According to a recent study cited in an article by Inc., nearly half of American consumers (49%) had invested in cryptocurrencies by early 2023, and 21% had utilised them for receiving or sending money, accepting payments or buying goods. While the scope of this research is limited, it does signify a growing acceptance of cryptocurrency in the mainstream.
Given the growing popularity of cryptocurrency, online retailers should contemplate whether to start accepting Bitcoin payments. A number of businesses like Shopify, Overstock.com and WooCommerce have already begun to embrace this trend. PayPal now also permits digital currency to be utilised for transactions with businesses that accept PayPal. In addition, a range of online applications are incentivising users with cryptocurrencies.
While it’s not imperative for businesses to begin accepting cryptocurrencies as payment right away, e-commerce businesses should take a thorough look at the potential advantages that come with embracing such transactions. In the upcoming sections, we will delve into various factors to keep in mind when deciding to take this step.
Buyer Integration
An escalating number of individuals are exploring Bitcoin’s potential as a payment choice. While Bitcoin users are presently in the minority, awareness of the cryptocurrency is increasing and could result in a higher usage rate. Therefore, it is prudent for e-commerce businesses to offer Bitcoin as a payment alternative as soon as possible, to prepare for potential demand.
The following report from CNBC sees at least one commentator suggesting that the utilisation of Bitcoin will likely surge over the next few months.
Market Share Percentage
When deciding to accept cryptocurrencies as payment, a platform’s user demographic should be carefully considered. Individuals who opt not to utilise banking services may be drawn to alternative payment options that do not require them. This payment alternative is increasingly favoured by males and younger age groups. As a result, businesses that do not offer this payment option could lose out on potential customers who are seeking this convenience.
Bitcoin facilitates cross-border payments, which provides early adopters an opportunity to draw in new customers, especially from nearby nations. E-commerce businesses that want to reach out to customers in other parts of the world may reap benefits by allowing cryptocurrencies as payment options. A recent study has indicated that embracing Bitcoin payment methods can lead to a surge in the average order value, a crucial factor for ensuring long-term profitability.
If a business’s target customer base consists of individuals over the age of 30 or those who are not technologically proficient, incorporating cryptocurrency payment alternatives may not be financially viable. The costs associated with investing the essential resources and time may not warrant such measures in such instances.
Security
Cryptocurrencies provide improved security benefits when compared to conventional payment methods. The anonymous nature of transactions reduces the possibility of fraud, as customers are not required to provide any Personally Identifiable Information (PII). Moreover, compared to credit card payments, transactions carried out via cryptocurrency are challenging to reverse, therefore limiting the potential for fraudulent transactions.
Speed
Cryptocurrency transactions are processed instantly, unlike credit card payments which may take several days. This quick processing time can facilitate improved cash flow for e-commerce businesses.
When it comes to completing purchases, speed is critical. Customers are spared the hassle of filling out lengthy forms, as no personal information is necessary. Streamlining the process (UX) is vital in order to minimise user frustration and ensure a seamless experience. An essential metric in boosting conversions and revenue is the percentage of shoppers who finish their purchase.
Cost
Providing customers with the option to use cryptocurrencies such as Bitcoin or Litecoin as payment could benefit international online stores by lowering transaction costs. For instance, regardless of where Bitcoin is utilised, its value remains the same, eliminating the need for currency conversion in international transactions. Although there may be some supplementary costs associated with these transactions, they are significantly lower than the 0.5% to 5% levied by credit card or PayPal payments.
Undesirable Consequences
Although accepting cryptocurrencies as payment has numerous benefits, there are a few downsides to consider. Firstly, the abundance of different cryptocurrencies makes it challenging to predict which ones will become widely accepted and which ones might fall by the wayside. Additionally, cryptocurrencies can be viewed as a brand that integrates with a company’s identity, which differs from traditional currency.
The instability of cryptocurrency prices presents a challenge for online retailers in setting accurate prices for their products. It can cause further complications when customers decide to make returns. For example, a tweet by Elon Musk concerning the end of his relationship with Bitcoin recently precipitated a significant drop in the cryptocurrency’s value.
The second issue that businesses should be mindful of is the security of Bitcoin storage. Although the lack of dependence on a bank can have its benefits in specific circumstances, it also has its drawbacks. Banks offer additional security measures to ensure customer trust in financial transactions, which may not always be the case for cryptocurrencies. Bitcoins are kept in digital or physical wallets, which, like other digital or physical assets, can be vulnerable to theft. Therefore, businesses must prioritise selecting the best storage option for their particular needs.
There is finally regulatory action being taken regarding Bitcoin. Mining operations require significant amounts of energy, which has resulted in certain areas taking drastic measures such as banning the use of the cryptocurrency completely, as in the case of China. Although the future of Bitcoin remains uncertain, its usage may face limitations or even be prohibited entirely.
In Simple Terms
Online merchants should consider the advantages and disadvantages of cryptocurrency as a relatively new payment option. While it may be advantageous to incorporate cryptocurrencies into their payment systems, they should not discontinue accepting other payment methods.
