Cryptocurrency is one of those things that people love to talk about. How much did Bitcoin rise today? Where can I use Bitcoin? Is the bubble going to pop? While it’s a popular topic of discussion, only about 5% of American adults own digital currency, according to a joint study by the Global Blockchain Business and Survey Monkey.
There are currently over 1500 digital currencies globally, with Bitcoin dominating just under half of the market share. Bitcoin is regularly priced in the several thousand dollar range. At this rate of growth, some experts believe digital currencies will be an unlikely liable avenue for currency and will be seen more as a digital asset to boost your portfolio. Cryptocurrency is still relatively new to the market—making it no surprise that 58% of cryptocurrency holders are white males under the age of 34, following the pattern of most early technology adopters.
Overstock was one of the first major online retailers to accept digital currencies. In 2014, the Overstock team integrated ShapeShift, a digital asset exchange service. The service enables the retailer to accept various coin types, including Bitcoin Cash, Ethereum, Litecoin, Dash, and Monero. With ShapeShift, Overstock can convert these different types of cryptocurrency into Bitcoin in a matter of seconds. During checkout, the customer simply chooses their preferred digital currency and submits their online order—very similar to a mobile payment or quick checkout process.
An increasing number of companies are buying into the cryptocurrency craze. Carl Boa, the oversea manager for BitcoinDiamond, says, “We are seeing a lot of companies starting to use cryptocurrency, but for various reasons. Some companies use it for the anonymity aspect, some based on the stability. I’ve also seen companies use cryptocurrency as a strategic stockpile asset.”
If you’re thinking of following in Overstock’s footsteps and integrating a digital currency gateway to your ecommerce platform, we’ve put together a list of pros and cons to help you make your final decision.
It’s Secure for Your Customers
Cryptocurrency transactions do not require any personal identifying information (PII)—the only thing that is needed is the wallet’s ID. Even if hackers get a hold of your customers’ private wallet keys, their risk of identity theft is minimal.
Additionally, there’s no central administrator or single centralized record of transactions. Blockchain, the technology behind cryptocurrency, is a distributed digital ledger. This means data is never saved on a single server like most traditional financial institutions. As a result, fraud should theoretically go down.
Boa agrees with the security of cryptocurrency: “I would say no other currency compares to the safety, stability, and accessibility of cryptocurrency. And what’s great about cryptocurrency is it can take different mediums of payment: mobile wallet, credit card, wire transfer, etc.”
Transparent Transaction Fees
The typical online transaction requires the involvement of four different parties: the merchant, the customer, the credit card company, and the issuing bank. There are typically fees associated with these transactions when it goes from one party to another. In comparison, cryptocurrency is a peer-to-peer transaction between the customer and the merchant, eliminating the fees from the credit card company and issuing bank—making it both faster to process and cheaper.
Ease of International Business
If your online retailer conducts business internationally, you know foreign transactions get expensive—global wire transfers usually cost between $24 to $50 in addition to the currency exchange fees. Bitcoin payment processors charge a flat 1% fee for converting bitcoin into local currency. And, Bitcoin can be converted into multiple currencies without involving a bank or government.
Coins for Loyal Customers
How many times have you earned points at a retailer, only to never use them? The problem with most reward points or punch cards is that their use is limited. You typically have to reach a specific amount before you can redeem them. When you finally do have enough points, you’re usually limited to what or how you can use them within the store.
With cryptocurrencies, loyalty points become tangible, tradeable, and liquidable. Consumers have the freedom to do what they want with their loyalty points, whether it’s to use them towards their next purchase, trade them with a friend, or cash them in to pay for something else.
Lack of Support
The majority of the top payment gateways do not support cryptocurrencies, including Braintree, Stripe, and CyberSource. As a result, you will need an additional payment processor that supports cryptocurrency in order to accept these types of payments on your online site. If you’re using Magento’s Commerce Cloud, you can accept cryptocurrencies by integrating with BitPay, CoinPayments, or CoinGate.
Stripe previously supported Bitcoin but rolled back its support earlier this year due to a number of reasons: Merchants saw a decrease in Bitcoin revenue, bank wires became expensive (costing tens of dollars per transaction), and the Stripe team saw an increase in transaction failures.
Lack of Regulatory Environment
Cryptocurrencies are in the early stages of its adoption. As a result, there are many gaps in the rules and regulations around it. The unregulated environment, along with its user anonymity, has made it an ideal scenario for illegal activity. Regulators are quickly trying to catch up with the spur of cryptocurrency popularity and create clear-cut rules for regulation.
There are PCI-type standards in place called the Cryptocurrency Security Standard (CSS) to act as a guide for security best practices. However, it’s believed most companies do not adhere to these standards nor are they enforced.
Increase in Transaction Failures
Stripe cited the increase in declined transactions as one of their top reasons for back rolling their Bitcoin support. Bitcoin and other digital currency values are determined by market demand, often changing from one day to the next. For example, one of your shoppers purchases a $50 shirt online with Bitcoin, but the funds are not captured until the order ships—this could potentially take days. By the time the transaction processes, the Bitcoin value changes. Consequently, the amount the shopper provided is no longer accurate, resulting in a failed transaction.
Have you ever heard of the grocery store studies that prove too many cereal or peanut butter options can overwhelm the customer? Customers now have numerous online payment options: mobile payments, micro-lending programs, credit cards, and now cryptocurrencies. While it’s important for retailers to personalize the online shopping experience based on the customer’s demographics and preferences, at what point does it become too much? Roughly a quarter of American adults believe cryptocurrency is too complicated to understand. Providing it as an option could potentially overwhelm your shoppers.
Because most major payment gateways do not support cryptocurrencies, you will likely need to invest in another payment gateway specifically for cryptocurrencies for your ecommerce site, such as Coinbase or ShapeShift. The process is very similar to integrating a mobile payment to your site. You’ll need to configure the back-end to ensure your ecommerce site can accept cryptocurrency payments and design the user interface so customers can make the payment.
Boa suggests, “For ecommerce sites, the needs of the shoppers are everything. As cryptocurrency becomes more popular and the payment experience is optimized, it will become a proper asset for companies to invest in.”
Most cryptocurrency processors offer guides for integration and provide wallet capabilities for payment buttons on the checkout screen—making it easy for most people to integrate without needing the technical know-how.
The cost to integrate a new cryptocurrency processor is typically minimal. For example, Coinbase is completely free and does not charge any fees to accept cryptocurrency. ShapeShift cites the same thing on their site, but there is a “miner fee.” Miner fees pay for the service of confirming a digital currency transaction.
If you’re thinking of integrating a cryptocurrency payment gateway to your site, but would like to speak to an expert first, feel free to reach out to the Blue Acorn team at email@example.com.