Cryptocurrencies become more and more mainstream, every day, and that is why people, as well as companies, consider using them in different ways. For some, they are a perfect long-term investment and for others, they even manage to displace fiat money.
What we see today, is business owners, who consider using cryptos as a payment option to customers. Of course, this process has its advantages and disadvantages, so let’s have a deeper look.
Pros of using cryptocurrencies as a payment method
Better payment security
During the pandemic, we witnessed a surge in credit card fraud, with almost 35%. Unfortunately, these kinds of frauds often target small companies and their users.
When it comes to cryptocurrency payments, they tend to be much more secure, since they do not use third-party services. When a user pays with a cryptocurrency, his data isn’t stored in a centralized hub. It is stored in their personal crypto wallet and is almost impossible for someone’s personal data to be stolen.
Lower fees
If using traditional payment methods, like PayPal for example, merchants are responsible for paying transactions and setup fees.
Cryptocurrencies do not charge such taxes, or if they do, they are much lower. While PayPal charges around 4% per transaction, some Bitcoin exchanges offer fees under 1%.
So, if you own a business who offers services overseas, you can use cryptocurrencies to avoid international payment fees. The reason for that is because cryptocurrencies are not tied to a specific country or national bank
Cons of using cryptocurrencies as a payment method
Transactions with cryptocurrencies are irreversible
Well, this can be looked at as both an advantage and a disadvantage, especially for small businesses.
The truth is, once a crypto payment is made, it is permanent. Transactions can be returned only by the party receiving the payment. So, the business must be prepared for the customer to ask for a refund, and track how much money has been paid.
On the other hand, this helps business owners to better manage their cash flow. They don’t have to worry about chargebacks, and if a customer asks for a refund it has to be done manually.
Of course, the whole process requires additional work and can cause inefficiency in the business operations, since it needs time and attention to return payments individually.
Tax implications
Cryptocurrencies are considered to be property, for tax purposes, by the International Revenue service. So, if you accept cryptocurrencies as a payment method, you must report it as an income, based on its market value at the moment of receiving. This also means that you must follow the value of each cryptocurrency, on the day it was received, as well as on the day it was sold. This can be a tough process, especially if you have to take care of many transactions every day.
Here is some advice, you can decide to accept cryptocurrencies for products over a certain value, and not for daily sales.
There is always a risk
While governments can’t manipulate the value of cryptocurrencies, they are still extremely volatile.
Cryptos are a hedge against monetary inflation, but on the other hand they are unpredictable, which makes them untenable for some business owners.
So, you must always consider the risk factor, before choosing cryptocurrencies as a payment method for your products and services.
Which companies chose cryptocurrencies as a payment method?
Mastercard
The credit card giant announced that it will be paired with Bakkt Holdings Inc - a digital asset platform, to offer crypto services to its customers.
Mastercard will allow its partners to enable buying, selling and holding cryptocurrencies, as well as rewarding customers with digital assets.
Visa
Another popular credit card company that confirmed the accepting of cryptocurrency payments is Visa. It now accepts USD Coins to settle transactions.
Microsoft
This is another well-known giant, who accepts Bitcoin payments for an array of services.
Furthermore, Microsoft has launched an authentication platform, which creates digital IDs for authenticating online identities.
Starbucks
Starbuck's customers can use the Bakkt application to pay for drinks and other goods with converted Bitcoin.
Conclusion
As we can see, there are pretty big and famous companies which accept cryptocurrencies as a payment method. Of course, that does not exclude the risk of using digital currencies, since they are extremely volatile.
So, before you choose cryptocurrencies as a payment method, consider both the pros and cons, and make an informed decision.
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