If you run an online store, you've probably had some of your customers ask if you take bitcoins as a form of payment. Reading around the web, you know that it's a digital form of currency, but it's also used for nefarious reasons on darknet market. Bitcoin popularity has increased as more people want a way to pay without using credit cards or traditional debit cards, so offering it could be a way to attract more customers to your store.
Adding bitcoins to payment options have advantages and disadvantages, but it's mainly a benefit. For e-commerce store owners that ship physical products, it's a huge advantage because customers aren't able to reverse their payments. However, bitcoins have a reputation for being an underground, shady currency that only criminals use. Here is some basic information to help you decide if taking bitcoin payments is right for you.
What are Bitcoins?
Digital currency is mined by allowing your computer to spend time calculating mathematical formulas. You "loan" your computing power and get rewarded with bitcoins. When your computer completes a calculation, your wallet receives credit for a minor amount of currency (usually a fraction of a penny). Unfortunately, to run a large warehouse of computers that generate bitcoins takes more money in electricity and hardware than the average person can make mining coins, so it's better to buy them from a vendor.
You can buy bitcoins from a supplier or even just a friend who has some to spare. The bitcoin market is completely unregulated by the government, so their value goes up and down daily. Currently, bitcoin value has continued to rise, so some investors have even bought them to make money from their increased value.
It's important to know that bitcoins can be transferred into real cash, so taking bitcoins as a form a payment is a legitimate way to add profit to your business. Some customers only want to work with bitcoins, so by adding them as an option, you attract these customers who would otherwise never buy from your store. You don't need even to buy bitcoins to start taking them as a form of payment. All you need is a digital wallet.
How do Payments Work?
You first need to set up a digital wallet. For an online business, a cloud wallet might be best, because it is available from anywhere in the world. Just remember that if the cloud provider gets hacked, your wallet is in jeopardy. You can also install a desktop wallet, which makes it more secure but it's only usable on your desktop.
Mobile wallets are available as well, but most people use them to make payments from a smartphone. When you choose a type of wallet, make sure it's one that doesn't limit your ability to take payments or even make payments when you aren't in front of your computer.
Your wallet has a public and private key. Users pay you using a public key that's linked to your wallet. Your private key is kept secure, and it's how you can access your wallet for payouts. All payments are logged on a digital ledger called the blockchain. Your public key is viewable on the blockchain, so users can see your balance provided that they know your public key. Public keys are sent with payments, and both the sender and you must agree to the transaction before it completes.
Are There Any Dangers with Bitcoins?
Every legitimate payment method online has a scam attached to it. If you take PayPal, you might get chargebacks from people whose PayPal accounts have been hacked. If you take credit card payments, you can have chargebacks from stolen card numbers. Every payment method has its risks, and you have to account for them.
With credit card payments, you can verify shipping addresses and ask people to input their billing address to validate the card. You have no way to know if a digital wallet is a stolen one. As long as the person in control of the wallet has public and private keys, then they can pay for the product.
Even if you can't verify the real owner, your risk as a seller is minimal. Once a buyer transfers bitcoins to your digital wallet, they cannot reverse the transaction. As an honest seller, this means you are not at risk when sending a product after you've received payment with bitcoins.
Because people can use bitcoins to buy products on the black market, the cryptocurrency has acquired a bad reputation. Black marketers also accept credit cards, so it makes no difference which payment method someone uses to pay for a product. When using bitcoin, the blockchain is encrypted and private; there is no government regulation, and no one's identity is linked to a particular wallet unless they choose to make it public. Because of bitcoins' association with anonymity, some people consider them a shady way to receive payments. However, it's an irrational stereotype given to cryptocurrency.
What are the Fees for Bitcoin Payments?
As a seller, you get to choose the fees that you want to pay for each transaction. You might ask yourself why you would ever pay fees if you can get it for free, but the bitcoin market has made it so that people can choose fees based on the speed at which they want to receive payments. If you decide to pay no fees, then your payment is processed at a low priority, and it can take days before you receive it.
Waiting too long to receive payment is not a viable option for most business owners, so your next option is to pay a fee. Paying fees bumps your priority level up, so you can receive payments more quickly. You don't need to pay high fees to get your payments quickly. You can pay a few cents for each transaction to get your money quicker, which is what most business owners opt for.
Most payment processing companies charge several dollars per transaction or a percentage of the amount. Bitcoin payments are much cheaper, and you don't have a third-party controlling your payments. That is one major advantage of using bitcoins for payments over credit cards. You still need to take credit cards to appease the masses, but you add a payment option for those people who prefer it, and it's a low-cost investment.
Should You Take Bitcoins as a Payment Option?
If you run an e-commerce store, the hardest part about collecting bitcoin payments is the wallet setup and programming that integrates it into your store. You can find plugins for WordPress that help you work with bitcoins without much programming experience. You can also find a developer that can code bitcoin into your payment processing pages.
Don't let bitcoin myths drive you away from cryptocurrency. It's a great way to reduce risk when you ship the product after payment. You no longer need to worry about chargebacks. You can easily integrate it into your e-commerce store, and it's a cheap way to drive additional revenue for your site without paying high commission fees to third-parties.
To request more information on accepting Bitcoin payments, please contact us!