Small businesses need to keep in the loop when it comes to advancing payment technologies. While bitcoin regulation and security practices still have a way to go, its low fees and international accessibility have proved tempting to merchants.
Writing in the Globe and Mail this week, Payfirma CEO Michael Gokturk outlined some of the key considerations for small businesses that are thinking of using bitcoin. Here are the top four takeaways.
1. For now, bitcoin costs much less than other digital payment methods.
Credit card fees cost merchants around 3% per transaction, while bitcoin transactions are currently sticking at 1%. This is a huge saving for small merchants.
But as transaction volumes grow, so does the potential fee creep. And even now merchants have to pay their service provider, such as Coinbase or BitPay, to convert bitcoin into their local currency.
2. Bitcoin is gradually being accepted by larger and larger merchants
The likes of Microsoft, Dell and Expedia now accept bitcoin, which has become an advanced marketing strategy for hundreds of small businesses. The crypto-currency is internationally accessible, which certainly helps companies looking to expand overseas.
Some 65 per cent of Americans, however, are still unfamiliar with bitcoin. Its current traction comes from early adopters, and it has some way to go before it reaches mainstream uses.
3. Bitcoin moves fast.
Still, the crypto-currency’s popularity is growing fast, mostly due to the speed at which transactions clear. Payment in bitcoin can be in your account in minutes, and the transaction cannot be reversed.
However, bitcoin is still very volatile, and money that came in yesterday can be worth a lot less today if the market shifts. But there are several solutions out there that allow you to transfer the funds into fiat immediately, or hedge it to another currency for a fixed period.
4. Regulation is moving – somewhere
The US has launched its first licensed bitcoin exchange, and several other countries are cracking down on the money laundering and terrorist financing question. Benjamin Lawsky is also working on a proposed Bitlicense, which will impose some rules on new bitcoin companies. While some argue that the Bitlicense regulations will be too heavy-handed, smaller businesses will benefit from the safety of harder regulation. However, this could reduce the ability of bitcoin startups to create innovative uses for the crypto-currency.
The problems bitcoin faces are especially risky for small businesses. However, the freedom it creates to make low-cost international transactions could prove invaluable for those looking to expand. For now, SMEs should keep a sharp eye on bitcoin, which could be the start of a new way to pay.