Should You Accept Bitcoin as a Payment Method?
Bitcoin, the mysterious and (currently) volatile decentralized virtual currency that relies on cryptographic mathematics to determine its creation and trade has managed to makes its way into a number of ecommerce sites’ shopping carts as an alternative payment option alongside PayPal and credit cards.
Opinions vary whether the novelty may wear off, the bubble burst or if it will truly disrupt the international banking system as we know it. But the question for ecommerce professionals is whether or not Bitcoin should be considered as a payment option today.
What is Bitcoin?
Bitcoin (BTC) is a peer-to-peer digital dollar that was created by an individual or collective by the pseudonym of Satoshi Nakamoto. Any computer can run a free application called a Bitcoin miner that performs the necessary calculations to create the coin, storing BTC in a free, open source digital wallet of your choice. All churn-and-burn activities are broadcast across the public Bitcoin network and permanently recorded, and it claims to be anonymous and untraceable to any individual (though a core developer told Gawkerlaw enforcement could apply network analysis to track down individuals if need be).
Bitcoin’s both a currency and a commodity -- speculators have sent BTC’s value soaring and crashing. Despite this, Bitcoin is being taken seriously by Web properties like Wordpress, Reddit and Wikileaks, physical businesses like bars and restaurants, and several small-business ecommerce software platforms now have plug-ins that support BitPay (a Bitcoin payment processor that performs exchange into local currency at its daily rate). Bitcoin claims over 4,500 digital and physical companies use its service.
Why Bitcoin for Commerce?
Bitcoin charges no transaction fees for consumers. From a merchant perspective, Bitcoin’s lower transaction fees (1-2%) and protection against any type of reversal or chargeback makes it attractive. BTC also opens up business to customers in countries unsupported by PayPal and other credit issuers, as well as minors. Unlike bank transfers through PayPal, payment clears instantly, a benefit for both business and customer.
Bitcoin for digital products
Digital goods publishers and online service providers like Web hosts have much to gain from access to a truly global market -- physical shipping is moot. While other virtual currencies like the defunct Facebook Credits are limited to a closed platform and typically siphon a large chunk of revenue (Facebook Credits was 30%, for example), Bitcoin’s universal, making it appealing to developers and publishers who want to maximize content monetization and use a standard virtual currency that's platform agnostic.
Is there demand for Bitcoin as a payment method?
Those in the know about Bitcoin tend to lean on the techie side, so your target customer may still be blissfully ignorant about it. In fact, offering it as a payment option to those who don’t recognize its branding can lower conversion by introducing confusion. On the other hand, if you’re a small business with a tech-geared customer, riding the wave and getting listed in shopping directories for BTC holders could build awareness of your site and be a value proposition to this customer segment. Web host Namecheap’s web site claims customer demand fueled its decision to include the payment option. “For months, Bitcoin has been requested of Namecheap among the tech audience. We're pleased to announce that we've listened to your feedback.”
As a digital currency, Bitcoin’s potentially vulnerable to hacking, the public losing interest or the bubble popping. And while it’s a proof-of-concept that shows promise for decentralized money, it’s yet to be proven. There remains enough FUD (fear, uncertainty and doubt) to keep customers from demanding it as a payment option. And to become truly disruptive requires a critical mass of trusting users. For now, only businesses with customer demand for Bitcoin should add it to checkout. The rest can sit back and wait to see whether this turns out to be a disruptor or just a digital pipe dream. Image credit: PeaceNewsNow