Many businesses still aren’t convinced that supporting cryptocurrencies as payment method is a worthwhile investment.
The drawbacks are well-known. Volatility continues to plague the crypto market. Coins such as Bitcoin and Ether are still liable to make double-digit swings sometimes even within a single training day. Because of this, some businesses fear the possibility of incurring losses should prices dip.
Transaction speeds also leave much to be desired. At a good day, the Bitcoin network processes just 7 transactions per second (tps). Most days, it does less. This makes Bitcoin quite impractical for use cases that need speedy transactions like in retail. In contrast, Visa claims that its network can handle 65,000 tps.
These, however, haven’t stopped more enterprising businesses to take the dive into cryptocurrencies. Adopting an emerging technology like crypto payments has its risks but the space does promise growth and potential gains.
Besides, there are already various cryptocurrencies and blockchain-based payments solutions aside from Bitcoin that make adoption easy for businesses. There is also an emerging market of crypto-rich individuals looking to spend their assets in businesses that support crypto payments waiting to be tapped.
As things stand, supporting crypto payments may require some work to mitigate risks. But here are three ways businesses can enjoy the process.
1 – Play the Market
Staunch critics of crypto often point at volatility as the major risk that comes with supporting crypto payments. A $10 sale paid in Bitcoin could yield a loss if the coin suddenly suffers from a price drop in the market. Since the crypto market trades non-stop, these price fluctuations can happen 24/7.
Taking in crypto assets as income can affect cash flow. The options to liquidate or exchange coins to fiat remain limited so there’s a chance for these coins to be parked in crypto form. However, expenses such as staff salaries, rent, utilities, and supplier payments still have to be made in fiat. Unless the business has some cash to cover expenses, retaining income in crypto form can limit its spending power. Not all businesses are open to such risks.
While this is one way to view the situation, businesses can also embrace the volatility and consider holding crypto assets as investment. Accepting them as payment is a quick and easy way to get hold of crypto. The same volatility that can cause a double-digit loss can also be a way to get double-digit gains. Playing the market could become a significant revenue stream for businesses. They just have to take care and manage the rest of their finances accordingly.
2 – Use Stablecoins
Those afraid of volatility shouldn’t discount crypto altogether. There are various blockchain projects that are attempting to address volatility by pegging the value of their tokens to assets with more stable prices. Dubbed “stablecoins,” many of such cryptocurrencies are pegged to established fiat currencies like the US dollar.
Tether‘s USDT and MakerDAO‘s DAI are two of the more popular US dollar-pegged coins. To keep its value stable, Tether supposedly keeps one US dollar in the bank to back each of its USDT tokens in circulation. It currently enjoys wide use in crypto exchanges as means for traders to park their crypto investments in something that holds its value. DAI uses ether put up as collateral to back its value.
Next-generation stablecoin projects are moving towards commercial and retail applications. T.OS, for instance, is working on an infrastructure that would allow territories to have stablecoins pegged to their respective local currencies. T.OS Payable (TOSP) tokens are designed to work as blockchain-based e-money that merchants and consumers will be able to use within their respective localities.
If the business is worried about volatility, stablecoins offer means for them to minimize the risks that come with supporting crypto payments.
3 – Maximize Crypto’s Benefits
Crypto payments actually have several other benefits for businesses.
Adopters can enjoy the security it provides. Payments fraud is costing businesses upwards of $20 billion. Fraudsters purchase goods online as a way to liquidate stolen credit card numbers. When the legitimate card owners file for chargebacks, card companies often rule in their favor which leaves businesses to shoulder the loss. Crypto payments can skirt around this issue. Payments made using cryptocurrencies are fundamentally final meaning there would not be any risks of chargebacks.
Unlike other digital payment methods like cards and digital wallets, crypto payments often entail minimal fees. Card companies can charge up to 3 percent per transaction. Receiving payments in crypto can cost below 1 percent of the transaction value.
The money saved from avoiding transaction fees and fraud protection services could add up as significant savings for the business.
Focusing on the Upsides
Being an early adopter does have its risks. But rather worrying too much on the possible downsides, businesses can look at crypto payments and focus on the upsides that the technology brings. Businesses can always evaluate the ratio of risk to the potential rewards. The benefits crypto adoption offers can be translated to actual business gains.
In addition, cryptocurrencies are still relatively niche. So, depending on the nature of the business, crypto payments may actually only constitute a smaller percentage of sales. The business may simply chalk up risks to be part of the learning curve to a new technology.
There’s no doubt that blockchain is gaining traction as a revolutionary technology for business and finance. The experience the business gains in using the technology and managing crypto-based assets at the earliest possible time would only serve it well when the blockchain eventually becomes mainstream.