Should you Accept Cryptocurrency Payments?
Anjali Oberoi | While few of us can describe how cryptocurrency works, having an opinion about it has become mandatory. Cryptocurrencies have been front and center in the news, they have made and unmade fortunes within months, they are a cause of headache for financial regulators and security agencies, all the while being contemplated as anti-establishment weapons by groups as varied as the anarchists, the government of Venezuela, and Steve Bannon. I tell you, simply nodding through cocktail conversations on the topic doesn't do it anymore!
Besides, all this crypto-ado has not been without an impact on the business world. Logically, the two questions that companies have grappled with are: Does cryptocurrency create opportunities to improve on operational efficiency? And, can the growing conversation on cryptocurrency be leveraged for marketing purposes? On both accounts, the simple answer is yes. Cryptocurrency transactions are easy to set up and cheaper than classic electronic payments. Accepting them makes your business look hipstery and techie, and can even be used to build your counter-culture identity. The perks don't stop at the limits of sensibility - Apparently, the simple addition of "bitcoin" or "blockchain" to your company's name could boost its valuation up to threefold.
Am I suggesting then that small businesses should embrace the trend and start accepting cryptocurrency payments? Absolutely NOT. Notwithstanding everything I wrote so far, my unequivocal advice for small entrepreneurs is: Forget about cryptocurrency! Practicing the delivery of a few striking factoids for your next cocktail party suffices for now. The time to act is far down the line. Here is why:
1. Cost savings are marginal. Remember that you should not just look at unit transaction costs, but also transaction volumes. There may be more crypto-enthusiasts around than you may think. But customers who will consistently or exclusively favor cryptocurrency payment are an infinitesimal minority. To put things in perspective, consider that Bitcoin - by far the largest cryptocurrency - records "only" about 200 thousand transactions a day, while the number of e-commerce transactions well exceeds 100 million. The returns from upgrading your payment options to accept cryptocurrencies may look fine on paper, but how likely is that to be the best use of your resources today?
2. The financial risks are high. You may have read about the vertiginous fall of cryptocurrency stocks since the beginning of 2018. These trends say little about the long term. The way we exchange money is rapidly evolving. And while we cannot predict which specific models will prevail in the coming years, blockchain technology's place in the global monetary landscape is bound to grow. For now though, what we do know is that cryptocurrencies are highly volatile. In other words, accepting cryptocurrency payments equates to making risky short-term investments. Of course, if you have a knack for trading commodities and plenty of time on hand, you might be able to turn this into a boon. But then, if you have plenty of time on hand, you are a rare breed of entrepreneur I have not met yet.
3. There are many other ways to earn your counter-culture creds. Seriously. Make your logo red. Post a Guevara portrait on your website. Write a mission statement that talks about "shattering stereotypes". Anything seems like a better idea than associating your business to such high-risk thing as cryptocurrency, whose hipstery vibe, to top it all, is likely to fade and die within years as it is embraced by large corporations.
* If you're not sure what blockchain technology is and how it relates to cryptocurrency, check out John Oliver's excellent segment on the topic.
* Illustration by Dannae Alvarez