Accept Bitcoins? Why Not?

How to ‘byte’ at the bit of this digital currency.

By Michael Silverstein, Contributing Writer On Jan 29, 2015

Bitcoins are a virtual currency, a kind of digital money not created by a government and with no government backing. No business is obliged to accept bitcoins in payment for goods and services. This “money,” at present, is used and accepted only within a limited community of users and accepters.

Why, then, are a growing number of businesses in New Jersey and elsewhere considering accepting bitcoins for purchases? For some, the simple answer to this question is: “Why not?”

Hotels, restaurants and stores often display little signs in a foreign language alerting potential customers that someone inside speaks that language. This gives them a competitive edge in attracting customers who might need or just like dealing with someone in their own language. The same thinking increasingly applies to bitcoins.

Except for a few online-only businesses, and those with an especially tech-oriented clientele tuned into anything new and digital, bitcoins still account for only a very small percentage of most business’ total sales. But in today’s highly competitive economy, anything that might increase the size of a customer base, even in a limited way, can seem desirable – provided it doesn’t come with too many drawbacks.

What are the pros and cons of accepting bitcoins for a business considering doing so? One attraction is that new customers will likely be bigger-than-average spenders. The virtual currency-liking community today is largely made up of techies, investors and international travelers who exchange currencies often, and these are people who tend to be big earners and spenders.

Because of the way bitcoin transactions occur, there are no transaction fees of the kind businesses pay when they accept credit card payments. Also, unlike many retail transactions, there are no chargebacks possible. When you make a bitcoin sale, it goes into a virtual wallet. A customer can’t reverse the sale.

Of course, along with such advantages there are some real and potential drawbacks to accepting bitcoins as a payment medium. Some money might have to be invested in software, and a certain level of technical skill is required to ensure a bitcoin payment system is correctly put in place and kept operational.

Converting bitcoin payments to dollars is usually done through digital currency exchanges. And the dollars you get back from these transactions depends on how the market values bitcoins, which changes often and sometimes dramatically for a variety of reasons.

After peaking at more than $1,100-a-coin in late 2013, for example, it fell two-thirds the following year. Thus, in a certain sense, when you accept bitcoins, you are making a currency trading play with big potential swings in both directions.

If you’re thinking of going a bit bitcoin, consider these factors: Is it worth the effort; can it be something that sets your business apart and gets you viewed as an innovator; and could it bring new customers your way?

 

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