The Case for Businesses to Accept Bitcoin as Payment

A few weeks ago, while on tour for the upcoming documentary, The BIT Movie crew stopped by 101 Deals Thrift Store to see how easy it is for small businesses to accept bitcoins as an option for payment and checked out the Bitcoin vending machine where folks can buy bitcoins locally. I also made the case why 101 Deals Thrift Store accepts bitcoins as payment and why other businesses should as well.

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First and foremost, accepting bitcoins as a form of payment is an improvement over merchant card services. Bitcoin is an instant cost savings to the business’s bottom line. Currently, 101 Deals Thrift Store accepts credit/debit cards through a merchant card service. The fee to accept the cards in person is 2.75% and over the phone is 3.5% plus 15¢ per transaction. This means that if a sale at the store is made for $10, only $9.73 is deposited to the business’s account. There are a few options to accept bitcoins for merchants, but one that is tailored to business and easy is Coinbase.com. When using Coinbase, there is no transaction fee for the merchant and the first $1,000,000 (!) of converting bitcoins to US dollars (IE “cashing out” is free). 

Consider a small business that processes $100,000 in credit/debit card sales a year. If 10% of the sales were instead in bitcoin ($10,000), the savings would be $270. Even if the business reached the $1 mil threshold and incurred the 1% fee, the savings is still $170 a year on every $10,000 of sales. If the business accepts cards over the phone instead, the savings are even more dramatic, $350 on $10,000, (not accounting for the 15¢ per transaction cost).

Bitcoin is also much better suited for distant transactions than credit or debit cards. I recently made a sale to a customer over the internet. After agreeing on the details via email (which I had mentioned I accepted Bitcoin but wasn’t taken up on it), we then had to get on the phone to complete the sale. Our schedules were not the same and it took several days and numerous voice mails before we could both find a suitable time to complete the transaction which was carried out via card over the phone. If the customer would have paid with bitcoins, he/she could have instead just made the payment at a convenient time and place for him/her. In this situation, bitcoins would have yielded a savings in terms of time for the business as the numerous phone calls/emails to connect to exchange information would have not been necessary.

The example above illustrates another advantage as well, security of information. Conducting a card sale over the phone is bad for both the business and consumer because of risk. There is more risk (and thus a higher fee) when accepting cards over the phone for the business and there is risk for the consumer as well since someone at the business could more easily record the card information and be able to run it again or sell the card information. With bitcoin, there isn’t this problem because the consumer retains their private information (the keys that allow him/her to spend the coins).

Bitcoin also has an advantage in fund availability. With credit/debit card sales, the funds are typically available to the business in one to two business days depending on the merchant card service provider. If a sale is made on Friday afternoon, the money is typically not be available to the business until Monday and can be even as late as Tuesday or Wednesday in the case of a week with a holiday on a Monday such as Labor day. With Bitcoin, as soon as the transaction is made, the bitcoins can be spent by the business.

What about cash though?

There are also many advantages to Bitcoin over cash as well, the key most being security. With cash, there is a high-level of risk and businesses have to employ many controls to try to safeguard their cash holdings from theft, loss/destruction, or even misplacement. There is a lot of work that goes into managing cash that doesn’t occur with Bitcoin. With Bitcoin, only designated persons can be given access to funds and the treasury function of business is thus much more secure. Also, in a theoretical business that only accepted Bitcoin, it would basically be impossible to “hold-up” the business since clerks wouldn’t have access to funds and thus couldn’t give them to the robbers.

There is also a lot of work associated with accepting cash that doesn’t exist with Bitcoin such as restocking and managing change for cash drawers and taking cash deposits to banks. It also helps deal with computational errors that result from cash transactions such as giving the wrong amount of change or logging incorrect amount of tender. Bitcoin has the potential to help eliminate these errors completely.

With Bitcoin, funds exist online and businesses can save time and money by not having to deal with the physical world as well. There is no standing in lines, buying/writing/mailing checks, there are savings on ink, envelopes, stamps, paying wire fees, etc. Business would instead be empowered to send funds instantly to suppliers, customers (refunds), and employees. Additionally they can save on bank fees and can save time by not having to deal with banks nearly as much. With Bitcoin, an entity can create an address (similar to opening an account at a bank) in seconds and not have to fill out endless forms, submit IDs, sign documents, etc.

Finally, accepting Bitcoin can differentiate a business from other businesses. A customer who has bitcoins might come to a business if it accepts Bitcoin instead of another that doesn’t. It’s an easy way to attract new customers who might simply come conduct business just because a business is willing to accept bitcoins.

Ultimately, while Bitcoin might seem far-fetched at the moment because it seems confusing, complicated, not widely used, and unstable, the Internet had similar characteristics in 1995. It may not be perfect at the moment, but in my opinion, Bitcoin is a groundbreaking advance in money and shows a glimpse at the future of money. Businesses should at least entertain accepting it as payment, what is the downside to providing customers another way to pay?

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33 Comments

  1. With the Coinbase app at Murphy’s Taproom in Manchester, the process works really well — except on those occasions when the Coinbase app crashes during the transaction, leaving the server completely in doubt as to the status of the transaction, even though the money left the customer wallet.

    So in this case, something needs to be improved before anyone can have confidence in this type of transaction.

