Most businesses offer multiple payment options; customers may even expect it. Cash, check, credit, debit, PayPal, Venmo, Square and Stripe are among the many choices. Now, businesses are increasingly welcoming cryptocurrency.
Most people have heard of Bitcoin. But there are over 1,000 other "altcoins" out there, including Litecoin and Ripple. There are many reasons a business might choose to accept cryptocurrency. But getting started may come with some questions.
What Is Cryptocurrency?
It is not uncommon for bank customers to bring cash and coins in a night deposit bag. With cryptocurrency, there is no deposit bag. There is not even a bank.
Cryptocurrency is a type of digital currency that is transferred via the internet. It is used like cash to sell and buy goods and services. But it is independent of the financial institutions most people know. You cannot see it, touch it or put it in your pocket.
Anyone familiar with cryptocurrency has most likely heard the word "blockchain." This is where confusion comes in. Blockchain is the technology behind cryptocurrency.
Investopedia makes it a little easier to picture: The "blocks" are digital pieces of information (transaction records) that are stored in a public database (the "chain") managed by thousands of computers ("nodes") around the world.
What Are Customers Buying With Bitcoin?
As of March 25, 2019, coinmap.org showed 14,480 merchants worldwide accepting Bitcoin. Customers can purchase a cup of coffee in a cafe in Tokyo, Japan, book a room in Ushuaia, Argentina, and pay for a pollinator garden in Seattle, Washington.
Sacramento Kings fans can pay for tickets with the digital currency. Overstock and Expedia accept cryptocurrency as well. According to Lifewire, people are using Bitcoin to:
- Make Dish Network payments
- Order delivery from PizzaForCoins
- Pay invoices through QuickBooks
- Buy fine jewelry from Reeds (and enjoy free delivery via armored transport for purchases of gold ingots or loose diamonds over $25,000)
- Book a flight with CheapAir
Why Consider Cryptocurrency?
Whether to save money or keep up with trending technology, more businesses are considering cryptocurrency. Here are just four of the potential benefits:
- Lower transaction fees.
Ever see a sign in a coffee shop that sets a minimum purchase for credit card use? That is because bank processing fees on credit card transactions add up. Plus, there may be an additional fee for each swipe. Fees for converting cryptocurrency to cash are typically much lower.
- Get funds faster.
Cryptocurrency transactions are almost immediate. There is no waiting for checks to clear, credit card payments to process or funds to transfer from online payment systems, which can take a few days.
- Reduce risk.
Card fraud is costly. When customers ask their bank to reverse charges on purchases, merchants pay chargeback fees. On top of the fees, there is lost revenue and merchandise. With cryptocurrency, transactions are final. Sellers manage refunds.
- Broaden the customer base.
While many businesses offer multiple payment options, some are now cashless. Data shows that by 2019, Millennials and Gen Z will make up more than 60 percent of the global population. They are known for embracing new technologies and are a powerful consumer base. No doubt, they will influence the future of cryptocurrency adoption.
What Does It Take to Get Started With Cryptocurrency?
Adding a cryptocurrency payment option may seem overwhelming. BitPay offers videos that show just how easy the process can be. Following is an overview of the process for brick-and-mortar merchants.
- Download and install the BitPay Checkout app.
- Pair the device with the BitPay merchant account.
- To complete transactions, enter the bill amount (with an option to accept tips).
- Turn the device to face the customer, who scans a QR code to pay the invoice.
- BitPay deposits to bank accounts (or cryptocurrency wallet), minus a 1 percent settlement fee.
The steps for online sales are similarly straightforward.
BitPay merchants can also integrate Bitcoin payments into traditional point-of-sale (POS) systems such as VisualTouch.
The cryptocurrency industry is currently unregulated, leaving some wondering how to handle taxes. Basically, income from cryptocurrency is subject to the same tax regulations as ordinary income. The same goes for employment taxes when wages are paid in Bitcoin or other cryptocurrency. The IRS offers additional guidance.
Cryptocurrencies have been around for a decade or so, and some predict they will eventually replace paper bank notes and coins. Still, it is important for any business considering cryptocurrency to consider both the benefits and the risks.
Earning an MBA can help business professionals get ahead of trending financial technologies and opportunities. Boise State University's online MBA program, for example, prepares students with a solid business foundation while covering relevant, current topics.
Learn more about the Boise State online MBA program.
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