Blockchain: A New Payment Frontier for Small Business?
Cryptocurrencies aren’t new, but the idea that a small business could benefit from using blockchain technology to accept crypto as payment is certainly novel.
However, it pays to understand the landscape before you leap at the chance to be an early adapter. We take a closer look here so that you can decide for yourself.
A Simple Definition
According to the site euromoney.com, “Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.”
While this sounds great when you apply it to commerce, there are some barriers that explain why most small businesses haven’t jumped at the chance so far.
An Entirely New Mindset
Adopting blockchain means setting aside conventional payment methods that have been around for centuries. Cash, checks, and plastic come with a comfort level that many small business owners simply don’t want to disrupt. Are you one of them?
Accepting cryptocurrencies also requires a close look at your customers. Do they want to pay using Bitcoin or any popular digital currencies available today? Do they even use crypto?
According to Yahoo!Finance, only 12% of Americans do, and most of them use it solely for investing. So, jumping into blockchain early might leave you with lackluster reactions from your customers.
Some Definite Plusses
If you—and your customer base—are ready for crypto, there are some benefits you’ll enjoy compared to traditional methods of payments.
For starters, transactions conducted using blockchain put you directly in touch with the buyer, without the transaction costs that come, for instance, from processing credit or debit transactions. This can be a significant, immediate boost to your bottom line.
Moreover, the digital nature of crypto and blockchain creates a secure layer of security. There are no cash drawers or prospects of transaction manipulation to be tampered with. And, since blockchain transactions are irreversible, traditional returns and unannounced chargebacks don’t occur.
And Some Minuses
Adopting blockchain and accepting crypto as payment means engaging in an entirely new infrastructure that costs time and money to set up.
According to entrepreneur.com, “the rollout will require a lot of planning and testing, as traditional merchant services are not set up to accept bitcoin. As such, a small business will need to evaluate and spend money on a digital wallet, a merchant gateway or a combination of services needed to accept the cryptocurrency from customers.”
And, as covered previously, there’s no guarantee that the investment will pay off, at least in the short term.
Benefits You Might Not Expect
Entrepreneur.com points out that there are some additional benefits small business owners don’t anticipate when considering blockchain:
“Businesses can use blockchain for smart contracts, which are basically self-verifying, self-enforcing contracts. Stored within a blockchain ledger, the contract is recorded in a way that cannot be changed or manipulated. Smart contract examples include commercial leases, agreements with vendors or suppliers and even employee contracts. Smart contracts offer small businesses a level of protection it would otherwise never be able to afford. The middleman—usually an attorney—would not be needed in a smart contract, and as such, a business would have lower costs.”
Safer, cheaper cloud storage is another benefit, as blockchain storage applications typically allow small business users to stockpile data safely away without relying on pricier conventional cloud storage.
Finally, according to entrepreneur.com “blockchain technology provides business owners with an alternative method to raising capital through Initial Token Offerings (ITOs). As an alternative to the use of traditional banks, lenders, private equity firms and even crowdfunding sites, ITOs are tokens available for exchanges where they can trade freely. These tokens are comparable to equity or a revenue share in a typical company.”
Is Blockchain For You?
We asked this question at the beginning of this piece and outlined several issues to consider regarding blockchain. While the considerations are complex, we hope to have helped you begin to unravel the answers.