There is no doubt that virtual currencies have captured the imagination of half of the world and somewhat confused the other half. But regardless of which half you belong to, there is no denying that today, you would be hard-pressed to find individuals, governments, banks, and even businesses that haven’t jumped on the cryptocurrency bandwagon.
The easiest way to understand cryptocurrency is to think of it as a digital currency that relies on peer-to-peer technology. Still confused? Well, think of it as a bank ledger that documents your deposits and withdrawals. The only difference is that everyone on the platform has access to this ledger. So, you can transfer funds directly to a seller without having to go through a third party to process your payments. Essentially, you are your own bank.
A cryptocurrency is encrypted and only you will have the key to it. So it is currently safe from a data breach. Which is why it seems like a good idea for small businesses to trade in and probably even accept cryptocurrency as a form of payment.
If you run a small business or plan to run one, here are 5 things you should know about cryptocurrencies:
1. No Payment Platform Fees
Let’s say you own a business that has an online presence. When someone buys something from your site and uses their credit card or debit card to pay for it, the payment platform will charge you anywhere from 2.9 percent to 9 percent of the amount as fees for their services. There are no such charges involved with the buying of cryptocurrencies. If any fee is charged, it is levied on the buyer and is more often than not too little to be of any concern.
So, if your business decides to accept cryptocurrencies as a form of payment, you will end up saving on seller fees.
2. Speed in Processing Payments
As mentioned earlier, credit card and debit card payments involve three parties. The buyer, the seller, and the payment platform. As the owner of a small business, you would probably have to wait for 3 to 4 days to collect the payment for the purchase made.
If, however, you accept payments in the form of cryptocurrencies such as Bitcoin, the entire payment process is completed in no less than 10 minutes since the payment is credited straight to your account.
This is extremely useful especially if the inventory management for your business is done via an overdrawn account or a line of credit.
3. International Expansion
One of the biggest hurdles for an online business, when they decide to expand internationally, is its ability to accept different currencies keeping in mind the multiple exchange rates.
This problem is eliminated with cryptocurrencies since not only are they universally accepted, but their value is not determined by foreign currency exchange rates. Moreover, you won’t have to worry about your payment platform not accepting transactions from certain countries.
This makes expanding to international markets much easier.
4. Competitive Advantage
It is a well-known fact that the more payment options your business offers, the more customers you will attract. While not many people may be using cryptocurrencies as a form of payment currently, in the long run, your business will be deemed more trustworthy.
Offering this payment option may not give you immediate returns, but think about it. A lot of businesses were once wondering if they should offer digital payment options. Today, almost everyone makes payments using plastic money. So, you will only stand to gain in the future.
Unlike the 4 points mentioned above, this one may deter you from accepting cryptocurrency as a form of payment. However, it is something you should know as the owner of a small business. Cryptocurrencies are extremely volatile and their value fluctuates from day to day. This can complicate simple activities such as trying to determine the earnings for a particular month as the value can either be inflated or deflated.
Apart from these 5 points, you should also keep in mind, that because of its relative newness, cryptocurrencies are currently unregulated. Most countries are yet to understand its workings. Some countries have already passed legislation on cryptocurrency use while others have since outlawed its use.
This may not directly affect your business, but it is important to keep abreast of any legal changes that could affect your business if you decide to accept or invest in cryptocurrencies.