Cryptocurrency and eCommerce
After gossip and speculation about cryptocurrencies, Web 3.0, NFT, and blockchain, you may have considered getting Bitcoin as payment for your e-commerce business. Even if you don't, it's still useful to learn how crypto is changing the e-commerce landscape.
While cryptocurrency prices are relatively volatile, many companies support crypto payments. Major e-commerce service providers like WooCommerce, BigCommerce, and Shopify accept crypto payments through digital wallets like BitPay and Coinbase Wallet.
In this article, we cover the pros and cons of implementing cryptocurrency payments in your e-commerce business. We also provide a guide for accepting cryptocurrency on your eCommerce website.
What is a crypto currency?
Cryptocurrency is a digital currency (i.e. lines of computer code) that is not issued by a bank or government and allows users to spend money anonymously. Bitcoin is one of the most important cryptocurrencies that can be traded on crypto exchanges such as Coinbase. Some businesses also accept bitcoin and other cryptocurrencies as payment.
Bitcoins are stored in a digital wallet that can be used online via cryptocurrency exchanges or offline on a flash drive-like device. You use this wallet for crypto transactions by transferring funds from your digital wallet to the merchant.
Top 4 Cryptocurrencies to Know
According to major cryptocurrency exchanges, these are the four most popular cryptocurrencies:
Bitcoin: The most well-known modern cryptocurrency
Ethereum: an energy efficient alternative to Bitcoin and the second most valuable cryptocurrency
XRP (Ripple): Has lower transaction fees and is often used for international fund transfers
Bitcoin Cash: Unlike Bitcoin, it offers an unlimited supply, making it a better choice for transactions.
Is Cryptocurrency a Viable Option for eCommerce Stores?
Many large e-commerce companies accept cryptocurrency as payment, but is it a good idea? Let's discuss the advantages and disadvantages.
Why Should Your Ecommerce Brand Accept Crypto Payments?
Adopting crypto payments for your eCommerce brand will help you reach more customers and complete transactions faster. Here are four reasons to start receiving cryptocurrency payments:
Reach a Wider Market
Receiving digital currency payments means reaching a new market of tech-savvy customers. Also, accepting crypto means you don't have to deal with converting currencies when doing business with international clients.
However, expanding your customer base to other countries means you may need to make international deliveries, so make sure your shipping and final delivery solutions can handle them.
Process Transactions Faster
Credit cards and bank transfers take hours, sometimes even days, to process. Cryptocurrency transactions take only minutes to reach your digital wallet, giving you faster access to money.
Get Lower Transaction Fees
Credit card companies and most payment processors may charge up to 5% on transaction fees. Crypto transaction fees tend to fluctuate, but usually do not go above 1.5% per transaction. This number may seem small, but it stacks - giving you significant savings in the long run.
Reduce the Risk of Fraud
Cryptocurrency transactions are transparent because they are recorded in a publicly visible digital ledger called the blockchain. In addition, it is very difficult to reverse crypto transactions, so customers cannot ask for withdrawals from your account without your consent, preventing fraud.
Benefits of Cryptocurrency in E-Commerce
Lower Transaction Fees
Credit card companies and payment apps like Stripe or Square charge transaction fees anywhere between 3-5% on every transaction. Many e-commerce companies include these fees in their online store prices. Cryptocurrency transactions usually have no fees or as low as 1%. However, there are cryptocurrency conversion fees when transferring cryptocurrencies to national fiat currencies such as USD.
For Anonymous Transactions and Bank Satisfaction
Cryptocurrency allows anonymous online purchases using encrypted wallet addresses - it's basically like using unmarked cash. This allows your customers to purchase products without compromising their personal information and allows you to do business without worrying about any privacy regulations.
Reduce Fraud and Chargebacks
Contrary to popular belief, developers specifically developed the blockchain technology of the cryptocurrency to reduce fraudulent activities. Cryptocurrency is accepted and the money is changed instantly, cannot be canceled or counterfeited; therefore, the probability of fraudulent chargebacks or refunds is greatly reduced.
Disadvantages of Cryptocurrency in E-Commerce
The value of cryptocurrencies tends to fluctuate wildly compared to the relatively stable movements of fiat currencies. If crypto values drop, you may experience cash flow problems and difficulties in day-to-day transactions.
Lack of Buyer Protection
Credit card companies and banks often have strong customer protection measures to protect you from unauthorized charges. However, cryptocurrencies do not have buyer protection, so you may need to build trust with customers before they warm up to crypto payments.
Bitcoin is generated through mining, an energy-intensive task that consumes more electricity per year than the entire country of Argentina and has a large carbon footprint equal to that of New Zealand. These issues could wreak havoc on crypto prices, such as the bitcoin price crash that occurred after Elon Musk and Tesla refused to accept bitcoin as a form of payment due to its environmental impact.
Although Bitcoin is not regulated, the government requires you to report your Bitcoin transactions and income/losses from the holding of "property", as declared by the IRS.
According to the IRS, “a taxpayer who receives virtual currency as payment for goods or services must include, in calculating gross income, the fair market value of the virtual currency, measured in US dollars, as of the date the virtual currency was received.”