The financial world changes quickly, and those who don’t keep up are quickly left behind. Fintech’s latest innovations, such as cryptocurrency, are starting to play a key role where even small businesses have the potential to cause impactful changes. More and more customers are requesting companies to accept cryptocurrency as a form of currency. In 2016, cryptocurrencies had a market capitalization of over $13 billion.
Microsoft and Amazon are just a few of the larger corporations that have adopted this new form of payment and the credibility is inspiring others to accept it as well. Today, over 100,000 companies accept digital currencies which are opening the door for smaller businesses to accept it as well. With new currency conversion platforms such as Uphold that make it even easier to pay through cryptocurrency, it might be time to see the impact it will have on your small business in the upcoming years.
Benefits of Cryptocurrency
Transaction security without third-party verification
As a small business, you cannot be waiting around to get paid. More than 40% of small businesses report cash flow problems within the last year. When using cryptocurrency, small businesses can avoid the traditional, bank-to-bank transfer that can often take up to seven days to complete.
However, paying with digital currency can help avoid this. It uses a blockchain so users can transfer cryptocurrency in just a few seconds thanks to its herculean computational power and a lack of a central entity needed to verify the transaction. By cutting out the middleman, there is an increase in security because there are fewer chances of the system being hacked. By accepting digital currency, startups can gain a competitive edge over other established players who are still using slower and more expensive technology to complete payment transfers.
Lower transaction fees
Nearly all small businesses who accept credit are responsible for credit card processing fees. The U.S. Small Business Administration reported that account companies charge about 5% of a business’s earnings from credit card sales. Since customers are not willing to pay in cash, a way for small businesses to get around this is through accepting cryptocurrency. This currency is decentralized, therefore there are no banks needed to process and verify the transactions, so there are lower fees associated with digital currency.
Using cryptocurrency can help make your business competitive on the global scale by keeping you ahead of the curve in terms of the latest currency technology. It also makes you more effective against competitors who do not yet use this technology. Since cryptocurrency is not affiliated with any one central institution and is a peer-to-peer transaction system, businesses who accept cryptocurrencies are not restricted by any border or currency exchanges and are able to attract more customers.
Sometimes, using a credit card or bank account to pay for things internationally can cause problems, because the legal tender is attached to one government with specific rules, regulations, exchange rates, and transaction fees which can make the process more time-consuming and costly. By offering the option to pay with cryptocurrency, you can eliminate these problems altogether.
Risks of Cryptocurrency
Prices change quickly
Bitcoin is a prime example of how quickly the prices can change. Bitcoin was first introduced in 2009 and initially was worth only pennies. By December of 2017, that value rose to $19,172 per coin. Today, one Bitcoin is worth about $7,000, but that price changes every day. 2017, in particular, saw huge increases in price, though, for the most part, it was an upward trajectory. The market remains extremely volatile and is subject to unpredictable and extreme fluctuations in price daily and sometimes hourly.
If you were to accept a digital currency as a form of payment, as a small business you would want to cash it into the paper currency used in your country. You could do this by using BitPay or Coinbase to help immediately cash in digital currency. By holding on, you could stand to make tons of money in the long run, or you could lose your investment when the market changes. If you decide to risk it and hold large amounts of cryptocurrency in your digital wallet, this could add stress as you watch the market prices change.
Potential cybersecurity threat
Even though cryptocurrency is much more secure than using a credit card and has a much lower risk of being stolen or hacked, there is still some risk involved. There are some cybercriminals who are able to gain access to your digital wallet.
Cryptocurrencies are not insured like a currency such as the U.S. dollar, so it can be extra dangerous. You can take extra precautions to protect your cryptocurrency, as there are now different companies that use a biometric verification method that uses facial structure recognition of the user in order to gain access to their account. It also helps users regain access if it is lost.
Uncertain regulations in the future
Cryptocurrency is still relatively new, and lawmakers in many different countries are still creating regulations to govern it. Some countries welcome cryptocurrency, others are not as sure, while there are still others which are much more hostile. These regulations are expected to evolve as the use of digital currency spreads, which means business owners will have to continually adapt.
At the time of writing, the United States has no direction on cryptocurrency regulation, but it is certain that some will be coming soon. The Securities and Exchange Commission (SEC) has issued warnings of cryptocurrency investing risks, stopped several ICOs, and indicated that there needs to be more regulation of cryptocurrency in the future. Therefore, anyone using cryptocurrency must be prepared to deal with changes in the law that could negatively restrict and impact their business.
By investing in digital currency, you could be taking advantage of a huge investment opportunity. As more and more countries, such as China, Russia, and Japan make strides to legalize cryptocurrency, the value is predicted to increase. By getting in and investing now, you might be able to receive a huge payout later. Even if you haven’t adopted cryptocurrency yet, it’s not too late to join the next big thing.