  2. All the server has to do is check for an unconfirmed transaction on the blockchain. They should just have the Block Explorer open at all times.

    Also, I wouldn’t use Coinbase for paying for food/drink. They’re not known for speedy transactions. I’ve heard good things about the Mycelium wallet.

  3. Wow. Seems so much easier than the hassle of taking a bill out of my wallet an handing it to the cocktail waitress.

  4. LoL. Shire Douche – as do all the other little douches – really doesn’t have much of a clue.

    Someone will inevitably figure out a way to hack their precious BitCoin nonsense and then they will all be crying in their virtual beer with no money to their name.

  5. I’m a conspiracy theorist and I think quantum computer is shit. I wouldnt try breaking bitcoin encryption with known computer technology. I’m a conspiracy theorist and I turn my hobby into practical advices

  6. This one pic is better than your FUD… http://i.imgur.com/DAolgXu.png

    Of course Central banks and money transmitting agencies will spread FUD because they are now competing with Bitcoin.

  7. “With cash, there is a high-level of risk and businesses have to employ many controls to try to safeguard their cash holdings from theft, loss/destruction, or even misplacement. There is a lot of work that goes into managing cash that doesn’t occur with Bitcoin. With Bitcoin, only designated persons can be given access to funds and the treasury function of business is thus much more secure. Also, in a theoretical business that only accepted Bitcoin, it would basically be impossible to “hold-up” the business since clerks wouldn’t have access to funds and thus couldn’t give them to the robbers. There is also a lot of work associated with accepting cash that doesn’t exist with Bitcoin such as restocking and managing change for cash drawers and taking cash deposits to banks. It also helps deal with computational errors that result from cash transactions such as giving the wrong amount of change or logging incorrect amount of tender. Bitcoin has the potential to help eliminate these errors completely.”

  8. That is an issue with the machine not the blockchain or Bitcoin. They need to just use a tablet and the coinbase app send hte coins via QR code and then cash out. Too much shitty automation is resulting in the problem you stated above.

  9. Look into the cryptography used to secure a Bitcoin wallet please. The cost to take over the Bitcoin network would bankrupt most governments. I agree this can change but I I’m fine with taking risks. I’m fine with you choosing to be a slave to FRNs, just don’t require me to be a slave as well.

  10. Competition is thriving in Bitcoin Hardware Wallet technology. Here is comparison of the latest cryptocurrency hardware wallets.

    Hardbit
    Trezor
    Ledger
    HW1 Wallet
    Cryptolabs case
    Mycellium

    Software hack proof
    yes
    yes
    yes
    yes
    yes
    yes

    Physical hack proof
    yes
    yes
    yes
    yes
    unknown
    unknown

    Phishing protection
    yes
    yes
    yes
    yes
    yes
    yes

    Source:
    http://talkera.org/wpTalkera/hardware-wallets-compared/

  11. http://www.bitcointrezor.com/

    “Hardware devices like the TREZOR that cannot be infected by malware will make holding bitcoins as easy and secure as holding paper money. They are an exciting step in the evolution of Bitcoin from an experiment for geeks to a payment system anybody can use.”
    Gavin Andresen
    Bitcoin Foundation

  12. you know that software is not actually hack proof given time right?

  13. given time someone will find a way to hack it.

  14. Lol terrible article. First of all most hackers are not breaking into personal wallets they are getting into shitty exchanges and tricking those exchanges into transfer Bitcoins. I have used Bitcoin for over a year now have had as many as 10,000 dollars worth of them and I have never lost a single one to a hacker. I only use exchanges in the United States and again have not lost a single one. I did have USD stolen from me by the Russian government when I was wire transferring funds from a Hong Kong Bitcoin exchange back to the United States. Big mistake lol. Fiat in this case was more risky as I had no control which banks it would be routed through.

  15. I buy real beer with Bitcoin. if you know anyone who can hack 256-bit encryption, I’ve got some beachfront property in Omaha I’d like to sell you.

  16. Not using the FED’s fiat notes is worth an initial hassle.

  17. so you wired some bitcoins and the russian government stole it? interesting.

  18. No I wired united states dollars and it was stolen by the Russian government. This has been the only time I have lost funds trading cryptocurrencies and it was United States Dollars not Bitcoins or Litecoins.

  19. FYI you cannot wire Bitcoins you just send them from wallet to wallet. Banks are not involved yet with the transfer and ownership of Bitcoins. Chad I’ll send you some free Bitcoin so you can learn about this process more. Why not make an account on https://www.cryptsy.com/ so you can start trading back and forth between currencies. This is United States exchange down in FL. They have never screwed me and their security is very very strong. I can send the coins straight there if you like.

  20. i guess this line “wire transferring funds from a Hong Kong Bitcoin exchange” is what is confusing me.

  21. Yeah I can see that my bad. I switched the BTC to USD then attempted to get the USD back into the USA.

  22. this is interesting and would like to hear more about it

  23. I transferred the USD from the exchange to a money service provider called payeer. Payeer is in Ukraine…lol. Payeer at the time was using the First Standart Bank of Russia. During the wire transfer USA and Russia relations went to shit sanctions went up and bye bye money. This is the biggest reason why I support Bitcoin. Its political proof in theory.

  24. for now it may be

  25. Thanks for this valuable information.

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