For the last few years, cryptocurrencies like Bitcoin and Ethereum have been all the rage. While skeptics have denied the potential of these currencies since their early days, evidence has proven that they will play a much bigger role as payments in the near future.
These days, cryptocurrencies are accepted and used by many organizations – some enterprises now accept them as payment and several countries are in the process of implementing these digital assets (along with blockchain technology) to help manage their nation’s currency.
With the popularity of cryptocurrencies growing each day, you may be wondering, “Should my business accept cryptocurrency, too?” Before you make that decision, there are several factors you’ll need to consider. If you choose to accept Bitcoin or Ethereum as payment, for example, you’ll have to think about whether the right infrastructure is in place to process and record those payments.
Fortunately, if you’re using Salesforce Billing along with Chargent, you’re already set up to accept cryptocurrency as a payment option – and in this post, we’ll show you exactly how.
What Is Cryptocurrency, Anyway?
Jumping into the world of cryptocurrency for the first time can seem daunting and confusing. Even if you are a bit familiar with digital currencies as a whole, you may not understand the nuances of each currency type. Let’s make it as simple as possible.
In short, cryptocurrencies are mediums of exchange that are not controlled by a central authority. Leveraging blockchain technology, these currencies are decentralized, transparent, and immutable.
For a business, there’s one important thing to know about cryptocurrencies – more Americans own them today than ever before. Around 6.2% of Americans owned Bitcoin in 2019 while another 7.3% were planning on purchasing some, according to studies by CryptoRadar.
With consumer demand for crypto at its peak, an increasing number of companies are beginning to accept them as a payment method. Around a third of today’s small and medium businesses accept cryptocurrencies in some form, as shown in a nationwide survey by Zogby Analytics.
Types of Cryptocurrencies
There are thousands of different cryptocurrencies in circulation. However, only two dominate the market – Bitcoin, and Ethereum.
Ethereum is the most intelligent of the two since it enables the deployment and use of smart contracts. Bitcoin, on the other hand, was developed specifically as a replacement to physical currency systems and is more widely accepted by businesses today.
It’s not just small businesses that are adopting cryptocurrencies, many of the country’s largest businesses now accept them too. AT&T, Overstock, Expedia, and even Subway offer Bitcoin as a payment option to their customers.
Before you get too excited, let’s be clear – just because other businesses are accepting these forms of payment does not necessarily mean that you should too. Before deciding, it’s important to balance the pros and cons of these payment types.
Should Your Business Accept Cryptocurrency?
Unfortunately, there is no solid answer to this question. There are benefits and drawbacks to accepting Bitcoin (or any other cryptocurrency) as a payment, and you will need to weigh them both against your business before making a decision.
Benefits of Accepting Cryptocurrency
Since digital currencies are not regulated in the way other currencies are, they can provide many incentives to businesses that accept them. These benefits include:
- Bankless Payments: Cryptocurrencies make it easy to accept payments from any customer who has access to the internet. Customers without bank accounts or those who live in rural areas with no major banks can make purchases online using their digital currency wallet.
- No Exchange Rates: If you serve international customers and accept foreign currencies, you know that exchange rates can be significant. With crypto, you can deal with a single currency, even when selling products in other countries. Since no currency needs to be exchanged for you to accept these payments, there are no associated exchange rates.
- Attracting a Younger Demographic: Millennial and Gen Z consumers have emerged as the most active demographic for holding and transacting with cryptocurrencies. Today, around 25% of affluent millennials are using or holding cryptocurrencies, while another 31% expressed interest in eventual ownership. If your business attracts a younger demographic, it may be beneficial to provide them with the payment option that they are most comfortable using.
Drawbacks of Accepting Cryptocurrency
Cryptocurrencies provide a vast number of benefits, but there are also some disadvantages to accepting this form of payment. Although there are several drawbacks we could discuss, there are two that are most important and can have the largest impact on your organization – volatility and transaction duration.
To understand volatility, consider gold, which is one of the least volatile forms of currency. Although the price of gold may peak and fall, it is generally steady. The US dollar is also considered one of the less volatile forms of currency, more so than any other country’s fiat currency. Unfortunately, this is not the case with cryptocurrency.
Unlike gold or US currency, the price of Bitcoin and Ethereum can greatly fluctuate from one day to the next. Since the value of globally owned cryptocurrency is only a small fraction of the value of owned gold or US currency, small events can have drastic impacts on its price. Negative media, a large investor liquidating their holdings, and even technology-related issues can cause major price shifts from one minute to the next.
Another drawback to accepting cryptocurrency is long confirmation delays. For Bitcoin especially, it can take minutes, and sometimes hours, to confirm a single transaction. This wouldn’t be as much of an issue if cryptocurrency was as stable as gold or US currency. However, high volatility combined with long transaction times can put your business at risk.
Let’s consider this example. Imagine that you are a merchant selling a product for $100. You accept the equivalent of $100 in Bitcoin from a customer. As expected, the blockchain begins confirming the transaction. During the several hours that it takes to confirm, the media releases a story about a large Bitcoin holder who is quickly liquidating his digital wallet. Other Bitcoin investors panic and begin quickly selling their Bitcoin. Within the span of a few hours, the value of Bitcoin has dropped by 70% and your $100 in Bitcoin has now been reduced to a value of only $30. Now imagine this on 50 or 100 orders, or for an amount much higher than $100 – pretty scary, right?
This level of volatility makes it challenging for many small businesses to accept cryptocurrencies as a payment option. Even some large businesses find it impossible to continue accepting them over the long-term. Stripe, for example, launched a program in 2014 to take Bitcoin as payment from its customers. By 2018, they ended the program, largely due to the constant fluctuation of Bitcoin’s value.
Accepting Cryptocurrency with Salesforce Billing
After considering the pros and cons, you may find that accepting cryptocurrency is the right option for your business. Here at Chargent, we are payment agnostic – we believe that you should have the right resources to take payments in the way that makes sense for your organization; whether that be through ACH bank draft payments, credit/debit cards, or alternative payment methods like Bitcoin.
If you’re using Salesforce Billing, accepting crypto for payment is a piece of cake. Simply create a Salesforce Billing Payment and Payment Allocation Record. These records will tie your payments back to your invoices in Salesforce Billing.
With Chargent, Salesforce Billing is even more flexible and capable. Along with managing recurring payments, Chargent also gives you the tools you need to deploy automated collections. As always, we’re here to help you streamline your payments and make it easier for your customers to make payments with a variety of payment options.
What challenges has your business faced when collecting Bitcoin or Ethereum as a payment method? Tell us about it in the comments section below!