Should Businesses Accept This Form of Payment?

Many businesses plan to add a new payment option for customers — cryptocurrency. Pew Research Center reported that 86% of Americans have heard at least a little about cryptocurrencies. Of those, 24% have heard a lot about it. Only 13% have not heard about cryptocurrency. These numbers are in stark contrast to a 2015 Pew Research Center survey on Bitcoin. At that time, only 48% of American adults had heard about the currency. Only 1% had collected or traded it.

As American consumers have become more familiar with cryptocurrency, many of them now want to use it to pay for products and services 32% of small businesses have already risen to the challenge and now accept cryptocurrency as a form of payment.

Cryptocurrency usage varies by gender, race and age

Consumers’ comfort level with cryptocurrency varies by age, gender and race. If a business’s target audience is more likely to request or expect an option for cryptocurrency, the business should prioritize it.

While the Pew survey mentioned above found that 16% of all adults in the U.S. have traded or used cryptocurrency, 43% of men aged 18 to 29 have used cryptocurrency, compared to 19% of women in the same age group.

Pew also found that Asian, Black and Hispanic adults are more likely than Caucasian adults to have invested, traded or used cryptocurrency. When deciding if offering cryptocurrency is the right move, businesses should consider whether their target customers fall into the demographics most likely to want the payment option.

Benefits of accepting cryptocurrency

Businesses add cryptocurrency because the payment method offers several key benefits that can improve operations and increase revenue. Offering cryptocurrency payments can help businesses:

• Bring in new customers. Many customers now specifically look to conduct business with cryptocurrency, and 40% of customers who pay with crypto are new to the merchant. The payment method offers many benefits to customers, including security and convenience.
• Digitize the payment process. Businesses have seen over the past two years how adding digital processes has saved them time and money. Because cryptocurrency payments are entirely digital, accepting them helps move businesses further toward digitization.
• Reduce transaction fees. Credit card transaction fees eat into the profits of many businesses. When a customer pays with cryptocurrency instead of a credit or debit card, the business pays less than 1% of the transaction amount. That means higher revenue.
• Lead their industry in innovation. Businesses that are early adopters of cryptocurrency payments are viewed as innovative leaders. As more businesses adopt cryptocurrency, those not accepting it will soon be viewed as lagging behind other businesses. They may eventually lose business to their competitors.
• Reduce fraud and avoid chargebacks. With credit card payments, merchants can lose money if a third party, such as the credit card company, processes a chargeback. Credit card fraud can also reduce revenue. By adding cryptocurrency as a payment option, businesses saw reduced fraud and chargebacks.

Concerns about accepting cryptocurrency

As with most new payment options, businesses may have concerns about accepting cryptocurrency. Common concerns include:

• Value fluctuations. Unlike traditional currency, the value of cryptocurrency can change daily. If the currency’s value goes down before the business converts it to cash, they lose money on the sale. Market volatility is a major concern of 50% of businesses that oppose accepting cryptocurrency payments. Many businesses overcome these challenges by cashing out daily. This ensures they get the same (or close to the same) value of the purchase price.
• Taxes. The IRS treats cryptocurrency as property instead of earned income. So, businesses must track and pay taxes differently on purchases paid for in cryptocurrency. With many types of cryptocurrency being used, businesses may have difficulty with complex bookkeeping. Many businesses overcome this challenge by limiting the types of cryptocurrency accepted and using technology that tracks the values.
• Security.  Businesses commonly ask if accepting cryptocurrency is safe from a cybersecurity perspective. As with any digital process, businesses open themselves up to cybersecurity issues and must proactively work to reduce their risk. Businesses should focus on cybersecurity best practices, such as using a zero-trust approach and requiring multifactor authentication for users, to reduce risk.

Getting set up to accept cryptocurrency payments

One of the biggest questions asked by businesses considering accepting cryptocurrency is: How does it work operationally? Many businesses find it’s much easier than they expected.

The biggest difference between cryptocurrency and traditional currency is that digital currency operates on individual blockchains instead of through an owner of the currency or platform. Each blockchain is a decentralized digital ledger that logs each transaction for the specific coins. Because a single person cannot change the blockchain, cryptocurrency has a level of visibility and transparency that is simply not possible with traditional currency.

Businesses can accept payments using one of two options: a cryptocurrency wallet or a cryptocurrency exchange. With a wallet, the business stores and retrieves the cryptocurrency either using software or a physical USB device. However, businesses must set up the wallet to accept each specific type of cryptocurrency. With cryptocurrency exchanges, businesses can trade all types of cryptocurrency from the platform.  

Making the right decision for your business

With cryptocurrency likely to become even more popular in the future, businesses who are on the fence should closely monitor their customers’ expectations. Remember, the process is apt to become easier as early adopters work out the kinks. Do most of your competitors or other businesses your target audience shops at take cryptocurrency? If so, your business may want to consider following suit to stay competitive.