The world of cryptocurrency is still new, and not everyone is even aware of it. However, this growing phenomenon is already making a splash, especially in the small business realm. Over the last few years, the digital currency has slowly been making its way into our lives, disrupting the way we spend money. Whether it is peer-to-peer (P2P) payments, remittances, e-commerce, or trading; this new technology is on the rise. That is why it is important to know the basics of digital currency.
Worldwide interest in using cryptocurrency for transactions across different industries - Source
Regardless of being a crypto coin or a token, this digital asset class has made a lot of people super-rich. With speculations that Gen Z will make all their big-ticket purchases through crypto, businesses are eyeing the possibilities it offers. Accepting cryptocurrencies as a form of payment at your eCommerce business could be a very smart choice in the long term. That said, there are a few things you should know before you make the decision.
Why Accept Crypto Payments?
The “why” is an obvious question that comes to mind before implementing any major change to your eCommerce store. So it is only fair to consider asking yourself that question before integrating something extremely volatile as crypto payments with your business.
Big names like Microsoft, Amazon, and Paypal have started accepting crypto payments. The SMBs are not far behind and are following the suit strongly with nearly one-third of small businesses in the U.S. accepting cryptocurrencies.
Programmable money offers a number of advantages that fiat currency does not. Here are a few good reasons that make a plausible case for accepting crypto payments:
Improves business performance
Cryptocurrencies, like bitcoin, ether, and others, enable real-time and accurate income sharing while also increasing transparency and facilitating back-office reconciliation. Organizations are slowly realizing that important clients and vendors want to work with them via cryptocurrency. Your eCommerce business needs to be equipped accordingly to meet the requirements of all the key stakeholders.
eCommerce businesses, no matter how big or small, have to keep the funds fluid to operate smoothly. When you accept crypto payments, you get faster access to the funds. This is because the payments are processed immediately, unlike credit card systems that take significant time to roll over.
It is almost impossible to reverse a crypto transaction after its fulfillment unless you have the merchant's permission. This gives retailers more protection against eCommerce fraud because no middleman can withdraw funds from your account without your permission.
A Larger Demand
Incorporating crypto payments during checkout opens up a whole new market of tech-savvy customers who have formed a community around the cryptocurrency market. 40% of the shoppers who use this method are new customers of the company. They are also likely to spend double the amount of money as compared to credit card users.
The fees associated with each transaction are substantially lower than other modes of payment. The charges do vary depending on whether you choose a third-party integration or set up a personal wallet. However, they will almost certainly be cheaper than those charged by PayPal or credit card companies.
Essential Things You Need to Know:
1. Be Thorough With the Basics
We are starting off with one of the most important aspects you need to know. You should think of accepting crypto payments only if you are acquainted and well-versed with the world of cryptocurrencies. If not, that is the first and foremost step of the operation. Surround yourself with people who have ample knowledge and experience in this arena.
Understand the different types of cryptocurrencies, wallets, and the laws and regulations about their usage for business. This will make it easier for you to follow the entire integration process and make informed decisions. Alongside learning about the basics of crypto payment, aim at understanding how your target audience approaches this feature. Find out their preferences regarding cryptocurrencies and payment gateways to achieve maximum customer satisfaction.
2. Understand the Modes of Integration
Once you decide on accepting crypto as a payment option, there are two main ways you can integrate it into the system. First, you can set up a personal wallet. You can receive payments straight into your digital wallet which can be stored on a hard drive, your phone, or laptop. However, this method will require significant knowledge and technical know-how about the blockchain realm.
Alternatively, you can choose an appropriate third-party processor to receive payments. Most eCommerce systems already have interfaces in place, making it considerably easier to set up Bitcoin payments. Several third-party services such as BitPay, Coinbase, or NOWPayments handle your transactions and are easily available for merchants using Magento, Shopify, or WooCommerce for their digital stores.
Using such third-party integration can be quite easy. For example, if you're a Shopify merchant who wishes to integrate cryptocurrency, you can go to your Shopify admin's 'Payment providers' page and enable one or more of these alternative payment methods. You'll be able to accept over 300 digital currencies after.
