The pros and cons of accepting cryptocurrency in e-commerce

Due to meteoric rises over the last few years, more and more consumers are trading their hard-earned American dollars for cryptocurrencies like Bitcoin, Ethereum, Litecoin, and others. These cryptocurrencies offer an exciting new way to speculate currency. They also represent a chance for e-stores to profit from accepting them.

However, with so much hype and mixed consensus about whether cryptocurrencies are still just a fad or here for the long haul, it can be tough for e-commerce owners to decide if crypto is for them.

Let’s look at the pros and cons of accepting cryptocurrency in e-commerce.

Why accepting cryptocurrency makes sense

Major companies like Subway, Overstock.com, and Expedia all accept Bitcoin, among countless others—and they’re not doing it just to be cool, either. Accepting cryptocurrency in your store allows for more secure transactions, an expansion of your customer base, more affordable fees, and faster transactions.

Saving money on fees

One of the most expensive parts of selling online can be fees charged by a payment provider. For example, Authorize.Net and PayPal each charge 2.9% + $0.30 per transaction. These can add up, making certain transactions cost prohibitive, depending upon the volume of goods you’re selling. By accepting a crypto like Bitcoin, you can reduce these processing fees to less than one percent.

Speed

Getting paid quickly can be the life or death of a business. Accepting cryptocurrencies can give you another avenue to accept payments and get cash faster than the traditional credit card route. Coinbase, for example, allows for purchases made with a credit/debit card or USD wallet to be available instantly. This avoids funds being locked up for a week or more in case there’s a chargeback.

Avoiding fraud

Chargebacks are a serious issue. In addition to imposing more fees and administrative headaches, there’s the trouble with banks that use these fees to evaluate merchant reliability. According to the 2016 LexisNexis study “A True Cost of Fraud” each dollar of fraud cost the merchant $2.40. This means that $500 of fraud would cost a business $1,200.

Here lies one of the greatest benefits of accepting cryptos: all transactions are irreversible. This is because of the blockchain infrastructure, which bakes the transaction’s security checks into the code, making chargebacks impossible. This shifts the power from the payer to the merchant and eliminates a costly e-commerce detail.

Expanding customer based

By accepting cryptocurrencies, you’ll no longer be tethered to certain countries supported by your payment provider and or have to convert between different currencies. You can also side-step the usual fees, time and fraud concerns that come with doing cross-border business.

One of the downsides in accepting cryptocurrency in e-commerce is the volatility of crypto market and the minimal use of crypto coins in the market. (Source)

Why accepting cryptocurrency doesn’t make sense

The varying nature of Bitcoin—and all cryptocurrencies—have led early adopters like Microsoft and Steam to reverse adopt Bitcoin, which could lead to other major retailers following suit if blockchain capacity doesn’t increase to make transactions more stable; Bitcoin’s current transaction fees are under $1, but late December fees were as high as $37. Aside from expensive transaction fees making relatively small purchases questionable, there are some other thorns to accepting cryptocurrency.

Price volatility

One of the biggest cons for buyers of cryptocurrencies is the price volatility. This can hurt merchants and shoppers. For merchants, it becomes an issue when transferring cryptocurrencies back into traditional forms like USDs or Euros.

For example, if someone spent the equivalent of $50 of bitcoins in your store and the value drops by half before you’re able to exchange that money for USD, it would only be worth $25 by the time it’s converted. This makes holding funds in these cryptocurrencies comparably risky.

Additionally, this volatility can have an adverse effect on consumer spending. When consumers aren’t sure if their currency is going to increase or decrease in value, currency deflation may occur, and consumers will spend less. Trends in the volume of Bitcoin transactions versus price confirm this, and we can see that as the price of the coin rises, people hold, ultimately hoping to cash in much higher than they purchased. Once these surges subside, there’s an increase in willingness to sell and spend.

Additional work to set it up

Depending on the option you choose, getting set up to accept cryptocurrencies may be more or less of a hassle. You could create your own manual wallet to receive payments directly. This is the hardest option but provides the best margins because you don’t have to integrate with a third-party provider, making it ideal for independent stores built on their own code. Third-party providers like Bitpay and Coinbase make the process easier but will be slightly more expensive. The third option is if you’re using a hosted e-commerce theme platform—many come ready to use with a Bitcoin payment gateway or require an additional plugin to be installed.

Increasing decision fatigue

With the large volumes of choices consumers already face, decision fatigue can surface when users are ready to pay. It’s important to consider whether adding one more choice could hurt abandonment rates or cause confusion in the payment process.

Minimal use

Its unlikely cryptocurrency will make up any considerable chunk of your overall order volume or revenue, meaning it shouldn’t really impact your store much on the whole.

However, regardless of one’s outlook on cryptocurrencies as an investment, they appear here to stay in some capacity. By accepting crypto in your online store, you can save money, reduce fraud, get paid quicker and expand your customer base—all while diversifying your revenue.

Weighing the pros against cons of accepting cryptocurrencies could be key to the future operation of your business.