The rise of cryptocurrency has been nothing short of astounding. In the past 12 months, the price of Bitcoin has increased tenfold, and other forms of cryptocurrency have risen along with Bitcoin.
This has made cryptocurrency, despite its volatility, an increasingly popular form of investment—and an increasingly popular form of payment.
Many businesses now find themselves wondering if they should start accepting cryptocurrency as a form of payment. While there are many benefits to accepting cryptocurrency, the benefits do come with a certain amount of risk.
Having a well-rounded understanding of the pros and cons of allowing your customers to pay with cryptocurrency will enable you to make an informed decision moving forward.
What Are the Benefits of Cryptocurrency for Businesses?
What makes digital currency particularly beneficial is its low transaction costs, digital mobility, and lack of geographical barriers to entry. Cryptocurrency can help businesses invest their profits safely and securely without having to deal with the obstacles of traditional financial institutions.
Below is a breakdown of some of the benefits businesses can extract from not only using cryptocurrencies but accepting them as well.
1. Transactional Benefits
One of the biggest benefits of accepting cryptocurrency is that it allows you to bypass traditional banks or other middlemen. This means that you can avoid high transaction fees, especially when it comes to fees related to credit card transactions.
Another coveted benefit for businesses is that cryptocurrency allows for near-instant transactions.
Transactions that may usually take several days to clear, with large amounts of money at stake, can go through almost immediately with cryptocurrency. This way of making transactions quick and effortless is a key part of ensuring repeat business.
2. Attract a Young, International Audience
Accepting cryptocurrency can also potentially increase your customer base, especially if you deal with international customers.
Cryptocurrency, unlike traditional fiat money, is a borderless currency. This allows businesses that accept cryptocurrency to avoid dealing with exchange rates. As long as your customer has Internet access, they can do business with you from anywhere in the world.
Similarly, by accepting cryptocurrency, you open your business up to a whole new demographic of consumers; a younger customer base who embraces NFTs and new technologies. For some organizations, this can be an extremely valuable segment, especially those looking to succeed in the tech or fintech space.
3. Branding Opportunities
As mentioned above, some of the benefits aren’t exclusively tangible. They can include targeting and branding opportunities for new demographics.
By adopting or embracing cryptocurrency, your business may be seen as more forward-thinking and tech-savvy. Having said that, there are a couple of issues to tackle when it comes to accepting cryptocurrency.
Your Customers May Not Use Cryptocurrency
Depending on your industry or the size of your business, you may find that the number of your customers who actually use cryptocurrency isn’t all that large. Although many can see the potential of cryptocurrency as an investment, its volatility means that some are only just beginning to experiment with using it as a form of payment for goods and services.
On the other hand, accepting cryptocurrency may allow you to capture a unique segment of the market — those who are underbanked. Not only will this allow you to broaden your customer base, but you can do so without turning away your existing customers.
You Need to Educate Your Staff on Cryptocurrency
Cryptocurrency can be a hard concept to grasp in and of itself, and the technology around it is even more nebulous.
If you choose to accept cryptocurrency, you will likely have to spend time and resources on training your staff on the ins and outs of cryptocurrency. Most importantly, you will need to have their buy-in and support.
1. Frontline Staff
Your staff on the frontline will need to come to grips with the technology that comes with accepting cryptocurrency. This will mean becoming familiar with different types of digital wallets. These digital wallets come in hard and soft wallet varieties, and your frontline staff may need to know how to handle both types.
You will also need to integrate the option to pay with cryptocurrency into your point of sales system and make sure your staff is trained on how to complete cryptocurrency transactions.
The worst thing you can do is advertise that you accept cryptocurrency and not be able to back it up. Negative experiences can have a detrimental effect on the brand loyalty of your customers. And cryptocurrency is no exception. Because digital currencies are so new, any bad experience may discourage users from future use, including transactions with your business.
Once you have decided to allow cryptocurrency payments, remember that your frontline staff will be the ones directly promoting your business’s acceptance of cryptocurrency to your customers. You will want to make sure that your staff is fully behind accepting cryptocurrency and will actively encourage your customers to pay with it.
2. Support Staff
On the back end, your IT and finance staff will need to be trained on the implications of cryptocurrency as well. For your IT staff, they will need to understand the ins and outs of blockchain technology. As for your finance staff, they will need to understand the different tax laws surrounding cryptocurrency.
Remember, adopting cryptocurrency is a big decision. One that requires ample preparation. But the rewards can only be maximized if your back-end systems and support staff are sufficiently prepared.
Your Cryptocurrency Policy Needs to be Flexible
Since cryptocurrency is largely unregulated, it remains highly volatile. While many large companies are looking for ways to stabilize the price of cryptocurrency this is still a work in progress.
On top of that, some forms of cryptocurrency are more volatile than others. Until the price of cryptocurrency stabilizes, you will need to decide which types of cryptocurrencies you accept and be ready to regularly review which ones you choose to accept.
Lawmakers are also beginning to draft regulations surrounding cryptocurrency. This means that your business will need to remain flexible enough to accommodate new laws and regulations surrounding cryptocurrency.
Again, a regular review of your cryptocurrency policy will be needed to ensure your business is keeping up with the latest laws and regulations.
A recent example of this is El Salvador’s adoption of Bitcoin as a form of legal tender. While it offers some interesting opportunities, the IMF acknowledges that there may be some economic and legal issues when it comes to turning Bitcoin into a national currency. At least at the moment.
You Need to Understand the Security Challenges of Cryptocurrency
While blockchain technology makes it difficult to make fraudulent transactions with cryptocurrency, there are still some challenges when it comes to turning cryptocurrency into traditional fiat money. Generally, cryptocurrency is turned into fiat money through crypto exchanges, but giving your cryptocurrency to a third party can leave your money vulnerable to theft.
Having said that, there are several ways to work around this security challenge. You can move large sums of cryptocurrency into an offline hard wallet to protect it from threats.
Furthermore, some companies are making strides in eliminating this security vulnerability by allowing both sellers and buyers to directly choose which currency they will use. For example, a buyer may choose to purchase your product using Bitcoin, while you can choose to accept the payment in U.S. dollars.
Protecting your money is just as important as making it. In a world with increasingly sophisticated digital threats, it is imperative that you are as cautious as possible when it comes to managing your assets – digital or otherwise.
When integrating cryptocurrency into your business model, these are some of the precautions you have to be aware of. Finding and establishing an exchange system ahead of time may make the transition to a digital currency that much easier and that much faster.
You Need to Stay Flexible and Active
Until cryptocurrency becomes more widely accepted, its volatility will likely continue. But changes in short-term prices won’t necessarily jeopardize your long-term investments. In fact, it could be an opportunity.
To maximize the value of your business’s crypto assets, you need to embrace a proactive approach to investment management. It is important to remember that Bitcoin, for example, isn’t the only cryptocurrency out there. As one currency falls and another rises, sales and purchases should be made to capitalize on the market.
If, for instance, the price of Ethereum goes down, it might be worth turning some of your highly valued NFTs into Ethereum before it goes up again. Obviously, this type of navigation requires reasonably sophisticated financial skills, but nothing cannot be obtained with a little bit of research and practice.
While cryptocurrency is beginning to gain more of a foothold, much of it is still in a state of flux. While businesses who choose to accept cryptocurrency will take on a certain amount of risk, much of it can be mitigated by constantly updating your knowledge regarding cryptocurrency and keeping you and your team flexible.
Keep this in mind, and your business can take advantage of the growing popularity of cryptocurrency.
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