8 Reasons to Avoid Cryptocurrencies For eCommerce
Last month, Elon Musk announced that buyers can now pay for a Tesla with Bitcoin. Visa also announced its intention to test a cryptocurrency on its network. Many big brands are jumping on the cryptocurrency buzz. Cryptocurrency has been around for more than a decade, but this year is especially hot for crypto because many cryptocurrencies reached a new all-time high. And you as an e-commerce merchant may be tempted to join the bandwagon. In this article we will cover 8 reasons we believe you should avoid cryptocurrencies for eCommerce.
We understand why you might have a FOMO for crypto, but we are here to tell you not to make that decision just yet. Here’s why;
The truth is most cryptocurrencies have no real-world value; they mostly thrive on buzz. You can’t gamble on them to maintain a stable price value because they can go up or down at any given time without warning. Bitcoin is the most popular of them all but also arguably the most volatile.
For example, Bitcoin went up to $21,000 in 2020, this year it went all the way up to $64,000+, but it is currently trading at $49,000+ as of the time of writing this article. This may not look too bad to you, but you should also know that Bitcoin went from $17,000+ in 2017 to $3,000 in 2018.
Therefore, asking buyers to pay with bitcoin or any other cryptocurrency is a risk that can leave you stranded when you need to spend money. Or worse, force you to spend your crypto reserve when it is less in value than when you received it.
No Incentives for Buyers
How many times have you paid with your credit card knowing that your credit card issuer will give you a kind of cash-back incentive or something? This is how a lot of buyers feel. They also pay for stuff with their credit cards because they often get point-based or cash-back incentives.
Cryptocurrency doesn’t have that yet. So, buyers who prefer paying with their credit cards because of rewards will find it hard to pay with Bitcoin or Ethereum, or any other crypto.
No Buyer Protection
When a buyer finds that someone used their credit card to make a purchase, they can request a chargeback. This is a system that gives buyers the security and confidence they need to avoid paying for fraudulent purchases. Now, if you know anything about cryptocurrencies, one of the core features of all crypto coins is anonymity. Transactions are anonymous and irreversible. So, not only will the buyer’s identity be unknown to the merchant but also the buyer can’t request a chargeback. This is an open field for criminals who make fraudulent purchases.
Additionally, buyers won’t get an easy path to request a refund of their payment if a merchant doesn’t deliver as promised. Sure, a merchant can choose to refund payments to preserve their reputation and integrity. Also, a buyer can choose to sue the merchant, but this doesn’t guarantee anything.
Fiat currencies are universal. In fact, someone in Ghana can keep a dollar reserve in a safe in their room with the confidence that they can spend it at any time. You can shop on any website from anywhere in the world and pay with your credit card or debit card without dealing with conversion. Your card issuer and payment processor will do that for you automatically. This makes it easy to pay for things online and for merchants to receive payments without stress. This is not the case for cryptocurrency.
Very few POS and payment gateways process crypto, which means transactions between merchants and buyers have to be direct. But both sides are moving blindly without trust.
When you decide to accept crypto payments, you have to answer the question of which crypto? There are about 5,000 crypto coins available right now, and new ones get released to the market almost every day (if we are allowed to exaggerate). So, what if some buyers don’t have the crypto you choose to accept? That’s a huge possibility given the number of crypto coins available.
Even when you find a payment processor that supports crypto payments, it will be hard for the payment processor to support all possible cryptocurrencies. This is never a problem with fiat. Many payment processors support up to 130 fiat currencies, Stripe is a good example. That means there’s no limitation or friction unlike what you will get if you start accepting crypto payments.
Expensive Payment Processing
One of the features crypto enthusiasts brag about is low transaction fees. A bitcoin owner can transfer over $7,000 worth of bitcoin from their Blockchain wallet to another wallet, say Binance. And pay a transaction fee of $14.99 for a fast transfer that will take less than 60 minutes.
This feature doesn’t particularly exist for online purchases because of the other factors involved. The payment gateway involved will take a cut, and then the fees for converting cryptocurrencies to fiat. Before you know it, you are losing parts of the payment buyers make to payment processors and conversion fees. When you compare this process to the good old fiat payments, you will realize that it’s better to stick with the well-defined transaction ecosystem of fiat currencies.
As mentioned above, crypto transactions are anonymous and irreversible. Should someone steal your crypto you have no institution to turn to for help. You won’t be able to identify who stole your money, which means you can’t even take matters into your hands. Crypto thefts leave owners helpless.
That’s why crypto owners are always advised to toughen up their security protection so that no one will have access to their crypto coins. However, several people still end up losing their crypto coins because they forgot the security details of their wallets. They have money they can’t access and no institution to complain to, to help them reopen their wallet.
Cryptocurrency Regulations in eCommerce
One of the biggest threats the cryptocurrency industry faces is government regulation. Over the years, the crypto/blockchain industry has had to battle one government regulation or the other. If it’s not China, it’s India or the U.S., or Nigeria. Many countries don’t know what to make of crypto at this point.
This is because crypto is still at an early adoption phase, and government bodies don’t know how to handle it yet. You don’t want to accept crypto payments and then after a short while your country bans crypto transactions. How do you spend your crypto reserve?
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