Cryptocurrencies are digital or virtual currencies that rely on cryptography to secure their transactions and regulate their creation. Cryptocurrency is decentralized, which means it is not controlled by governments or financial institutions.
Small businesses can benefit from accepting crypto as a form of payment due to the low fees and quick transactions. By accepting cryptocurrency, businesses can reduce their financial costs and streamline transactions, making them more efficient and appealing to customers.
What Benefits Does Cryptocurrency Provide To A Small Business?
Cryptocurrency is rising in this day and age in the commercial world. "Is it beneficial to small business owners to accept cryptocurrencies?" is a question a lot of small business owners are asking.
Remember these three following benefits:
- It provides superior payment security
- Transactions are irreversible
- Lower transaction fees.
Cryptocurrency Provides A Higher Level of Payment Security
In the modern age, business owners usually accept credit card payments. In relation to that, the epidemic has resulted in an increase in credit card fraud.
In April 2020, the dollar amount of attempted fraudulent transactions increased by 35% over April 2019. In 2020, credit and debit card payments accounted for the bulk of fraud reports across all payment methods.
Small businesses, regrettably, are frequently the target of this form of fraud from credit and debit cards.
Small business payments made with cryptocurrency are regarded to be more secure than those made with credit or debit cards. Cryptocurrencies do not require third-party validation due to their decentralized nature.
When customers use cryptocurrencies to pay, their information is not held in a centralized hub, where data breaches are rampant. Instead, the information is held in their cryptocurrency wallets.
Furthermore, the blockchain general ledger ensures the authenticity and security of every transaction, making identity theft very difficult, if not impossible. The decentralized nature of cryptocurrency also protects retailers against fraudulent chargebacks.
Transactions Involving Cryptocurrencies Are Irreversible And Final
Cryptocurrency transactions are irreversible once they are completed. For small firms, this can be a double-edged sword. Funds can only be reimbursed by the recipient.
Businesses that welcome Bitcoin should be ready for refund requests from customers and keep track of how much cash each customer pays.
On the one hand, the irreversibility of cryptocurrency allows business owners to better control their cash flow. There are no chargebacks, and if customers request a refund, the store must personally refund them. As a result, your team will have to keep meticulous records.
This approach, on the other hand, might lead to inefficiencies in your business operations and a lot of extra work for your personnel. As a result, your team will have to devote time and effort to return each payment individually over the holiday season.
Pay Lower Transaction Fees
Settlement fees, as well as setup fees for many payment processors, are the responsibility of merchants. PayPal, for example, levies a transaction fee of around 4%. (and sometimes more).
In contrast, cryptocurrencies have considerably lower costs, if there are any. Some people who use a Bitcoin currency exchange have costs as low as 1% thus, lower fees.
Similarly, if your business services consumers from other countries, cryptocurrencies can help you avoid international currency transaction fees. This is due to the fact that cryptocurrencies are not linked to a certain country or central bank. As a result, companies do not wait for payments to clear a foreign bank or pay the associated fees.
What Are The Disadvantages Of Bitcoin Payments For Small Business Owners?
There Are Tax Implications To Consider
For tax purposes, the IRS considers cryptocurrency to be "property." This means that if you welcome cryptocurrencies, you must record it as gross income at the time of receipt, depending on its fair market value. "In other words, you're subject to capital gains tax every time you sell, buy, or use Bitcoin," Inc. stated.
You must also keep an account of the value of each cryptocurrency on the day it was received and the day it was sold, according to IRS guidelines for taking cryptocurrencies. This can easily become problematic, especially if you're dealing with a large number of settlements per day. Instead of taking daily sales, you might try accepting cryptocurrency for things with a set monetary value.
It’s Still Regarded As Dangerous
Crypto enthusiasts like the fact that this is monetary inflation-proof. Cryptocurrency's value cannot be manipulated by governments, which is both a risk and a gain.
On the one hand, cryptocurrencies act as a deflationary hedge. The value of bitcoin and other cryptocurrencies, on the other hand, is exceedingly volatile. The market volatility of Bitcoin hit roughly 8% in a three-month period. This level of price volatility makes cryptocurrencies unsuitable for many business owners.
Despite the fact that a bitcoin transaction reduces cyber dangers such as stolen credit card details, the money isn't completely secure. There is currently no method to completely prevent cybercriminals from accessing users' money. A FIAT currency like the US dollar and the Euro are neither backed or insured, making them particularly hazardous.
Is It Possible For Small Businesses To Accept Cryptocurrency?
To put it plainly, sure, you can. According to a nationwide HSB survey conducted in January 2020, 36% of small companies accept bitcoin payments. If you're one of the businesses that has been left out of the crypto payments revolution, it's time to figure out how to take crypto payments in order to keep up with the competition.
What Is The Impact Of Cryptocurrencies On Small Businesses?
While traders like the novelty and volatility of cryptocurrencies, small businesses may be scared off by the risk factor. You can lower your risk by conducting thorough research on cryptocurrency companies before deciding which to accept.
