Bitcoin For Merchants
Lesson 3: How to Accept Bitcoin
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Welcome back to Bitcoin for Merchants: An original Coin Academy course. This is Lesson 3 entitled “How to Accept Bitcoin”. In this lesson, we’re going to look at both manual and automated point of sale processes and how you can implement them for your business. Let’s start by talking about manual payment systems.
This is clearly the easiest way to go and it does have the lowest fees, though the transaction times tend to be slower, you’re locked into the normal Bitcoin confirmation cycle and settlement is an issue that you have to deal with on your own. In other words, getting your money out of Bitcoin is something you have to manage on your own.
That said, all you need to do is get a Bitcoin Wallet. There is a separate discussion on this in one of our other courses, we’re not going to get into that now. Once you have a Bitcoin Wallet, and you have a public address and a QR code, you’re ready to go.
All you need to do to get paid is present the customer with the QR code. For example, what you see on the right-hand side of the screen, oftentimes people display this at the register so the customers can simply take a photo of it or use their QR code reader (they’re not really taking a photo of it) and make the payment at the register.
Other people I’ve seen put it on the back of menu cards or it’s carried by the staff on a lanyard and shown to the customer. It is important that you keep control of your QR code to avoid QR code fraud, so I generally don’t recommend doing something like putting it on materials that are outside of your control like the back of a menu. When the payment clears, all you need to do is pass the customer the goods, the transaction is complete.
If you need to issue a refund, the process works in reverse. The customer passes you their Bitcoin public address, where they want you to send the refund. Alternatively, you can just manage your refunds in cash if you prefer.
Now, there’s another thing you can do here that works very well. If you want to tie specific payments to specific orders, you can use software that generates unique public addresses for each transaction. You can actually pre-generate those if you want to save time. Just put them in a spreadsheet, pull them out and use them as you need them. This works very well for online transactions, anytime you want to track a particular payment to a particular order.
Let’s take a look now at implementing Point of Sales solutions. Frankly, with the attractive clauses associated with point of sales solutions, I really recommend this to a lot of people as an alternative to setting up a manual system. It’s so much simpler and one of the big advantages is the accounting side of things.
The reports that you get out of the Point of Sales systems can reduce dramatically the accounting overhead that goes with adapting a new form of payment in your business. There are numerous solutions in the market today. This is really exploded in the last 18 months. A few of them have fully-automated dedicated terminals which are going to be right for some people. Others, most of them in fact, are software wallet-based solutions. So you can use your own smartphone or your own tablet. So if you’re a restaurant and you’re using tablets for taking orders from menus, you can actually implement the point of sales list system right on that tablet.
The market leaders, and there are a large number of people here, we’re not saying these are the only options or necessarily the best options, but the market leaders seem to be BIPS, Bitcoin Pay, Bit Pay, Coin of Sale, Coinbase, and Coinkite.
All of them offer a variety of services but their largely similar in terms of set-up, process, and the actual transaction process. There’s very little difference in the transaction process: how you get paid, how you present it to a customer. There are a number of available features and plans available. You do need to shop around here: make sure that it meets your requirements, make sure that it handles your national currency, make sure that you can deal with the fees, you’re aware of what you’re getting into, etc. It’s simply a matter of doing due diligence on these things. But these companies all seem to have very solid systems. We’re actually going to take one of these and use it as an example and dive a little more deeply into it and that’s the Coin of Sale system.
What does a coin of sale do? They offer a free version, no charges at all, and a premium version. This is not a system that provides a dedicated terminal. Instead you use your smartphone or your tablet. The premium version costs 0.59% per transaction. That’s it. As you can see, compared to credit card systems or even Paypal, this is tremendously advantageous.
They will also convert your local currency to Bitcoin price in real time, which means all of your pricing headaches go away. You can use it with any iOS or Android smartphone or tablet. With the premium version, you can use any wallet that you want so you’re not locked in a particular wallet. In the free version it ties into the Electrum wallet. The premium version also supports multiple locations, multiple retail locations for example. And it supports multiple cashiers, which is important for a lot of people. The premium version also supports refunds and it supports a wider range of report generation.
