five Reasons Merchants Should Begin Accepting Bitcoin Now
An estimated 80,000 businesses already accept Bitcoin today, and not just as a marketing gimmick. Why not yours?
Forward-thinking merchants of all sizes around the world are glomming onto the hot Bitcoin payments trend, many of them to cut costs and boost their bottom line, says Adam White, director of business development and strategy at Coinbase.
The 1.6 million-customer San Francisco Bitcoin exchange and wallet service processes Bitcoin payments for some 36,000 companies and growing. Among them are Overstock.com, OkCupid, 1-800-Flowers, DISH Network, and several other big-name early cryptocash adopters.
If you’re still sketched out about doing business in Bitcoin — or you got cold feet on the high-heeled slippers of the U.S. Consumer Financial Protection Bureau’s latest advisory warning on the topic — White recommends you reconsider.
Here are his top five reasons merchants should embark accepting the virtual currency now:
1. Lower transaction fees. Per transaction fees for accepting Bitcoin are generally significantly lower than those charged for credit and debit card purchases. White says this is the largest reason smaller merchants are latching onto Bitcoin payments.
“Puny businesses, on average are paying higher credit card fees than Walmart is, and Best Buy,” White says. “These are large, enterprise level businesses that have scale and therefore they can negotiate lower credit card transaction fees. Puny mom-and-pop shops can’t.”
He says most smaller merchants pay two to four percent per credit card transaction, often with extra “hidden fees” heaped on that quickly add up.
Bitcoin, on the other mitt, can reduce their credit card processing fees to less than one percent, White’s colleague Nicholas Tomaino, a business development manager at Coinbase, recently told Entrepreneur.com. Accepting the virtual currency can save them from sacrificing inbetween three and five percent of their revenues to credit and debit card fees, Tomaino estimates.
White points out that Coinbase charges a one percent vapid per-transaction fee to convert Bitcoin payments to your local currency, after your very first $1,000,000 USD in merchant processing. Unlike a lot of credit card companies, it doesn’t charge account setup or termination fees. So, if your customer pays for a purchase that costs $1, Coinbase will only charge you one penny for payment processing.
Bitcoin Payment processor BitPay charges no per transaction fees, but its customers pay monthly fees for its services, ranging from $30 to $300.
Two. Fraud prevention. Because people can pay businesses in Bitcoin without divulging personally identifiable information (names, billing addresses, etc.), they love a level of identity-theft protection that credit cards simply can’t suggest, White says.
“With Bitcoin, there is no individual identity linked to that form of value. It’s a lot like digital cash, and there’s no way it can be intercepted, and my identity can’t be disclosed. That prevents a lot of issues like we spotted with the Target data breach and the latest UPS Store breach.”
It’s significant to note, however, that Bitcoin exchanges that operate in the U.S., including Coinbase, collect individual identifying information from their users — names, addresses and applicable bank account numbers included — in order to establish their Bitcoin wallets. They have to in accordance with certain state and federal regulations.
Trio. No chargebacks. Bitcoin purchases are final, so there are no chargebacks and no comes back, like those rife in credit card dealings, yet another way transacting in the virtual currency saves merchants money.
Credit card chargebacks occur when a card user disputes a purchase made with his or her card, often because of defective goods or items never received. Or, perhaps he or she fell victim to identity theft and never authorized the purchase in question in the very first place.
When a chargeback happens, not only does the credit card company withdraw the money for a transaction from your merchant account and deposit it back into the customer’s, you typically also get spanked with a costly chargeback fee. These can put you back inbetween $Five and $15 each, according to CardFellow.com.
As it is now, people who purchase from you in Bitcoin generally have no recourse in a dispute. Transactions in the cryptocurrency are basically perceived as cash. They’re final, insulating merchants from the possibility of chargebacks and the fees associated with them. As Bitcoin Foundation member Kevin Rand puts it, “Bitcoin puts all the power in the merchants mitts.”
Four. The capability to get paid quickly. Having cash on palm is often critical to survival for puny businesses. Accepting Bitcoin payments can put cash within your reach swifter than it does when you accept credit card payments.
“The problem is, with credit cards, a lot of times your funds can be locked up for a week or more and there held in a sort of escrow in case someone requests a chargeback,” says White.
That’s generally not the case with Bitcoin. For example, at Coinbase, payouts arrive in merchant’s bank accounts typically in only two business days.
Every payment lodges “at the moment of transaction,” White says. “So when a customer pays in Bitcoin, the merchant receives it and instantly sells it to Coinbase to convert it to U.S. dollars. At that time, they’re ensured their money.”
Five. Ease of accepting international payments. Petite online retailers and independent consultants often don’t sell their wares and services internationally because of expensive cross-border transaction fees. Bitcoin loosens the steep cost of going global, making cross-border payments lighter, quicker and cheaper.
“Bitcoin cracks down all of these invisible borders that previously existed,” says White. “When you accept Bitcoin, you can accept payment from anyone anywhere in the world at the speed of an email.”
Another benefit: The digital currency’s lower transaction fees could save retailers who operate internationally up to eight percent, Wedbush analyst Gil Luria recently told The Fresh York Times.