionsgate Films, Microsoft, shows that cryptocurrencies can turn into viable and legitimate mediums of trade. To understand the driving factor for acceptance in the bigger stages, that both medium and small businesses can equally enjoy, we suggest looking at nine reasons why merchants should accept cryptocurrencies.
Low transaction fees
The main attraction to business is earning profits. Businesses that generate higher profit margins are more lucrative and endearing. Yet, in today’s economy, there can be only a few Fortune 500 type of enterprises. As such, small businesses have to make the best of every available option to increase their income. Cryptocurrencies could just be the favorite way out. While traditional means of payment through banks and credit cards attract high-interest rates of up to 3% per transactions, cryptocurrencies offer significantly lower rates. Interchange fees for Visa as of this writing are a net of refunds and chargebacks at 1.51% + 0.10%. Transaction fees for Paypal and Stripe are both $2.04 compared to PayBear’s $0.03. Meanwhile, Coinbase does not charge fees within its wallets, with minimal fees outside their wallets. The same is replicated in GoByte since transactions are verified by miners, consequently maintaining accounts on very low fees. These rates can further be brought down to zero if merchants choose to act as masternodes to aid verify and validate transactions. High account maintenance cost in banks, for instance, are passed down to users through high fees.
Cryptos give a multi-pronged approach to security. While cryptocurrencies provide for transactions with Two-Factor Authentication, some go further in enabling hardware wallets for mobile devices. BreadWallet for instance, transacts directly with blockchain via Android or iOS phones, reducing the risk of system failure. Trezor is the first flash drive wallet similar to Ledger Nano S that can be connected to PCs and is used to safely store coins offline. Hardware wallets are hacker proof, ensuring loses through such risks are eliminated. These type of wallets do not require passwords and as such, minimizes loss of accounts as they have paper keys in place of passwords. Moreover, the use of P2P model ensures users involved in crypto payments have absolute control of their funds. Elimination of brokers in this way provides additional security.
Elimination of Fraud and Chargebacks
How often does a retailer feel 100% sure that clients will honor their part of the deal in transactions? Almost never. The good news is that cryptocurrency payments do not require faith or trust in customers, since blockchain technology, which they are based on, makes them irreversible.
As such, there is no loss through reversal of funds by unscrupulous customers as well as no fees lost in chargebacks after reversals. Chargebacks by their very own design favor customers while leaving merchants to the mercies of good will. In case a customer requests for a chargeback, only their grievances are taken into consideration before funds are credited back to their accounts. This means a scheming fraudster may take advantage of this lopsided provision by banks to defraud merchants.
Not only do merchants face the risk of losing legitimate pay for goods and services, they further incur fees from chargebacks. This is entirely different with crypto payments. To avoid disputes, both merchant and customer end up with a credible transaction by employing multisignature in transactions. Multi-sig verification during transactions ensures that both parties are satisfied before payments are commenced. Other services employ Smart Contracts that execute transactions only after a set of conditions are met. Important to note, the P2P nature of crypto payments allows parties to have direct interactions for negotiations and settlements amongst themselves without bias from third parties in case of disputes.
Removal of third parties and increasing liquidity
Everyone wishes they could access their money immediately after a transaction. Sadly, we have to contend with waiting periods which can vary from several minutes to several days. Banks need to verify transactions, cheques need to mature, physical banks offices do not operate 24/7, given that most technical fund issues are handled on location… the lag is inevitable.
Crypto payments change this all together. With direct P2P payments, assets are instantly credited to merchants, consequently affording them never seen before luxury in liquidity. Availability of funds immediately after a transaction ensures merchants have control of their funds and can either withdraw them or stake them in wallets to increase their stake as masternodes. Exchanges and withdrawals are possible with robust and active exchanges available.