Let’s take a look now what it takes to set up a typical Point of Sale system. Here again, we’re going to stick to Coin of Sale. And we’ll also use that to show how transaction occurs in just a moment. I wanted to show you the set up because I think a lot of people have the opinion that this is going to be really difficult and really time consuming. But it couldn’t be further from the truth. It’s just dead simple.
Now you go back, log in again, this time log in to the admin system using the credentials that you just created. So enter that username that you gave, enter that password, click the sign in button and kaboom! There you are with your admin console. This, by default, immediately sets up one outlet which gets a generic name – Main Outlet. And you can see of course that there are no balances at this point in time, so what we need to do is, we need to go ahead and customize this so we can set it up for our business. So you’d click that blue button that says ‘edit/staff’ – this is the link for editing your store and managing your staff. This is then what you’ll get. You’ll get a screen that has multiple tabs in the left-hand side. Those tabs detail staff account, security, etc.
We want to start by creating our store. So click the “edit details” tab or click “details” tab and begin to edit. Give a name for your store or outlet, put in the opening hours. By the way, the opening hours relates to how the transactions are grouped in the reports for report generation. And also enter your Bitcoin public address. Once that’s done, you can click save.
And now let’s go ahead and deal with the staff. Click on the “staff accounts” tab. It’ll load up a list of demo staff and allow you to edit or create new staff or delete the existing ones that are in the system. Just click edit, change the staff details, click the plus sign add staff button on the bottom right. To create new staff, you need to tell what role they are, if you set them as a supervisor they’d be able to access the admin system, where you are right now. If you set them as a cashier, they can only access the cashier interface, and they need to have a unique PIN, you can’t use the same PIN for more than one person. The system will generate a random one for you or you can specify it if you prefer. That’s literally all there is that you need to do for the set-up. There’s more you can do but it’s not absolutely necessary at this point.
So let’s switch over now and look at what it’s like to actually use this Coin of Sale solution in a business environment, and in a transaction environment. Here’s what you do: you open the browser in your device whether it’s your smartphone or tablet – the one that you’re going to use to show to the customers.
Go to the payment URL coin of sale and you’ll see a login option. Click the cashier option (so we took the premium option). Once you see the screen on the right, enter the outlet code, which matches what store you’re in and then enter the PIN (personal identification number) for this particular user. Click the sign in button. Now you’re ready to go. This is the interface that you need.
If the customer orders something, all you have to do is type in the price of the sale in your currency, click the generate button, and this is what happens: the screen changes and shows you a QR code, it shows you the price in USD that you just input. It shows you what that value is in Bitcoin, and now you take this QR code and you show it to the customer and the customer scans the QR code and then they pay you.
Now, let’s look at this from the other side. This is what the customer sees: when they scan that QR code, this is what appears on their phone. It shows the venue, shows them the price in the local currency, it shows them the public address (it’s a long number string), and it shows them the amount of Bitcoin that’s required to conduct this transaction, and all they have to do is click the send button and kaboom! Second slider, this is what you then will see on your POS screen.
Coin of Sale processes the transaction and returns the confirmation within seconds. And that’s it, you’re done. You’ve just completed a sale. You’ve just handled the whole thing using your tablet or smartphone. It’s all done, the money is in your account now on the Coin of Sale website, in the wallet of your choice and you can withdraw that using the systems that they provide.
That’s it! It’s actually that easy. The set up is remarkably simple, though obviously it varies by levels of complexity by which vendor you use, but the process is essentially the same, and the actual usage in front of the customer is really that simple. You have to log in obviously, so you can access the app, you have to put in the amount, you have to let it generate the QR code. That takes seconds. Show it to the customer, customer scans, customer pays you, transaction confirmed, boom! You’re done! That’s all there is to it.
And that’s it for this lesson. Join us for lesson 4 where we look at Accounting, Tax and Legalities.