Bitcoin. Dogecoin. Ethererum. Cryptocurrencies are all the buzz, and not going anywhere anytime soon. As cryptocurrencies enjoy their spotlight, how can brands take advantage? Are there opportunities for everyday companies to cash in on the world’s latest currency trend — or is it still the Wild West?
Will Brands Start Accepting Cryptocurrency Payments?
The short answer is that many already have. In the luxury market in particular, some fashion brands have capitalized on the lure of crypto for several years. In 2018, Luxury Swiss watchmaker Hublot made a splash when it released its Big Bang Meca-10 P2P timepiece that could only be purchased using Bitcoins. Another watchmaker, Chronoswiss has also had success with crypto in the luxury timepiece market, and their CEO reports it has even brought in a new sect of clientele.
Earlier this year, PayPal announced it would allow customers in the U.S. to check out with cryptocurrency alongside other payment methods in the PayPal wallet. According to the company’s announcement about the offering, this move significantly increases cryptocurrency utility by making it available at checkout at millions of businesses.
And just this September, El Salvador adopted cryptocurrency as legal tender. Indeed, crypto is seemingly everywhere these days. But it’s also not without its risks. Let’s take a look at the pros and cons.
Pros: The Business Case for Cryptocurrency
Crypto offers protection from inflation. Cryptocurrency offers some protection that other forms of currency can’t—like the fact that it’s widely considered unaffected by inflation. With a fixed supply that is free from government manipulation, crypto offers companies some advantages over cash during uncertain times (you know, like say… a pandemic).
In this way, businesses looking to wade into the crypto market can consider converting some cash assets to crypto to take advantage of inflation protection—but they can stop short of accepting it as a customer payment method. For small businesses in particular, this might be a lucrative move, as their own expenses can likely not yet be paid in crypto, meaning they still require traditional cash flow to effectively manage operations.
Crypto provides some universality for international payments. Cryptocurrency can help alleviate the sometimes cumbersome logistics of international payments, particularly for companies and brands with a global presence. In addition to providing seamless conversions among global currencies, crypto gives businesses an opportunity to avoid transactional banking fees and exorbitantly long processing times, which can hurt business.
Cons: The Business Challenges of Cryptocurrency
Cryptocurrency is not great for the environment. The computing power required for mining digital currency consumes an incredible amount of energy. Unfortunately, to get that energy, most of the mining facilities rely heavily on coal. In fact, according to research by the website Digiconomist, the entire Bitcoin network now consumes more energy than several countries.
With China’s recent exodus from the market, this has actually improved in recent months, however, brands seeking to align their values with sustainability and carbon-neutral initiatives may find cryptocurrency at odds with their reputation goals and their customers’ expectations.
Crypto volatility is real and can be risky. Ironically, the very appeal of cryptocurrencies like Bitcoin and Dogecoin is also one of the biggest risks. The same reason that $100 of Bitcoin a few years ago is now worth so much more than that is the same reason businesses should proceed with caution. Unless you immediately cash in your cryptocurrency upon receipt, you run the risk of the currency greatly affecting your bottom line. While crypto is currently enjoying a race to new heights in value, the flip side of the coin is a hard downward slide many small and medium businesses could not weather.
Crypto charges are irreversible. Unlike payment processes for credit cards and PayPal where an organization is managing the transaction and often a mediator in customer disputes, cryptocurrency can only be refunded by the seller. This complicates issues in two ways. First, the value of the currency may change between the purchase and return request, which requires a great deal of records analysis. Two, it puts the onus of trust on the buyer-seller relationship, forcing retailers to manually handle returns and refund requests in-house.
Bottom Line With Crypto: What Are Your Goals?
Whether you’re interested in diving head-first into cryptocurrency as your exclusive method of payment, or just want to dip your toe in the water, it’s absolutely critical to first establish your goals for doing so. Are you trying to elevate your brand? Secure business finances? Reach more customers? All of the above?
Knowing what your goals are with crypto will help you understand how and when to roll it out, whether you should accept payments, which currency (or currencies) you should consider, and more. There’s nothing wrong with participating in new global trends, but it’s of vital importance that you don’t dive in without a plan.
If you’re interested in learning more about how crypto fits into your eCommerce plan or want to learn more about Performance Branding, let’s talk.
Featured image by Executium on Unsplash.