Different cryptocurrencies have different models when selecting masternodes. A cross-sector requirement is a high number of coins held in stake wallets (however, this is not the sole determinant as it could raise further issues on a monopoly of verifications, consequently diminishing decentralization). With more liquidity, enabling them to stake more coins, merchants who wish to act as masternodes get the chance to be selected as masternodes, like in case with GoByte Pay, and increase returns for those who already operate masternodes.
Markets drive profits. It follows that higher market access creates successful businesses while lack of market competitiveness greatly increases chances of failure. By incorporating cryptos, merchants get the advantage of attracting new customers using them while maintaining those who use traditional systems.
Being a new technology, acceptance of cryptos in payments sets businesses apart, giving them unprecedented brand visibility. This exposure is highly valuable in introducing businesses to the continuously growing crypto community. Corporations that support and encourage cryptocurrencies get higher exposure. It was big news when Virgin Group accepted payments in Bitcoin back in 2014. Its CEO’s, Richard Branson’s enthusiasm for cryptocurrencies and Blockchain, shows the Group of Companies as a progressive entity, easily drawing to itself a huge number of crypto followers. This, however, is not a preserve for big businesses. In July, a little-known barbeque joint in Kenya gained enormous publicity in the country after accepting payments in Bitcoin.
With the advancement of e-commerce, businesses leverage on global needs to expand their markets. To strengthen this further, cryptocurrencies as ‘global currency’ can propel businesses to success. This is because they are not affected by fluctuations in fiat currencies. They also do not attract exchange fees nor other charges in interests charged differently by different countries.
Inevitable business practice
The growth curve in crypto applications in the last 10 years indicates that cryptos are set to be the medium of exchange in the near future. By the fourth quarter of 2017, 11,000 businesses had already started accepting cryptocurrencies. At the moment their number has already exceeded 13,000 thresholds, according to coindar.org. Additionally, cryptos’ incredible blockchain technology serves to further confirm their place in finance, thanks to the revolutionary aspect of blockchain technology. Trends indicate that cryptocurrencies are not going anywhere, so we can get used to them as well. Early adaptors in sectors such as payments stand to reap big by attracting huge volumes of users.
Tapping from a growing technology
Payment gateways solutions keep growing their technology and innovations to better serve merchants. A number of networks such as GoByte offer free open source technologies with options for personalized integration. In what is termed as 6-in-1 service, GoByte provides for; issuing and integrating payments, invoicing and collections for accounting and tracking of transactions between clients. The free API’s ensures that innovation is encouraged, consequently leading to a much-needed improvement on networks. Additionally, merchants can use this to learn the technology and can create their own networks in the future.
Blockchain-based transactions are recorded in the public ledger. These records help in resolving disputes as well as acting as a store of records for merchants. This means speedy retrieval of records on transactions. The introduction of wallets that receive invoices via GoByte pay services and BitPay’s billing tool, makes this functionality even better as it tracks and stores records on transactions. The Billing tool on BitPay means separate email billings are not required outside the wallet. In the same way, GoByte’s invoicing ensures all transaction records are found in the same place. Gilded marketplace offers similar invoicing services with the option of invoicing in fiat and getting paid in fiat. The notable significance of these invoicing services is that they offer comprehensive records at no extra charge.
More than just a coin for buying some coffee
While this is not a conclusive list on why merchants should accept cryptocurrencies, it shows that crypto payments can become competitive with traditional payment systems in e-commerce in a short while. Over time, big enterprises have been on the lead adopting changes in financial systems. This is no longer the case with crypto payments as any business size can adopt them using progressive tools created by geeks. The steady improvement in crypto technologies means payment systems are set to grow in tandem with the technology. Hence, businesses that adapt crypto payments are more likely to position themselves as the vanguards of e-commerce. More importantly, cryptocurrency adoption is shifting from the primary use in investment and moving back to the initial intention of shaping up the financial sphere.
Alexander has worked in community growth for multiple cryptocurrency companies. He is now the Sales and Operations Manager for CoinDiligent. In his free time, he writes articles sharing his industry insights. You can get in touch with Alexander on LinkedIn.