The allure of overnight riches can outshine the fact that Bitcoin was first used in an everyday transaction — to buy a pizza. Today, even the tastiest slice won’t come close to the 10,000 Bitcoins that order cost in 2010 — an amount now worth more than half a billion dollars.
Accepting cryptocurrency at a business has become easier and more widespread in the decade since. But it’s still more complicated than simply acquiring it as an individual. The checklist to get started includes finding a payments partner (probably), working through integration questions and thinking about your cash-conversion strategy.
Who accepts Bitcoin and crypto?
The first high-profile businesses to accept crypto payments reflected its inception in the world of tech: Companies like Microsoft and PayPal have been accepting it to some extent for years. Shopping website Overstock took adoption a step further, funding new blockchain projects in addition to allowing customers to buy a new side table, a juicer or whatever else using Bitcoin. In recent years, less techy companies have started coming online: Whole Foods, Home Depot and the NBA, to name a few.
Global companies like these can make headlines if they start accepting crypto, but thousands of small businesses dotted across the world also take payments, capturing some of the more than $1 billion worth of daily transactions in Bitcoin alone.
Why accept Bitcoin or crypto payments
Quicker, cheaper payments can be an attractive proposition for existing businesses. Crypto payments also might unlock new business models, similar to how the rise of card payments enabled the growth of online shopping.
“What we see in this space historically is that once you bring the cost of access down, you might see some new and interesting businesses you haven’t seen before,” says Roy Zhang, group product manager at Coinbase, a crypto exchange platform.
What to consider before accepting Bitcoin and crypto
Go it alone or with a payments tool?
Peer-to-peer transactions are an integral part of cryptocurrencies. In other words, you don’t need a third-party processor. This is the cheapest route to go — Bitcoin, for example, is free to receive and can be free to send.
However, building a payment workflow is a time-consuming job that demands technological expertise. Third-party payment tools address this need by giving businesses a way to quickly start accepting crypto payments. You’ll likely need to submit information about your business in an application, and more information might be needed if you plan to convert crypto to cash through the service provider.
These services are not payment processor replacements, as they do not process card payments. If you want to accept card payments and cryptocurrency, you’ll need both.
Which cryptocurrencies will you accept?
There are thousands of cryptocurrencies, but not every one is accepted on every service. The most popular, Bitcoin, is generally supported everywhere. But if you’re interested in accepting Mooncoin or Alice, for example, you might need to search harder.
What are the tax and accounting issues?
It’s a good idea to talk to your accountant or bookkeeper if you are thinking about accepting crypto.
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First, you should be aware of the tax implications, especially if you plan on holding on to any crypto you receive.
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Second, think through how information from your point-of-sale system gets to your accountant. For example, if you rely on a cloud-based system like QuickBooks or Xero, you’ll want to know if your crypto payments tool integrates with it.
Converting to cash — if, when and how?
This can have huge implications on your business, as big price swings mean the value of your crypto could rise — or fall — in a short amount of time. Will you hold on to whatever crypto you receive indefinitely? Will you convert to cash immediately? Will you convert it on a scheduled basis?
If you rely on consistent cash flow for your operations, these questions are all the more important. And once you have a plan, make sure your preferred crypto payments service can actually implement it.
Other operational questions
The services provided by crypto payments companies can help smooth out implementation issues, like monitoring price volatility and setting up a modern user interface. However, a company will have operational questions to figure out.
When accepting crypto, there’s no direct cost to you, says Don Apgar, director of the merchant services advisory service at Mercator Advisory Group, a payments industry firm. “But you have incurred a cost: to reformat a report; to train customer service; what happens if someone wants to return; what about disputes?” And time is a limited resource. “Everything you do means something else waits,” he adds.
Operational questions you might want to think through include:
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What training will staff need?
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Will you be prepared to answer customer questions?
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Are there elements of customer service — like issuing refunds — that need to be rethought?
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How will your crypto payments tool work with your current inventory or reporting practices?
At a glance: accepting Bitcoin vs. credit cards
Cryptocurrency is fundamentally different from credit cards. However, they share similarities that are important to businesses. Specifically, they both provide a way for customers to pay electronically, which is convenient for in-person transactions and a necessity for online sales.
A side-by-side comparison illustrates where key differences lie.