It's also crucial to keep in mind that regulations are constantly evolving, so new merchant protections may be implemented in the future.
Finally, Bitcoin appears to have a bright future for both small enterprises and consumers. Widespread adoption is accelerating, and as more large corporations, such as Microsoft, begin to accept crypto as payment, smaller firms are expected to follow suit.
A rising number of services are available to help you manage bitcoin payments on your behalf, eliminating all risk. It's worth investigating only for the possibility of expanding your brand's reach into overseas marketplaces.
What Steps Does A Small Business Need To Take In Order To Accept Bitcoin Payments?
It's simple to accept bitcoin payments. To do so, follow these steps:
Create A Wallet For Your Cryptocurrency
Set up a cryptocurrency wallet first. A wallet is a digital wallet that works similarly to a bank account, allowing you to send and receive cash.
Because you're likely to accept a variety of cryptocurrencies from different consumers, a multi-cryptocurrency wallet with multiple sorts of cryptocurrencies is the ideal option.
A multi-crypto wallet stores multiple types of cryptocurrency, eliminating the need to open multiple crypto wallets.
Bitcoin, Ethereum, Litecoin, and Binance, are the most popular cryptos among small enterprises. Consider getting a wallet that can store these well-known cryptocurrencies.
When looking for the best multi-cryptocurrency wallet, consider the following:
- Supported digital currencies (wallets such as Ledger Nano S and Guarda support more than 30 cryptos)
- Purchase fees (for cold or offline wallets) and transaction fees are both affordable.
- Integration with other software wallets is also possible.
- Malware (and hacker-proof) protection
- Connectivity with other apps for easy money transfers
Embed Cryptocurrency Payments Within Your Website
It's time to integrate crypto payments into your website after your cryptocurrency wallet is up and running.
There are various plugins available for setting up cryptocurrency payment processing on platforms like Shopify, Magenta, and Woocommerce.
If you can't find the proper plugin, you can create an account with a cryptocurrency payment gateway. You can accept payments on your website using a variety of methods provided by a crypto payment processor. Payment buttons and invoices are just a few of these methods.
CoinBase Commerce and BitPay are two of the best crypto processors in the world. You can read more about the difference between Bitpay vs Coinbase Commerce by clicking here.
Choose a bitcoin gateway that complies with the following requirements:
- Different methods of cryptography are supported
- Transaction total costs are low
- Integrate with the platforms that are critical to your business success
- Instant conversion to FIAT currency protects your cryptocurrency from market volatility
- There is no minimum balance requirement, and there are no limitations on payouts
- You'll be able to settle your bills in a variety of currencies
- Other features include invoicing, recurring payments, and bookkeeping
- Has a solid track record and positive feedback
- With strict sign-in and user verification methods, it's safe and secure
You can arrange direct payments with your customers if you are unable or unable to integrate. They only require your wallet address or a QR code generated from your wallet. To make a payment, your customers will need to enter your address or scan a QR code.
When Accepting Cryptocurrency Payments, How Do You Keep Transactions Secure?
You can keep your cryptocurrency secure and valuable by:
- Converting Bitcoin and other cryptocurrencies into cash in an instant. Sign up for payment processors like BitPay and Flexa, which will convert your Bitcoin to cash for you immediately, removing the risk of your cryptocurrency losing value due to volatility.
- Direct interaction with cryptocurrency should be avoided at all costs. You can also accept cryptocurrency payments without exposing your customers to the cryptocurrency by allowing them to pay using PayPal's cryptocurrency option. PayPal credits your account with U.S. dollars after your crypto holding transmits the digital money.
Cryptocurrencies are highly decentralized. Thus, no bank or government authority supervises them. Your business' assets aren't totally safe due to a lack of regulation. Data security breaches and cybercrime losses will necessitate insurance.
As stakeholders continue to consult on how to regulate cryptocurrency, you should be ready to keep up with evolving rules.
Who Is Using Cryptocurrency The Most?
According to research, 74% of cryptocurrency owners are between the ages of 25 and 44, with 19% between 44 and 55.
If you cater to a younger, tech-savvy customer, the payment option of accepting bitcoin payments may be a must-have for your business.
However, older generations of at least 60 years are catching up, and if you serve the older market, you'll need to adjust as well.
Why Should I Accept Cryptocurrency In My Small Business Payments?
You may lower transaction processing costs, defend your firm from chargebacks, extend your market, and accommodate customer preferences by adopting cryptocurrency as a payment method.
If you're going to accept a crypto payment option in your small business, take precautions to ensure that settlements are processed safely and that digital payments are securely stored. You may use multifactor authentication, safeguard and manage your private keys, and even put your cryptocurrency in cold storage to make your accounts more secure.
Any business owner who accepts a bitcoin payment must be willing to react to changes in the law on a regular basis. If you accept digital currency, you should be aware of the ever-changing local and state business legislation in general, as well as laws governing doing business online and data protection.