When Bitcoin launched in 2009, it opened the door for new types of digital payments and modern business processes. Crypto.com estimates that 106 million people worldwide use cryptocurrencies and businesses are taking notice.
Tesla has over $1 billion in cryptocurrency investments. They recently announced that they were going to accept Bitcoin as payment, only to reverse their decision weeks later. Paypal offers “Checkout with Crypto,” allowing users to checkout with cryptocurrencies directly through their Paypal account at millions of online retailers. Overstock, Expedia, Microsoft, AT&T, and Home Depot have set up payment systems to facilitate Bitcoin transactions.
We’ll likely see more brands and retailers integrating cryptocurrency payment gateways, but the digital payment option has benefits and pitfalls that could affect your business. We put together the pros and cons of accepting cryptocurrency to help you decide if it’s the right choice for your company.
Prefer podcasts? On Blue Acorn iCi’s The Funnel, we interviewed Chris Guerra, Co-CEO at Blue Acorn iCi, about the pros and cons of accepting cryptocurrency.
The Pros of Accepting Cryptocurrency on an Ecommerce Site
Outside of being trendy, cryptocurrency offers benefits that could help a business expand their customer base, increase conversions, and streamline customer experiences.
More Secure Transactions
Blockchain, the technology behind cryptocurrency, is a distributed digital ledger. This means transactional and user data is never saved on a single centralized server like most traditional financial institutions. As a result, fraud should theoretically go down. Additionally, cryptocurrency transactions do not require any personal identifying information (PII)—the only thing that is needed is the digital wallet’s ID—making the risk of identity theft minimal.
Lower Transaction Fees
Overall, cryptocurrency transaction fees are less than credit card fees, which can range anywhere from 0.5% to 5% plus an additional flat fee for each transaction. Cryptocurrency can be transferred with little to no fees attached, saving the merchant costs associated with processing payments.
Easier to Expand Globally
When expanding into the global market, it’s a complex, time-consuming process figuring out exchange rates and finding and integrating local payment gateways. However, cryptocurrencies are not tied to a specific country’s exchange rate because they are universally recognized. Merchants can sell to consumers no matter where they are in the world with a single cryptocurrency payment gateway.
Faster, Simpler Checkout User Experience
Unlike traditional bank transactions that can take days to process, cryptocurrency exchanges are near instantaneous due to the digital asset’s decentralized, peer-to-peer network. This gives brands and retailers instant access to funds and allows them to immediately ship products.
Additionally, cryptocurrency makes the frontend user experience frictionless. Unlike credit or debit card transactions that require numerous fields during checkout, customers use their digital wallets to complete cryptocurrency transactions. By offering an additional payment option and reducing the number of checkout fields, you can streamline the checkout process and ultimately reduce cart abandonment and increase conversions.
CALL OUT: “Brands and retailers are always looking for ways to increase conversion rate, and by accepting cryptocurrency and creating a frictionless checkout experience, you should in theory see an increase in conversion rate across devices.” – Chris Guerra, Co-CEO at Blue Acorn iCi
Enhanced Customer Loyalty
Conventional loyalty programs often suffer from low redemption rates, high operational costs, and competition from other loyalty programs in the market. According to Infosys, the average US consumer participates in at least seven loyalty programs, but 30% of total points awarded are never redeemed.
With cryptocurrencies, loyalty points become tangible, tradeable, and liquidable. Consumers have more flexibility in how they use their loyalty points, whether it’s to use them towards their next purchase, trade them with a friend, or cash them in to pay for something else.
Seamless B2B Transactions with Smart Contracts
Many B2B companies still use a manual process of negotiating contracts and transacting payments, but blockchain technology offers a more efficient process for business operations. A smart contract is a coded agreement between two or more parties and stored on a decentralized blockchain server. Together, Artificial Intelligence (AI) and blockchain facilitate more complex agreements, expedite the negotiation and execution process, and increase the efficiency of the contract.
Several blockchain integrations for B2B use Ethereum as the blockchain network. The network is open-source, which allows companies to create a market, store registries of debts or promises, and move funds without a middleman.
The Cons of Accepting Cryptocurrency on an Ecommerce Site
While there are numerous benefits to accepting cryptocurrency, you need to understand the disadvantages before making the investment.
Too Many Options to Choose From
As of early 2021, there are over 4,000 cryptocurrencies. And thanks to meme-based cryptocurrencies, or cryptocurrencies that gain popularity due to a viral meme, it’s hard to predict which cryptocurrency will become mainstream long-term and which will be a fad. When evaluating cryptocurrencies for your ecommerce site, you need to think about your business processes and your customers’ preferences.
“When you’re B2B considering cryptocurrency, it’s all about your brand and what will work with your contract process. When you’re B2C and trying to choose a cryptocurrency, it comes down to what your customers want.”Chris Guerra, Co-CEO at Blue Acorn iCi
Volatility in Cryptocurrency
The value of cryptocurrency is highly volatile. For example, Bitcoin was worth $60,000 in April 2021 and around $30,000 in May 2021. Cryptocurrencies can also fall victim to viral social media posts. Elon Musk recently tweeted a meme about breaking up with Bitcoin indicating the possibility of Tesla selling off its $2.5 billion in cryptocurrency. Bitcoin immediately fell by 6% and Dogecoin by 10%.
The volatility of value makes it challenging for brands and retailers to price their products and refund returned items bought with cryptocurrency. For example, your customer buys a shirt for 5 Bitcoins but decides to return the shirt a week later. However, by the time they return the shirt, the value of Bitcoin goes down 50%. Do they receive 5 or 2.5 Bitcoins?
Overstock, which partnered with Coinbase to accept Bitcoin, ran into this issue early on. The retailer makes it clear at checkout that the refund would match the dollar price of the item, rather than the quantity of Bitcoin spent. So in the scenario above, the customer would have been refunded 2.5 Bitcoins. For this reason, “cryptocurrency is likely to be more successful for companies with non-returnable goods,” noted Chris.
Over 100 million people have bought cryptocurrency, but most consumers don’t understand how they can use it. According to a survey by Cardify, only 17% of investors that bought cryptocurrency “fully understand” the value and potential of cryptocurrency. 33% of buyers have zero knowledge of the space or would describe their level of knowledge as “emerging.”
Before cryptocurrency becomes mainstream for making purchases, the perception of it needs to shift from being seen as an investment to an exchangeable asset. “You wouldn’t buy something online with stock,” said Chris. It will take time for consumers to feel comfortable using cryptocurrencies to buy products and services. We predict cryptocurrency is here to stay, but what it will look like in a year or five years is unknown.
If you’re thinking of integrating a cryptocurrency payment gateway to your site, but would like to speak to an expert first, feel free to reach out to the Blue Acorn iCi team.