3. Features of a Third-Party Payment Gateway
Choosing third-party payment gateways like BitPay and Coinbase is usually preferred over setting up a wallet and receiving payments manually. However, choosing the right payment gateway can be a crucial step to ensure maximum value for you and the shoppers. So, it is important to understand and compare the features of different crypto payment processors and ensure that you get the best deal. A few important criteria include:
- Customer support: the whole point of opting for a third-party payment processor is to ease the tasks for your eCommerce business. Therefore, you must choose the one that can aid solve all your queries and be helpful when there are any problems with crypto payments.
- Transaction fees: Crypto exchanges themselves come with hefty transaction charges. In addition to that, the payment gateway might also charge a certain amount on every transaction. Conduct thorough research to know about the varying charges you might come across when introducing a third-party crypto payment gateway.
Average transaction fees for Bitcoin exchanges - Source
- Safety: You should consider choosing a payment processor that takes security seriously. They should stay up-to-date with your site’s maintenance. You can ensure that by installing all the new updates of the third-party integration and performing regular backups to your wallet.
- Payout frequency: You need to consider this factor as if it is important for your business that the money comes in fast. A few crypto payment processors have a daily payout policy, others may take a few days before processing the payments.
4. Setting Up Guidelines
Even though payments through crypto have become very popular, it is a fairly new concept for many shoppers. They are bound to have a few queries and concerns while transacting through crypto. You can make this easier for them by setting up and communicating your crypto payment policies with them.
The guideline may explain the crypto payment procedures in detail. Tell your shoppers about the steps they need to follow, the information they might need to provide. This will surely reduce the questions that come across to your customer support team. For example, if your shoppers reside predominantly in the UK region you can provide supplementary information like how they can buy bitcoins via UK websites, the regulations in their country, the benefits of paying through crypto, and the different types of cryptocurrencies they can pay with.
Also, as crypto payments are an irreversible tender, the users cannot initiate chargebacks if they are unhappy with the purchase. You need to establish appropriate policies for return, exchange, and refund in such scenarios. These factors are important when you start accepting crypto payments to your eCommerce store.
5. Know the Tax Implications
Cryptocurrencies are based on blockchain, and while the entire concept revolves around decentralization, crypto still has an equivalent in real currency. The IRS considers cryptocurrency as property. Due to this, these transactions are subject to tax as per the government laws and regulations.
You have to keep a record of all the crypto exchanges and document the revenue generated in your tax reports. The payment processors can be a great help in this matter as well. For example, Coinbase summarizes your digital currency transactions in a “Cost Basis for Taxes Report”. This document also includes the capital gains, losses, and cost basis for conversion.
A glimpse of the tax report provided by Coinbase - Source
You need to understand the tax implications with the help of an expert who knows about different cryptocurrencies and the laws surrounding the same. This will help you file your taxes appropriately. Failing to do so, the IRS can impose fines and penalties which can cause unnecessary hurdles in your eCommerce business.
6. Need for Ample Security
Yes, the transactions made via cryptocurrencies are anonymous and can keep the user’s data safe and sound. However, this anonymity also paves the way for some misbehavior from the legally deviant lot. Hackers have a knack for targeting and stealing cryptocurrencies. Therefore understanding the security measures that need to be taken, on the storefront and through the third-party payment processors.
Past values of crypto theft in the last 5 years - Source
Accepting crypto payments is a great way to help your eCommerce business evolve with the changing times. Providing multiple payment options has been a key trend in improving customer services across all the eCommerce platforms. The addition of crypto as a viable option just furthers the reach to new customers and increases satisfaction in existing buyers.
You can integrate crypto payment methods and provide a seamless transaction mode by understanding the basics, collaborating with suitable payment processors, and regularly checking on updates about the laws related to the programmable currency.
Author bio: Virginia Andrus is an independent Digital Marketing Consultant with 6+ years of marketing experience. Virginia is a chef by heart. In her free time, she is either writing marketing copies for brands and agencies or experimenting with new recipes at her home. Connect with her on Twitter: @andrus_virginia.