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Credit card |
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Payments not required to run through a payment tool. |
Payments must run through a payment processor. |
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Cryptocurrency: A cryptocurrency payment tool provides a user interface that makes transacting in crypto easier for the merchant and the customer. These tools can also help ease issues related to price fluctuation and often provide a built-in way to convert crypto to dollars. Crypto transactions aren’t required to be routed through payment tools — instead, they are a value-add service. Credit cards: A credit card processor communicates with card networks and banks to verify customer identities, confirm that customers have sufficient funds or credit and initiate the movement of money from the acquiring bank to the merchant’s account. It’s impossible to accept a card payment without a payment processor. Bottom line: You don’t need a payment service to accept crypto like you do with card payments, but replicating the user interfaces and tools they can provide would take some serious time and technical know-how. |
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0% if done directly with customer. Can be 1% or so using a payment tool. |
Standard flat rate is 2.9% plus 30 cents per transaction, but varies by processor. |
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Cryptocurrency: The cost of a crypto transaction is zero if completed with customers directly. Payment tools that streamline the transaction process typically charge 1% of each transaction. Unlike card transactions, crypto transactions don’t rely on identity verification or funds verification. As a result, there are no fees associated with compliance or chargebacks. Credit cards: Fees can vary. A standard flat rate is 2.9% plus 30 cents per transaction. A large business that uses interchange pricing might pay less, while a high-risk business will likely pay more. You also might encounter additional stand-alone fees, like payment card industry, or PCI, compliance fees. Bottom line: Not only is accepting crypto much cheaper than accepting card payments, you’re likely to encounter simpler pricing structures. |
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Safety and security |
Little to no responsibility for compliance or fraud. |
Responsibility for compliance and (via fees) for fraud. |
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Cryptocurrency: Crypto can only be used if you know the password, and the password is only ever entered on the customer’s device. As a result, there are no compliance requirements surrounding crypto payments because secure customer data does not travel through a business’s systems. If a customer loses their password or has it compromised in any other way, the responsibility lies completely with them — not a merchant. Credit cards: When paying with a card, a customer authorizes the merchant to use the information on the card to, with the help of a payment processor, instruct the customer’s bank to move money. Because anyone — not just merchants — can initiate a transaction if they have card information, fraudulent charges can and do take place. Card networks do use advanced techniques to spot and halt fraudulent transactions before they go through, and PCI compliance helps strengthen the security at each business, but the threat of fraud can’t be completely extinguished. The risk of fraud is a cost of using cards, a cost that is ultimately passed on to the merchant in the form of fees. Bottom line: With crypto, you’re not on the hook for fraud, and you can say goodbye to PCI compliance. |
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Resolving customer issues |
No legal protections or chargebacks to manage, but you’ll likely need to make clear your own policies. |
Decisions often in the hands of card networks, and they often favor the customer. |
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Cryptocurrency: Cryptocurrency transactions are irreversible. There are no chargebacks. This removes a pain point for merchants, but it can open the door to dealing directly with unhappy customers if any issues do arise. Merchants should also think about making sure return policies address cryptocurrency-specific issues. For example, as the price of cryptocurrency fluctuates relative to the dollar, there should be a clearly stated process for how and when you’ll calculate and send cryptocurrency to a customer making a return. Credit cards: If a customer has a return, the merchant can refund the sale amount to the customer’s account. In addition, a card user can claim that a card transaction was unauthorized, which can occur if card information is lost or stolen. This claim initiates a chargeback, a process in which the merchant must return the funds, and often a fee to go with it. There is an appeals process if the merchant wants to contest the claim. However, the decision is ultimately in the hands of the card network, and they often rule in favor of the customer. Bottom line: The good news is that you won’t see expensive chargebacks or bureaucratic appeals processes if a customer pays with crypto. The bad news is that, from a customer-service perspective, you’ll probably need to build out and administer a new return and complaint policy of your own. |
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Settlement |
Flexible and fast, but also can be volatile. |
Slower, but likely more stable. |
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Cryptocurrency: Crypto funds are accessible about 10 minutes after a transaction. Some merchants choose to keep the crypto itself while others choose to convert it to U.S. dollars or another currency. Converting funds can take place immediately or at a later time. The price volatility of many cryptocurrencies brings risk to conversion, though some merchants help alleviate this risk by only accepting stablecoins, which are typically less volatile. Credit cards: Credit cards don’t have the volatility crypto does — merchants are paid in U.S. dollars — but it can take a few business days or more for that cash to be available to the merchant. Bottom line: Crypto is flexible, but it’s also volatile. If cash flow is important, you’ll need to be scrupulous about finding a payment partner who offers tools to help, including automatic conversions and volatility-limiting measures. If you wish to keep some of your funds in crypto, monitoring it becomes another task on your to-do list. Cards might be slow and clunky in comparison, but they excel at predictability. |
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Regulatory oversight |
Not much now, for better or worse, but stay tuned. |
Stable and uniform, and comes with lots of compliance effort. |
