The Rising Trend of Cryptocurrency: Does it Make Sense for Your Small Business?
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Cryptocurrency may no longer be a term reserved for big business. As digital payment options continue to rise, this buzzword is gaining more traction in the mainstream environment.
But, as difficult it is to ignore, does cryptocurrency make sense for small businesses?
According to The Strawhecker Group (TSG) survey of nearly 600 U.S. small businesses, fewer than 1 in 10 accepted cryptocurrencies as a payment option. This statistic indicates that most small business owners have not accepted crypto as a payment method.
“However, acceptance is gaining traction; 65% of small businesses who reported taking cryptocurrency just started accepting the payment method in the past two years,” according to The Crypto Divide eReport released in October.
In another survey conducted by small business invoicing and accounting firm Skynova, almost a third (32 percent) of 584 small business owners and managers surveyed reported they already accepted cryptocurrencies as payment.
What is Cryptocurrency?
Cryptocurrency is essentially considered digital currency – ideal for e-commerce businesses rather than the traditional brick-and-mortar environment.
It is a type of payment that can circulate outside a central monetary authority such as a bank or government, according to the definition provided by Nerdwallet.
“Instead, cryptocurrencies are created using cryptographic techniques that enable people to buy, sell or trade them securely,” states the personal finance company.
While Bitcoin is more widely known, other types of cryptocurrencies that are accepted by businesses include Ethereum, Binance Coin and Dogecoin.
Nerdwallet recommends businesses examine their customer base and business model before taking the leap toward crypto. The personal finance company’s guide on cryptocurrency may be a good start for those interested in learning more.
For businesses where adopting crypto makes sense, the TSG survey found the following reasons:
- Nearly 50 percent wanted to keep up with consumer demand
- 48 percent sought to take advantage of its popularity right now
- 41 percent use it to decrease fraud and chargebacks
- More than one-third use it to reduce transaction fees
Should your small business take on crypto?
For the most part, the small businesses that have embraced crypto into their operations are familiar with its usage, a large majority – 92 percent – already owning the digital currency themselves, according to the TSG report. Only 17 percent of small business owners who owned cryptocurrency themselves didn't accept it as a digital payment option.
"We found that merchants that do not accept crypto have a variety of nuanced reasons," said Jared Drieling, Senior Director of Market Intelligence and Insights at TSG, in a press release. "Some are closed off to the payment method entirely and see it as something only used by criminals. Others had a low awareness of the payment method in general but might be open to it should their customers start asking about it."
"We found that merchants that do not accept crypto have a variety of nuanced reasons. Some are closed off to the payment method entirely and see it as something only used by criminals. Others had a low awareness of the payment method in general but might be open to it should their customers start asking about it."
- Jared Drieling, Senior Director of Market Intelligence and Insights at TSG
Still, the report states, more than three-quarters of businesses that adopted crypto shared that it had positively affected their operation, while 20 percent reported there was no change. Even with the neutral or negative feelings, 97 percent of businesses were likely to continue accepting crypto – two-thirds of which said they were highly likely to continue taking it.
According to TSG data, the most popular platform for crypto accepting businesses is Coinbase at 44 percent, followed by Bitpay at 20 percent. Meanwhile, Bitcoin was the most commonly accepted token, taken by 93 percent of merchants who accepted cryptocurrency.
Crypto may be here to stay, but many remain uncertain
Nearly half of the small businesses owners and top-level executives surveyed by Skynova stated that they would never accept crypto. In contrast, a quarter pointed to the lack of knowledge as a reason for holding back.
One of the most cited reasons for businesses to start accepting crypto is the desire to remain competitive.
In a SCORE webinar in September about how retailers can capitalize on evolving customer trends, Blake Clark, group vice president of Software Advice, and Suzanne McGrath, a SCORE mentor, discussed the rising trend among small business owners. SCORE is a nonprofit association dedicated to helping small businesses get off the ground.
While it's true that the pros of payment flexibility and minimal transaction fees are valuable, McGrath cautioned that the cons of currency volatility and security risk for crypto might be too high for businesses.
Still, it's a trend that doesn't seem likely to fade away.
The three key questions McGrath recommended businesses consider before diving into crypto are:
- Is it going to reverberate with your target audience?
- Are any of your competitors offering it as a payment option?
- Will it increase your sales?
"If you decide right now that the answer is no, you probably need to calendar this for a year and revisit that decision because eventually, it's going to be something you need to consider," McGrath said. "So just to make a mental note, if you don't think now's the time, schedule yourself to think about it again in a year."