With Bitcoin making headlines in the past few weeks, companies may wonder, “Should I start accepting crypto in my business?”
Unless you are in the crypto space, accepting cryptocurrencies in your business can seem like a risky and daunting task. However, the number of companies accepting cryptocurrencies in their business as means of commerce is accelerating in the U.S.. While crypto’s surge in pricing has just recently been making headlines in mainstream media here in the U.S., crypto is more widely adopted in the rest of the world. If you have vendors or customers outside the U.S. you may have been (or will be soon) approached by them to pay or be paid in crypto.
Bitcoin isn’t the only cryptocurrency.
While meteoric rise of Bitcoin’s value has been making headlines, some business owners may think of making an “Elon Musk” move of adding Bitcoin to their balance sheet. After all, Bitcoin’s price has exploded 76% in a little more than a month and a half. Some business owners may see accepting Bitcoin in lieu of cash as a way to earn profits far exceeding their core business, but there are others who may have been considering accepting crypto in their businesses but are taking a step back because of the volatility.
Stablecoins are a form of cryptocurrencies that are “pegged” to the US dollar, meaning, that $1 in a stablecoin equals $1 in USD. There are a few stablecoins like USDC, PAX and DAI which will allow you to transact in crypto without the wild valuation swings of Bitcoin. Transacting with stablecoins are a great way to dip your toe into the crypto waters without risking your precious cash to big market fluctuations.
Why would you want to transact in a cryptocurrency when you can just keep doing things the way you have? The answer is speed, efficiency and transparency. Think about a current transaction with a vendor. They send you an invoice. Your accounts payable people process that invoice. They may enter it into your accounting system or enter it and route it through the organization for approval. When it comes time to pay, they print a check (heaven forbid!), initiate a wire transfer, initiate a bill pay from the bank or do an ACH. Not that hard, right?
Traditional payment processing can be slow.
While paying a bill isn’t a hard process– it can be expensive and slow. Sending international payments can cost anywhere from $35-$50 + a percentage for the exchange rate. If you are frequently transacting overseas, this can add up. But cost isn’t the only challenge—speed is the other. Let’s say it doesn’t take that long to enter a bill and queue it for payment. It’s the payment process that takes a long time. For example, if the business was to use paper checks, that vendor won’t get the money in their bank account for at least a week, between mailing, depositing and the money clearing their bank. An ACH may be quicker, but it is still 1-3 business days before the funds are deposited. Wire transfers can also take up to 3 days to clear. That’s a normal course of business, right?
How crypto can help you rethink “business as usual”
While businesses may have become accustomed to the timeline of international payments and begrudgingly pay the fees, there is a hidden cost that comes with the delay–productivity. What if that vendor is holding the release of important code for your product or a shipment of goods until the money clears their bank? You’ve just added up to a week to your production cycle waiting for money to be received by your vendor and for them to release their goods or services.
The reason it takes so long for payments to clear is because transferring money relies on banks to act as intermediaries to facilitate payments between parties. And, while technology has significantly improved this process, there continue to be a lot of steps that happen behind the scenes when you push the button to initiate payment to another party—whether domestic or internationally.
In our next post we’ll look at how using the blockchain “rails” to route transactions for crypto currencies is a faster, more efficient alternative to the traditional banking system.