What Businesses Should Consider Before Accepting Crypto Payments
By TOI Staff November 3, 2023 Update on : November 3, 2023
Accepting crypto payments could end up hurting your business.
Believe it or not, the fact that most new-generation businesses are incorporating the crypto payment option doesn’t mean every company should. Lax regulation of cryptocurrencies raises multiple questions that might make them wrong for a business —your business.
At the same time, crypto payments could reduce business transaction fees and boost profits. So, to help your business enjoy the potential of crypto, there are some key things to first consider:
There are roughly 22,932 cryptocurrencies in existence; could a business accept all those? You decide.
So, the first thing to consider is the choice of accepted cryptocurrency. The most common ones accepted by most businesses include Bitcoin, Ethereum, Cardano, Tether, etc. A significant reason for their widespread adoption rate is their stability. Therefore, it is advisable to start accepting only stablecoins for payment at the early stages.
Nonetheless, you can’t just decide on accepting crypto payments without consulting with your current customer base to know which coins they can make payments with. So, conducting adequate customer research and gathering feedback on the best cryptocurrencies should be your priority before receiving crypto payments.
You’ll likely find that a majority report holding either Ethereum, Bitcoin, or both. Ethereum is one of the most well-established and profitable cryptocurrency projects in the DeFi market that is familiar to almost everyone who has ever traded cryptocurrencies. Russian- Canadian programmer Vitalik Buterin created it, and has become the second-largest crypto project with a market cap of $359.5 billion (source: https://insidebitcoins.com/buy-cryptocurrency/best-cryptocurrency-to-buy). So, it’s a fairly safe bet to join countless others and start accepting this coin.
Amidst the options presented by your clients, you have to select the most viable options by looking out for essential features like transaction speed, fees, and prices. This knowledge helps you determine the potential impact of the adoption on your business. For instance, you don’t want to offer a crypto whose transaction fee is roughly the same as your average price point. This would waste a lot of money, and there’s little or no upside to such implementation.
Let’s face it: Do your customers need that crypto payment option, or do you just think it’s the new cool?
Sure, the awareness and adoption rates of cryptocurrencies are increasing exponentially. But a sizable population still doesn’t know what the fuss is about. So, before accepting crypto payments, it is imperative to identify how such implementation is advantageous to your customers.
That’s not all. You must also teach them to ensure they don’t find the experience too unsettling. Speaking of teaching it to them, who’ll do that?
It has to be your customer service team. But do they know the technicalities themselves? If they don’t, they must undergo some retraining to prepare them for handling customer complaints and disputes.
In addition, the business has to speculate customer questions and prepare tailored answers for faster response times. These exercises could commence with a basic understanding of the fundamentals of cryptocurrency transactions.
Crypto prices are unpredictable.
So, whenever you receive a payment, the price could drop in the financial markets, thus exposing your business to potential losses. Companies must consider possible ways to shield themselves from these fluctuations before accepting crypto payments.
A common technique employed by businesses already accepting crypto payments is the conversion of the crypto coins to the cash equivalent immediately after collection using instant conversion platforms and services. Conversely, companies that want skin in the crypto game might also prefer to trade the received crypto assets for potential profits.
It all depends on their risk assessments and business models.
With fiat payment options, you could either collect cash and keep it in the cash register or receive payment through the financial institution of your choice. When you start receiving crypto prices, it’s a different ball game for various reasons.
First, crypto transactions are irreversible, and this might be an issue in situations where a refund needs to be made. Companies should design systems enabling them to verify and make such payments when needed, to maintain positive customer service.
An excellent approach to handling these and other payment processing issues is to employ the services of a quality payment processor. Selecting one that accepts multiple currencies gives your company much-required flexibility to buy numerous cryptocurrencies. It is also advisable to see these payment processors integrate seamlessly with your existing systems.
Financial responsibility must also be considered before accepting crypto payments. What are the regulatory and compliance requirements for businesses accepting crypto payments in your country? Do they have to pay separate taxes? Is crypto even legal?
To avoid short or long-term hiccups, you need to get positive answers to these questions before proceeding with crypto payments. Doing your due diligence and following regulations from the get-go will save you from future troubles and lawyer consultation fees.
Standard regulations across most countries for cryptocurrency businesses include Know Your Client (KYC) and Anti Money Laundering (AML). Both these regulations are implemented to prevent fraud and internet scams. You should be up-to-date on the latest guidelines before accepting crypto payments.Read more: What Businesses Should Consider Before Accepting Crypto Payments