Ecommerce payments: Time to start taking Bitcoin seriously?
It’s fairly unusual for a currency to be dogged by a bad reputation outside of financial trading , but that’s exactly what’s happened to Bitcoin over the last year or so.
In addition to the ongoing volatility of its trading price, there have been extraordinary reports of guns, drugs and hit men being bought with the controversial currency, while the high-profile "un-natural" death of its CEO earlier this year also made headlines.
Despite this, the world’s leading cryptocurrency has seemingly turned a corner, with some big name brands now accepting Bitcoins. Expedia recently announced it was jumping on the bandwagon by taking hotel bookings with the currency, and a man even bought a Tesla car for $103,000 (91.4 Bitcoins) earlier this year. A PR stunt, maybe. But one that’s led to a number of businesses sitting up and taking notice.
The million-Bitcoin question
So, should your website be doing the same? And if so, what are the pros and cons of accepting cryptocurrencies as a payment method, and more importantly, what are the risks? Do people understand how to use them yet?
Will King, CEO of King of Shaves thinks so. Aided by his head of design, Simon Watson, the pair have overseen the very recent implementation of Bitcoin payments onto the brand’s website, shave.com, and have now had their first few transactions with the currency. “I was the first to transact on shave.com with Bitcoin,” King says. And what did he buy? “A razor, obviously.”
Outside of the employee circle, a smattering of customers have followed suit too, and King believes these early purchases have justified the company’s decision:
“It’s a frictionless currency. Yes it’s got a bad rep, but as we transact more and more electronically and as the currency stabilises in the future, well, it becomes quite an interesting way of receiving funds. We’re all in the business of trying to make life easier for the customers, and we firmly believe Bitcoin will do that eventually.”
The fact that a multimillion pound global business like King of Shaves has taken Bitcoin on will be music to the ears of the currency’s founders. Seeing other ecommerce providers such as Expedia and Zoo York will also help – the current list of businesses in the UK accepting the currency is not a comprehensive one, with a mixture of niche and rag-tag techno-vanguards only occasionally intertwined with bigger brands with a bigger presence. Uptake has been unpropitiously slow.
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David Kohler, research director and ecommerce expert for Gartner suggests that there are too many questions to be answered for most ecommerce providers to deem making Bitcoin a worthy payment method, at present: “In retail, everyone is talking about NFC payments for phones, but even that’s really niche,” he says. “It’s less than $20m in payments so far, so that hasn’t taken off. But if you look at that and then where Bitcoin is next to it, it’s tiny; you wonder whether it’s worth it.
“Once you take your Bitcoin payment, what do you do with it? Banks aren’t accepting them as currency and even in the US, banks have kicked out Bitcoin operators as clients because they didn’t want the risk on their books. So you have to ask what you’re going to do with your Bitcoins once you’ve cashed them in?
“The other thing is that it’s not just a payment method, but it’s also a currency and a highly volatile one. Currently the value is going up, which is nice, because you might get a 10% appreciation overnight or something. However, if it ever collapses you have that risk directly translating onto your books and your creditors may have an issue with that.
“There’s too many questions and coupled with the main one - how many Bitcoin payments do you expect to take – you have a lot of retailers asking what their business case is for doing this.”
If the business case is based on numbers, than the UK is seemingly not the right place to start just yet. A recent survey by payments specialist Venda found that 71% of the public don’t want the option to pay with digital currencies on websites, while 43% say they do not trust cryptocurrencies at all. However, Will King believes this misses the point, and that by at least providing the option, ecommerce businesses are proving that they have one particular edge over competitors:
“If you go onto Twitter and type in 'King of Shaves' and 'Bitcoin', you’ll see that there’s quite a lot of tech-savvy, cryptocurrency websites talking about the fact that a consumer-facing brand is accepting Bitcoin, so it’s spreading the word. The reason for doing this is that a lot of the tech community, the guys that understand what this is, are big users of our site. So it’s important for us to be forward-thinking and give them every available option.”
King of Shaves is also able to swerve the issue of currency volatility by using BitPay, which acts as a payment gateway for businesses looking to exchange their Bitcoins rather than hold onto them and risk the wildly fluctuating trade price. There are issues regarding certain types of payment – for instance, Simon Watson states that King of Shaves is currently unable to process subscription payments in Bitcoin, because “each month the user would have to convert the Bitcoins to ensure it matches our correct payment” and it would be “too much of a laborious task until BitPay works out a way of processing subscriptions seamlessly”. And then there’s also the concern with the amount of time it takes to confirm a payment:
“It’s not like a credit card where you can authorise it almost instantly,” Watson adds. “If you want to ensure you have the money then you have to wait a few minutes for the network to authorise transactions. From that point of view, it’s not as customer-friendly as a credit card; it doesn’t dump you back to a thank you page as quickly as you like.”
Despite this, Watson believes these types of problem only marginally detract from the main benefit of using cryptocurrencies – the removal of transaction fees for both seller and buyer. David Kohler concurs, stating that this element is Bitcoin’s biggest selling point for ecommerce providers trying to decide on implementing P2P-style currencies:
“Visa and Mastercard typically charge 1.5 to 2% for transactions, AMEX charges up to 4%. Obviously the attraction from the vendor’s perspective is that there’s no centralised body taking commission on Bitcoins, which is the driving factor behind the digital currency movement as a whole.”
As with most new technology, it’s the benefits that will inevitably draw the sceptics in. Venda’s research back in April suggests that ecommerce providers looking to increase their Bitcoin engagement might want to consider “discounts for using virtual currencies that might coax [consumers] into using them”, while anonymity and the security of not having to carry cash around were also seen as potential game-changers.
Diamond Circle, an Australian start-up, is one of the first companies to try and tap into this consumer psyche that currently surrounds Bitcoin, by creating more familiar debit card payment methods, as well as Bitcoin ATMs alongside an array of mobile payment options. The hope is that consumers will be guided slowly and safely into using the currency, with familiar payment methods acting as a way of building early trust and removing some of the supposed complexity putting people off.
“In its current state, Bitcoin may seem too complicated,” Kohler adds. “But in the same way that the Internet used to be seen as complicated, cryptocurrencies need time to proliferate. They’re kind of like the Internet for currency – in the same way technology came forward to help people resolve URL problems in a friendly way, there’s also a whole bunch of start-up companies looking to do the same with Bitcoin.”
Will King agrees, and feels that it will only be a matter of time before digital currencies become a standard payment method across the globe, regardless of the initial hiccups and consumer fears:
“We’ve moved on so much in the last two years – the technology has evolved into something that’s far more customer-friendly.
“We want to be able to sell our products to as many people as possible; obviously it will take a while to pay back the investment we put in, but hopefully more people will start using Bitcoin and our decision will be justified.”
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Chris is Editor of MyCustomer. He is a practiced editor, having worked as a copywriter for creative agency, Stranger Collective from 2009 to 2011 and subsequently as a journalist covering technology, marketing and customer service from 2011-2014 as editor of Business Cloud News. He joined MyCustomer in 2014.