“Cash, credit, or Bitcoin?” Ten years ago, this simple question would’ve caused the majority of shoppers to scratch their heads at checkout. Today, however, over 60% of consumersare aware of digital currency—a fact that’s pushing online merchants to start exploring the future of payments.
More so than anything else, the rise of cryptocurrencies has put the spotlight on our evolving definition of “currency.” Consumers are increasingly receptive to non-traditional forms of payment and will make intentional choices to pick retailers that are more accommodating of them. As a result, understanding the nuances of cryptocurrencies is not only a valuable asset, but will lead to long-term success, growth, and customer loyalty in the highly-competitive world of e-commerce. That said, there’s no need to start accepting digital currencies overnight. It’s more a matter of acknowledging their challenges, and formulating an informed approach to what’s on the horizon. Here are three ways to help your business ride the cryptocurrency wave, and keep up with changing payment trends:
1) Evaluate whether accepting cryptocurrencies are right for your business.
Here’s the reality: While a large percentage of shoppers are familiar with cryptocurrencies, less than 14% have invested in the most popular form, Bitcoin. So, there’s still a long ways to go until digital currencies are used as frequently as credit cards—despite the growing number of massive retailers that are already accepting Bitcoin. These companies have the resources to gamble on what’s hot and flashy in the payment space, because their sheer size and profitability shields them from the abrupt appreciation and devaluation of cryptocurrencies. If Microsoft invests $10 million in Bitcoin, for example, its annual revenue won’t take a significant hit if the market price suddenly drops.
The same can’t be said for small and mid-sized businesses. Instead, these merchants should approach cryptocurrencies with caution. Offering Bitcoin as a form of payment, for example, may be the right decision once its market becomes stable and the majority of consumers are invested in it. Or, if your brand is geared towards millennials, a group that’s more likely to invest in digital currencies, accepting cryptocurrencies would be a smart move to engage with a younger consumer base. But for most retailers, investing in digital currencies is a costly, premature way to engage with consumers. Offering alternative forms of payment should ultimately be influenced by the demands of your shoppers, its impact on revenue, and internal business objectives.
2) Understand the Challenges of Digital Currency.
Although experts are predicting a relatively positive future for cryptocurrencies, there are still several “unknowns” to keep top of mind. For starters, regulations around all digital currencies are murky at best—and non-existent at worst. There is no single global regulator or entity to oversee cryptocurrency transactions, so it’s particularly challenging for online merchants to track fraud, money laundering, and other types of criminal activities. And, without a central governing body to keep tabs on everything, consumers don’t have the same protections that hold traditional financial institutionsaccountable. These issues are further compounded by policies in the United States, where digital currencies aren’t recognized as legal tender. Because of vague federal regulations, state legislatures have been emboldened to introduce their own policies—including the outright ban of exchanging cryptocurrencies or requiring companies to obtain expensive operating licenses.
Another prevailing concern around cryptocurrencies is how incredibly volatile their value is. In a blink of an eye, their price can fluctuate tremendously, because it isn’t tied to physical assets. Investment in the market is a big bet, and there’s no guarantee it’ll pay off.
These challenges, while significant, shouldn’t blacklist digital currencies. But, they are key warning signs retailers should consider before jumping the gun to invest in cryptocurrencies. There’s always a risk associated with digital transactions, and the onus will be on retailers to protect customers and the reputation of their retail site.
3) Look Beyond Cryptocurrencies…and at Blockchain
The hype around cryptocurrencies has put blockchain, the technology that enables digital currencies to function, in the limelight—and for good reason. If accepting Bitcoin or any other form of cryptocurrency is too risky or the wrong option for your business at the moment, there’s a case to be made about using blockchain for things beyond transactions. It has the potential to revolutionize the way online merchants control the quality of their products and services.
Take, for instance, the recent partnershipbetween retailers and IBM to study blockchain and its ability to improve food safety. Documenting each step of the production process gives customers greater control over the items they choose to purchase. Not only does this build up brand loyalty, but it also allows online merchants to be more transparent about product quality. These studies are an excellent opportunity for retailers to jump in now and participate in similar initiatives. By exploring blockchain, merchants have an opportunity to become known for their transparency and innovation. It’s a first step retailers can take before going big in the market for cryptocurrencies.
If the headlines are any indication, the rise of cryptocurrencies highlights a shift in the way consumers view the exchange of currency. But, it’s still very early and there’s a long road ahead before we see digital currencies become lingua franca for online purchases. The future is bright, and there are several steps your business can take to stay ahead of the pack.
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