Providing multiple payment methods in your online store ensures that you can cater to a wide variety of customers. However, you might be wondering if accepting cryptocurrency is worth the potential risks. That’s why we’ve put together this comprehensive guide to help you make an informed decision.
In this post, we’ll discuss the benefits and risks of cryptocurrency so that you can determine if it’s a good option for your online store. Then, we’ll briefly explain how to get started with this payment method. Let’s jump in!
An Introduction to Cryptocurrency
Cryptocurrency is a type of currency that is transferred between digital wallets. Rather than passing through a bank or traditional institution, it uses ‘blockchain’ technology. In this setup, cryptocurrency is moved using a series of distributed databases and cryptographic hashing that protects the transactions:
Image source: Wikimedia Commons
There are a few different ways to obtain cryptocurrency. The first is mining. During this process, miners use powerful computers for up to a month to solve complex puzzles and earn bitcoins.
There are around 9,300 cryptocurrencies currently in circulation (as of November 2022), including popular options such as Bitcoin, Ethereum and Tether. These currencies fluctuate in value, but at the time of writing, one bitcoin is worth approximately $16,800 USD.
Additionally, there are already integrated cryptocurrency gateways for accepting payments in your WooCommerce store. Later on in this article, we’ll explain how to get started with these payment methods.
The Benefits of Accepting Cryptocurrency in Your Online Store
There are numerous upsides to accepting cryptocurrency in exchange for goods and services. Here are some of the main benefits!
Appeal to More Customers
The most significant benefit of accepting cryptocurrency payments is that you may entice shoppers who prefer this financial system over traditional debit or credit cards. Overall, you can appeal to a broader customer base.
This is especially important when considering that 9% of cart abandonment is a result of not providing enough payment methods. If your competitors don’t accept cryptocurrency, this can give your online store an edge.
Cryptocurrency transactions process almost instantly. Therefore, you’ll receive payments much faster than when using credit or debit cards, since those funds can take up to two working days to clear. Furthermore, cryptocurrency transactions aren’t reversible, so you don’t have to worry about fraudulent chargebacks from shoppers.
Accepting cryptocurrency can ensure that your business has sufficient cash flow. In turn, this can enable you to keep products in stock, pay overhead and bills, and provide the best possible service to your customers.
Minimal Transaction Fees
Furthermore, cryptocurrency payments usually have comparatively low transaction fees of one percent or less. By contrast, Paypal charges up to 5.4%, depending on the location of your business and the currency used in your store. Other payment processors like Stripe or Apple Pay have similar fee structures.
Low fees are attractive both to your customers and your business. You can offer your goods and services at lower prices while making the same profits.
Finally, accepting cryptocurrency is arguably more secure than credit card payments. This is due to how personal data is stored during a cryptocurrency transaction.
All customer data is stored within their digital wallet. Then, when they pay for services with cryptocurrency, their identity will be verified against the wallet. This means the information doesn’t have to pass through a central database that can be more easily hacked.
Furthermore, there is a blockchain public ledger. This recordkeeping system keeps track of every cryptocurrency transaction while maintaining individual users’ anonymity. All transactions are verified against entries within this ledger to ensure that customers can’t easily have their information and identities stolen.
The Risks of Accepting Cryptocurrency in Your E-Commerce Store
Despite its benefits, accepting cryptocurrency isn’t without its risks. Here are some potential downsides of implementing this payment model in your online store.
Unfortunately, the value of cryptocurrency can be very volatile. As you can see in the following graph, Bitcoin’s price has fluctuated monthly and dropped significantly since March 2022:
Image source: Statista
Of course, ‘normal’ currencies are also subject to fluctuations, but these tend to be less extreme.
Therefore, accepting cryptocurrency could be risky for your business if its value drops dramatically. This is especially true if you need to cover your business expenses in USD or similar currencies since you may have significantly fewer funds at your disposal from one day to the next.
Unique Tax and Legislative Considerations
Dealing with cryptocurrency can be tricky from a tax perspective. Specific regulations will apply depending on the country where your business is registered.
For example, in the U.S., cryptocurrency is classified as ‘property.’ It’s also taxed according to the value it holds at the moment you receive it.
Therefore, you’ll need to record the value of all your cryptocurrency transactions for reporting purposes. Additionally, your company must pay a capital gains tax. This can get confusing on top of your usual business taxes, and you’ll need to be vigilant with your bookkeeping.
Cryptocurrency can also be challenging from a legislative point of view. Many countries and states are still developing their laws concerning this currency form. That means the rules could change on you, so you’ll need to keep up-to-date with financial news.
Unlike card payments, cryptocurrency is still relatively new and not widely used. Therefore, you’ll have some unique considerations for accepting it in your online store.
For example, you’ll need to decide if payments will go directly to your digital wallet or if you’ll use a third-party processor to convert them into other currencies. This conversion can be instant or delayed, depending on your strategy.
Overall, you’ll need to put in more work to accept cryptocurrency payments in your e-commerce store. The viability of using cryptocurrency will depend on your store, so you’ll have to consider if the extra effort is worth it for the potential profits.
How to Get Started with Cryptocurrency Payments
It might seem overwhelming to accept cryptocurrency in your online store. However, if you’re using WordPress, a few handy plugins can streamline the process.
Commerce Coinbase is a great add-on that accepts payments of Bitcoin, Litecoin, Bitcoin Cash, and Ethereum. Once a customer makes a payment, it will be stored either in your Coinbase account or your digital wallet:
Alternatively, CoinGate is another great cryptocurrency plugin. It works with more than 70 different digital currencies, including Bitcoin, Ethereum and Dogecoin. Then, you can convert the payments into USD or Euros and transfer them to your bank account.
Accepting cryptocurrency in your e-commerce store can help you appeal to more customers, speed up transactions, and secure payments. However, cryptocurrency is pretty volatile, and you’ll need to consider its limited infrastructure and unique tax requirements. Overall, it’s worth assessing all these factors before deciding if this payment method is suitable for your business.
Do you have any questions about accepting cryptocurrency in your online store? Let us know in the comments section below!