A recent Inc. article cites study results showing that nearly half of U.S. consumers reported investing in cryptocurrency in early 2021 and that 21% have used it to send or receive money, buy goods, or accept payments. While these studies are limited in scope, they reflect a growing trend toward cryptocurrency acceptance and use.
As that trend continues, ecommerce retailers should determine their position on whether or not to accept cryptocurrency as payment. Some, including Shopify, Overstock.com, and WooCommerce are already doing so. Additionally, PayPal now enables the ability to use digital currency for purchases with merchants that accept PayPal. And online programs are gifting users with cryptocurrency as rewards for shopping at certain stores.
These developments don’t mean that accepting cryptocurrency as payment is right for every company. But companies that operate an ecommerce site should be aware of accepting cryptocurrency as an option and explore the benefits to decide if it’s worth adopting now or in the coming years. In the following sections, we explore some important considerations for making this decision.
Consumer Adoption
As noted above, more people are interested in and comfortable with using cryptocurrency to pay for products and services. While the overall number is still relatively small, an even greater number are becoming familiar with this form of currency and may cross the line to using it for payment at any time. To prepare for the coming wave of interest and even demand, ecommerce operators are smart to add this option before a critical mass is reached.
The following news segment from CNBC presents at least one commenter who believes cryptocurrency adoption is likely to rise in the coming months.
Market Share
The decision of whether to accept cryptocurrency as payment may very well depend on a platform’s customer base. Those who don’t trust banks for a variety of reasons are attracted to payment methods that don’t require their use. Also, younger people and men are more likely to be comfortable with or even demand this option. By not offering it, companies may risk losing customers.
By implementing it early on, they may gain new customers especially from other countries, given that cryptocurrency makes it easier to make transactions across borders. For companies interested in expanding operations to serve consumers in other countries specifically, the addition of cryptocurrency can ease the transition. Additionally, at least one report has found that accepting cryptocurrency boosts the value of average orders, an important key performance indicator (KPI) for ongoing success.
If customers are outside the young and male demographics, offering cryptocurrency as a payment option may be less urgent. For companies in this situation, it may not be worth the time and expense.
Security
Cryptocurrency transactions carry security benefits. They can be completed anonymously, reducing the potential for fraud. When customers make purchases using cryptocurrency, they don’t have to provide any personal identifying information (PII). The only information required is the customer’s digital wallet ID. Thus, the potential for identity theft is also reduced. Additionally, these purchases are difficult to reverse, unlike credit card transactions that can potentially withdraw funds from a company’s account without its permission.
Speed
Because they bypass the banking system or any other third party, cryptocurrency payments are processed immediately, making it much faster than credit card payments, which can take several days. This speed can help ecommerce operations improve their cash flow.
The speed factor also applies to checkout. Because no PII is required, customers can skip the lengthy forms when they’re ready to pay. This streamlined process reduces the frustration level, critical for maintaining a frictionless user experience (UX). Such an improvement can also reduce the number of abandoned carts, another KPI important for maximizing conversions and revenue.
Cost
Ecommerce merchants that do business internationally will pay less in fees for transactions in which cryptocurrency is accepted as payment. One reason is that cryptocurrency has the same value in every country, unlike fiat currencies, which must be converted for cross-country purchases. While there may be other fees attached to these transactions, they’re lower than those associated with purchases made using credit cards or PayPal, which typically range from 0.5% to 5%.
The Downsides
The items listed above are primarily positives. But accepting cryptocurrency for payment does include some negatives as well. For one, ecommerce operators must choose between the thousands of cryptocurrencies available. Considerations include determining which ones will be adopted into the mainstream, which are fads based on memes or other factors, as well as which customers prefer. Unlike fiat currencies, cryptocurrencies can be seen as brands that become part of a company’s own brand.
Additionally, the value of cryptocurrency fluctuates wildly, creating difficulty for ecommerce operators in assigning appropriate values to products available for purchase, and even more difficulty when customers want to return items. Something as simple as a tweet can have a major impact, as when Elon Musk tweeted that he would break up with Bitcoin, causing the value of Bitcoin to drop.
Another downside is the vulnerability of cryptocurrency storage. While lack of attachment to banks is an advantage, it’s also a disadvantage because banks provide protections for customers’ money. With cryptocurrency, the owner is responsible for storage in a digital or physical wallet, which, like other digital and physical assets, can be breached. Companies should thoroughly research the various storage options available.
Finally, cryptocurrency is being subject to increasing regulation. For example, China banned cryptocurrency transactions and some places have disallowed cryptocurrency mining — which is the method for creating new units — because the computing process required uses up so much electric power. No one knows what developments will occur next, some of which could dampen the ability to work with this type of currency altogether.
The Bottom Line
Each e-commerce operator must weigh the pros and cons of this still-emerging payment method. While it might make sense to adopt cryptocurrency, operators should continue to accept standard payment forms as well. To effectively integrate and manage cryptocurrency transactions alongside traditional ones, it may be beneficial to hire cryptocurrency developers. This strategic move can help ensure that both payment systems operate seamlessly and securely within your e-commerce platform.
