Cryptocurrency is frequently discussed as a speculative investment, but its main purpose is to function as a mainstream currency. Accepting crypto at your small business could help to competitively differentiate you and might even hold some financial advantages.
Is it worth accepting?
Small Business Finance and Customer Service
It's helpful to think about the possibility of accepting cryptocurrency as providing benefits in two dimensions; first, there are financial advantages, and second, there are customer service advantages. You'll also need to think about the logistical challenges presented by cryptocurrency, but we'll get into that later.
From a customer service standpoint, accepting cryptocurrency is all about broadening your appeal and making financial transactions easier for your customers. This benefit is hard to measure concretely, since many of your customers may not know how to facilitate cryptocurrency transactions and may not even know what cryptocurrency is.
The Benefits of Accepting Crypto
So, what are the benefits of accepting cryptocurrency at your small business?
- Appeal to target niches: There are millions of people who are crazy about cryptocurrency. They believe that crypto is the future, and they want to use it whenever they get the chance. Accepting crypto as payment in your small business is immediately appealing to them, motivating them to purchase more from you.
- Flexible payment options: You already know that accepting many different forms of payment increases your customer base; different people prefer to pay in different ways, and all your customers appreciate your flexibility. Accordingly, accepting crypto by default could be a great way to increase your appeal.
- Competitive differentiation: How many other small businesses like yours are accepting cryptocurrency as payment? If you're the first small business in your niche to do it, you'll have a massive advantage in competitive differentiation. Otherwise, you'll be keeping pace, so you avoid falling behind.
- Fewer financial complexities: With cryptocurrency, you'll never have to worry about chargebacks. You also don’t have to worry about PCI compliance. While cryptocurrency itself is technologically complex, it lends itself to less financial complexity for your small business (once you're over the initial learning curve).
- Security and privacy: Crypto enthusiasts are proud to extol the security and privacy virtues of their favorite currencies. By using the blockchain, transactions are recorded immutably, and to an extent, these transactions afford users more privacy than they would find in traditional forms of payment.
- Reduced transaction costs: Though transaction costs fluctuate, cryptocurrency has the potential of providing your small business with reduced transaction costs overall. It's still not as good as cash, which carries no real transaction cost, but if you can save even a few pennies on every transaction, the savings will add up over time.
- Investment potential: If you're interested in investing in cryptocurrency, accepting crypto as payment could help your investment strategy. You can convert cryptocurrency into dollars when you receive it, but you can also hold the cryptocurrency in your own account. It's up to you.
The Downsides of Accepting Crypto
There are also some downsides you'll need to keep in mind.
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Setup challenges: If you've never used or invested in cryptocurrency before, you might not understand how to set up a cryptocurrency transaction system for your business. No matter what, you're going to experience some hurdles and challenges to get your crypto acceptance online. This process isn't nearly as complicated or intimidating as people unfamiliar with cryptocurrency make it out to be, but if you're a total newcomer to this financial product, it's going to take some time for you to build your familiarity. Expect at least a week or two before you feel comfortable with the system.
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User confusion: Many of your customers will be enthusiastic about paying with cryptocurrency, but they may not understand how to do it. And of course, all your customers who are uninterested in cryptocurrency will have no idea how to facilitate this type of transaction. That means you could encounter customers who struggle to pay with cryptocurrency – and you may need to teach them on an individual basis.
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Market volatility: Most cryptocurrency markets are volatile. There is a significant upside for investors who can time the market well, and if you believe in the future of cryptocurrency, long-term holds could be a lucrative strategy. But the fact remains that current prices are constantly in flux. If you're planning on keeping cryptocurrency, rather than converting it to dollars, this could be problematic for you.
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Taxation ambiguity: Managing taxes when accepting cryptocurrency as payment can also become complicated. In addition to properly accounting for sales tax, you'll be responsible for tracking any gains you make by investing in the crypto market. Be sure to keep thorough, accurate records.
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Future updates: Cryptocurrency processing technology doesn't remain static; it's constantly evolving. That means your business may be responsible for making upgrades and process changes in the future.
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The hazy future of crypto: It's hard to say exactly what the future of cryptocurrency is going to be, especially if governments introduce new regulations to try and curb digital currency growth. One major negative change could instantly disrupt the balance of advantages and disadvantages in your strategy. Of course, by that same token, a positive change for cryptocurrency could instantly make accepting this currency more favorable to your business as well.
The Bottom Line
So, what's the bottom line here? Ultimately, accepting cryptocurrency isn't a total net positive or a total net negative for your business. There are some important challenges you'll need to overcome, and potential benefits you can enjoy, but no matter what, you'll need to carefully consider who your customers are, where your business is, and what you're trying to achieve.
Accepting cryptocurrency is an awesome advantage for some small businesses, while it has the potential to hold other small businesses back. We wish there were a simpler answer, but hopefully the details in this article can guide you to a conclusion for your unique business.