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Cryptocurrency: The regulatory paper trail of crypto is much thinner than card payments, which has been around for a lot longer. However, the future remains a question mark. There’s no shortage of proposed regulation at the state, federal and department level. One thing is already clear — accepting and holding crypto and later selling it is akin to buying and selling stocks, so you’ll have extra work come tax time. Credit cards: The existing payment system has decades of oversight under its belt. One upside to this is a stable, relatively uniform system that has widespread adoption and consumer awareness. One downside is that adhering to regulation on every level, whether administered by the government or by the payments industry, comes at a cost of time and money: PCI compliance and consumer protection laws are a few examples. Bottom line: Compared to card payments, crypto payments are barely regulated. That makes them better, right? On the one hand, it can help reduce indirect compliance costs and responsibilities. On the other hand, government involvement can provide clarity to murky questions as well as establish a baseline of safety and confidence to the system. For example, your savings account is likely FDIC-insured, but your Bitcoin isn’t. Finally, just because regulations are currently scant doesn’t mean they will always be. |
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Convenience |
Transactions are comparatively fast, but there are some learning curves. |
Transactions are quick and how-to is well known, but underlying processes can be hairier. |
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Cryptocurrency: Relative to credit cards, crypto payments excel at speed and security. Using crypto can also eliminate or reduce some administrative tasks. On the other hand, as a new technology, there might be a learning curve for employees and customers who use it, and integrating it with other aspects of running a business, like inventory management or bookkeeping, could be difficult. Credit cards: A relatively mature technology, card payments have widespread familiarity among users. The online shopping experience is made easier with autofill or keeping card information on file with companies or platforms. Mobile payments have given consumers another option at in-person checkouts. However, the payments process is complex and can be difficult to understand, which can make comparing options and deciding on a payments partner an opaque process for some. Bottom line: From start to finish, a typical crypto transaction is a breeze compared to a card payment. But transactions don’t take place in a vacuum — each one is nested in a particular business, which has its own customer service policies, bookkeeping needs, employee awareness and other operational realities. Realistically, crypto is more convenient in some domains but could be bumpier in others. |
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How to start accepting Bitcoin and crypto payments
A typical peer-to-peer crypto transaction might look like:
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A customer choosing to pay with crypto is presented with a QR code.
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That QR code tells the customer’s crypto wallet or app where to send the crypto, a destination known as an address. This is similar to an email address, however it’s typically generated and used just once.
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To verify the transaction is legitimate, the customer enters their password, called a private key.
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Before the transaction is complete, it must be verified and added to the public ledger, a process completed by users around the world running special computer programs. This process can take time — about 10 minutes for Bitcoin.
A business that accepts crypto payments using a payments firm might have a few differences, such as faster completion times and a window during which the rate is locked to limit volatility.
The companies below offer tools that allow customers to pay with cryptocurrency:
BitPay
Price per transaction: 1% of each transaction for most businesses.
Volatility management:
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When a customer initiates a payment, Bitpay compares rates on multiple exchanges, uses the most competitive rate and does not charge a markup. The exchange rate presented to the customer is guaranteed for 15 minutes.
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If a merchant chooses settlement in the cryptocurrency used for the transaction, the actual amount received is equal to the amount the customer paid as denominated in that cryptocurrency, even if the exchange rate changes later in the day. If settlement occurs in U.S. dollars (or other currency), the amount a merchant receives equals the original price stated in dollars — a $98 jacket will result in a $98 deposit, less the 1% fee, even if the exchange rate of the crypto used changes throughout the day.
Payment options: BitPay supports 11 currencies.
Notable feature: BitPay has a partnership with Verifone to make in-person payments with cryptocurrency easier. While most payment tools enable merchants to accept in-person cryptocurrency payments through a QR code displayed on a mobile device, this partnership allows the QR code to be displayed on the same card reader the point-of-sale system uses to accept cards. This simplifies the checkout process and makes it more familiar for customers.
Coinbase
Price per transaction: 1%.
Volatility management: The exchange rate locks the moment a customer starts the checkout process, and the merchant can adjust the amount of time the price is locked.
Payment options: Coinbase accepts seven cryptocurrencies.
Notable feature: Coinbase offers two account types. The pricing is the same, but there are differences in the level of hands-on control a user experiences:
Self-Managed:
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You can set up an account in minutes.
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Cryptocurrency payments go directly to your wallet for you to manage directly.
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To convert to U.S. dollars, you’ll need to create a Coinbase Exchange account, transfer your crypto there and sell on the exchange.
Coinbase-Managed:
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Requires a compliance review that can take up to a month.
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Transferring money to a bank account is made easier.
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Coinbase manages your wallet and private keys.
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Some or all of the cryptocurrency payment can automatically be converted to U.S. dollars or other currencies.
PayPal
It’s worth noting that PayPal allows shoppers to pay using cryptocurrency. What makes PayPal different from other services is that merchants neither choose to allow this option, nor do they have the option to be paid in crypto. Instead, a PayPal user who holds cryptocurrency in their PayPal account can choose to pay with it. PayPal credits the merchant’s account with U.S. dollars.
While this option provides no functional direct exposure to crypto transactions to the merchant, you are giving some customers the option to pay in this way.
