If you’re still on the fence about cryptocurrency, you’re not alone. Only 15% of people own some form of digital currency — and a good percentage of these investments were made over the past two years.
Now that more mainstream companies are adopting forms of digital currency — including tech giant Tesla and mega payment platforms like Visa and Mastercard — the future of cryptocurrency may change how you approach your ecommerce entrepreneurship journey.
As an online retailer, you probably don’t need to know the science behind cryptocurrency, but you should figure out how this form of payment may impact your business.
In this ultimate guide, we’ll dive into the future of cryptocurrency and how it relates to ecommerce, including a straightforward overview of the advantages and disadvantages, plus how to prepare your growing business for whatever’s coming next.
The scoop on cryptocurrency and ecommerce
- What is cryptocurrency?
- The Good: Cryptocurrency’s advantages
- The Bad: The disadvantages of cryptocurrency
- The Future: How can your ecommerce store accept digital currency?
- The future of cryptocurrency: Is it for you?
What is cryptocurrency?
Put simply, cryptocurrency is digital money based on encryption. It’s decentralized, which means users can directly exchange with each other without the need for banks, governments or other intermediaries.
And the best part?
Due to the complex encryption, digital currency isn’t at risk for counterfeit or theft like the money sitting in your bank. In fact, unlike the money in your bank, cryptocurrency isn’t even a physical currency — every transaction runs through blockchain technology, where data is transferred from one user to another.
There’s no need for bank intervention, hefty transaction fees or confusing exchange rates.
Sounds good, right? Cryptocurrency definitely has an upside, let’s take a closer look at some of the benefits it can bring to the world of ecommerce.
The Good: Cryptocurrency’s advantages
If you’re an ecommerce retailer who’s thinking about accepting cryptocurrency payments to your store, or keeping a balance of cryptocurrency for your backend operational expenses, the good news is you’re already one step ahead. After all, your digital store plus a digital currency might just make the perfect combo.
Let’s take a closer look at the advantages of crypto. Just be careful to weigh each of these pros carefully, and consider your current market, average consumer and the competition.
- Avoid slow bank processing times: Though online purchases feel instantaneous, the reality is you often don’t see the money until a few days after the transaction. Blockchain technology cuts out the middleman, which means you’ll receive money directly from your customers without waiting for the bank to process each payment.
- Lower fees than other payment processors: Most sellers cringe when they think about customers entering their credit card details, thanks to pesky processing fees that can eat into your revenue. With cryptocurrencies, third-party fees are significantly lower — often by a percentage or two.
- More reliable security: It’s difficult to counterfeit cryptocurrency, which means you’re far less likely to experience fraud. Plus, your customers won’t be able to cancel a transaction as readily or file a chargeback once a transaction is completed.
- Expanding the market: Forget calculating exchange rates or avoiding certain markets due to pricing issues. Cryptocurrencies work the same in any part of the world without having to adapt prices and currencies.
- More open supply chains: Beyond the benefits of using blockchain for cryptocurrency payments, you can also use it to track the supply chain for your products. For example, your online shoe shop can use tokens to create tags for shoes and track inventory, allowing you to see exactly where they were manufactured and what materials were used in the process.
- Find new customers: Though the US is credit-card dependent, many other world regions don’t rely on creditors and centralized banking to make purchases. By offering digital currency, you open up your online shop to an entirely new market that probably wasn’t accessible when you had limited ways to accept payments.
The Bad: The disadvantages of cryptocurrency
Cryptocurrency has its advantages. But like everything else, there is a downside.
Here are a few things to consider when deciding if the future of cryptocurrency includes your store:
- Volatility: If you’ve paid attention to the state of digital currency recently, you’ll know it varies widely. Because it’s an ‘invented’ form of currency, new ones pop up while others fizzle out — and this instability may bring uncertainty to your business. For example, if someone wants to return a purchase and the currency rate drops, you have to either take a hit or lose a customer by refunding them less. Extra scoop: There are new forms of currency called stablecoin coming on the market. This may be the answer to help support the global market and introduce a little extra stability.
- Too many options: Though Bitcoin is the primary source of cryptocurrency, other forms known as altcoins often take the main stage for brief periods. At the start of 2021, more than 4,000 cryptocurrencies hit the market. As an online retailer, you may hesitate to adopt any one form of digital currency and may also wonder if the coin you choose will be around for the long haul.
- Slow adoption: Humans like comfort, and they have many reasons not to trust this new form of currency. Thanks to the media sensationalizing the blockchain and associating it with illegal activities, ransomware and confusing tech languages, it can be hard for consumers to get on board.
- No consumer protection: If someone steals your credit card information, you know you don’t bear the responsibility for fraudulent purchases. This isn’t so with digital currency. Though instances of fraud are far less likely, if they do happen, consumers are out of luck.
- It’s not great for the environment: Cryptocurrency doesn’t appear out of thin air when you need it. It’s stored in huge databases called mines. It takes a massive amount of energy to create a mine and validate them on blockchains. In fact, if cryptocurrency were a country, it would be the 30th largest energy consumer in the world. Though companies are working to tackle greener solutions, it’s unlikely we’ll see them for years to come.
The Future: How can your ecommerce store accept digital currency?
The future of cryptocurrency is bright.
Despite the low number of brands accepting digital currency right now, its reliable features and ability to support global transactions means that may soon change.
But how does it actually work in store?
When accepting payments for purchases with cryptocurrencies, you have two choices:
- Digital wallet: You can set up and accept payments to your digital wallet. This digital wallet can be downloaded and stored on your computer, smartphone or hard drive for more security.
- Third-party services: These services process transactions similar to the way banks process credit card transactions. Third-party services include BitPay, Coinbase and Exodus.sell
The future of cryptocurrency: Is it for you?
In 2020, the world learned that consumers are more ready than ever to adopt ecommerce services — and that includes cryptocurrency.
As an ecommerce brand, your next step is to figure out if your store’s ready for modern digital payments. Here’s a quick checklist to help:
- Evaluate whether your current customer base is ready to switch to digital currency and whether your brand is ready to expand to a larger crypto-ready market.
- Keep up with the latest digital money trends. Start learning more about cryptocurrency, the ups and downs of the market, and the future of cryptocurrency for ecommerce.
- Start subscribing to crypto-focused news sources like CoinDesk and CCN to stay abreast. The more time you invest upfront in research and education, the quicker you can make the switch when you’re ready.
The better prepared you are for the future of cryptocurrency, the faster you’ll be able to react to industry changes and jump ahead of the competition.
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