As more and more digital currencies are developed, customers are now turning to ecommerce over traditional high street stores due to the simplification of payments. One of these ‘virtual’ currencies that has gained mass media coverage is Bitcoin. Here is a practical guide on how businesses can prepare for this in the future.
What is Bitcoin?
It is a digital exchange of money between two people, similar to the hundreds of alternatives within this extremely competitive market, such as PayPal and Google Checkout. As a business, giving your customers the ability to pay via digital currency will significantly benefit your growth, as this option progresses to be the first choice of payment for today’s society. Below we outline the pros and cons to help you better judge this option.
1. Currently, only 40 to 50 countries have access to a bank and payment options such as PayPal, which ultimately means the majority of countries are excluded from ecommerce. However, Bitcoin opens up ecommerce to anyone with an internet connection. There is an opportunity for merchants to take advantage of this payment method to aid growth of their business as it makes selling worldwide easier.
2. No personal information is shared when it is used, which means that hackers can’t intercept. Ultimately, it provides a platform for quicker, more secure payments.
3. With no transaction fees or foreign exchange fees worldwide, this is a cheaper alternative for your consumers.
4. For businesses, the cost of receiving payments through this is a fraction of the price of a credit card fee. Instead of having to pay excessive amounts in order to adhere to the security checks and regulations to be able to accept credit card payments, with this option your business is only required to set up wallet security.
5. In the past, ecommerce merchants have been faced with the lengthy and stressful process of chargebacks; when banks hold onto money from reversing transactions until they can rule out fraud. However, Bitcoin is non reversible which means that businesses don’t have to worry about this nightmare anymore.
1. At the moment, consumers will find cash or credit cards more convenient and easy to understand, as they may not be familiar with the latest technologies or do not have access to the internet.
2. The currency is also highly volatile; in 2013 the value of one Bitcoin increased by almost 100 times the original value in 11 months.
3. Although this payment option offers a relatively high level of security, if someone gets access to the private key then they would have access to the public key, therefore risking the wallet. This puts a threat on the consumers trust.
4. What’s more, Bitcoin doesn’t make the industry any easier as it is just adding another rarely used currency.
How businesses can prepare
This payment option will only benefit your business if you put actions in place to properly prepare your business and customers for this change.
Use a Bitcoin merchant solution
It is essential that you create a functional and secure account your customers will be able to trust. Therefore, you should use a merchant solution, such as BitStraat. What’s more, this means avoiding fraud as best as possible. By ensuring your customers always use a safe link from your site, via a secure SSL, you will be able to control fraud. You will also have to have a paper trail, by printing out most of the address on the payment you will keep the transaction secure yet logged.
Your business should use a merchant service, such as BitcoinPay or BIPS, to set prices. These services will automatically use the current market rate to quote the price and change proceeds into your businesses preferred currency.
Tell your customers
Make sure your customers are aware that you accept it. The most obvious way of doing this is adding a badge to your site that says ‘We now accept Bitcoin’. Depending on your customer profile, you could include an introduction to this service that explains what it is and what it means to them.
The majority of your customers might not use Bitcoin, especially if you don’t cater to a ‘techie’ audience, but by giving them somewhere to use it you will help develop the digital currency and help your business stand out from the crowd.
Your business needs to address paying tax on income from this payment option. Your business should approach Bitcoin as if it were cash; how you handle the transaction, how you accept the transaction and how you pay tax on the transaction. There is likely to be some difference however, so talking to your accountant is an essential process.
Similarly, it is also important that you talk to your accountant about how you are going enter the transaction. The best solution will suggest you received the payment whilst not disguising the nature of the payment.
At the end of the day, providing various payment options for customers is essential, so not utilising one in your business could be restricting the growth and benefits these platforms can bring. Even if Bitcoin isn’t the right solution for your business, not giving your customers modern payment techniques could potentially restrict your future.
Nick Pinson is director at iWeb Solutions