Bitcoin for Merchants
Lesson One: Why Accept Bitcoin?
Transcript of video lesson
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Welcome to Bitcoin for Merchants, a Coin Academy original course design to introduce you to the world of accepting Bitcoin as part of your business.
There are four lesson plans in this course. The first one, this lesson, is called, “Why accept Bitcoin?” The second lesson is all about understanding the risks. The third lesson is how to accept Bitcoin, and the final lesson is called, “Accounting, Tax and Legalities”.
Let’s go ahead and get started with why accept Bitcoin in which we are looking at a variety of different reasons and advantages that relate to Bitcoin and why you might want to accept Bitcoin as part of your regular business transactions. First, let us take a look at some of the demographics. There are fairly compelling depending on the nature of your business.
There was a study from a Massachusetts Division of Banks in 2014 that arrived at some interesting conclusions. First, they found that affluence plays a role in propensity to use Bitcoin with more than seventy percent of the people who earned over a hundred thousand dollars a year being aware of Bitcoin. In contrast, those who earn less than a hundred thousand dollars a year, less than half knew about Bitcoin.
It is also fairly apparent that users of Bitcoin tend to be tech savvy and well educated. They are largely early adopters. So, if the demographics and personality of early adopters matches your business service, this is the logical place for you to be, whether you are a coffee shop or selling personal tech devices. In those situations, Bitcoin is likely to be a good channel for you and open up additional purchasing power.
There are also new marketing channels that are unlocked by being part of the Bitcoin ecosystem. Bitcoin users tend to be quite active and social and they tend to network quite a bit, it is the nature of the beast. This allows you to tap in the Bitcoin lists, groups and meet ups. It also means that you can tap into some other websites that provide maps listing businesses that accepts Bitcoin. Some of the examples are SpendBitcoins.com, WhereToSpendBitcoins.co.uk and Coinmap.org, the last one being in a global service. As you can see, from the screenshot that’s apparent on the right hand side right now, these will actually map out the different locations and tell people about your business so someone is looking to spend Bitcoin, they can prefer your merchant over another merchant which only accepts fiat currency. For travel and tourism businesses, there’s even a dedicated site, Bitcoin.Travel.
Another reason why you might want to consider accepting Bitcoin is that it’s extremely easy to accept settlement via the mobile device. So if for example you are a maker or craftsman who wants to sell things face to face outside of the office or in a shop, you can take payment directly on your mobile device.
Similarly, it’s very easy to implement online. It means that the Bitcoin is able to extend your reach to people beyond your physical location in a very simple fashion, in a very minimal transaction cost. It is nowhere near as difficult and as simple as making your credit card payment system, we will look that on later in this course.
And then, another idea you may want to consider is that if you’re concerned about a Bitcoin price fluctuations, one alternative is to sell gift cards, sell them for Bitcoin but have them denominated in a fixed U.S. dollars or national currencies prices. So, whoever receives the gift card is able to purchase items at a face value of the gift card. So the cards are purchased in Bitcoin but are actually redeemed at national currency prices.
Another powerful reason for accepting Bitcoin is the low transaction fees. If you’re conducting manual transactions, that is, doing it yourself using your wallet, fees range widely from free to nearly free, from point zero one percent up to about point three percent depending on which wallet and what you have got to go through with an intermediary.
If you are using a premium or point of sale service, you will find that fees are often more, those services are out to make money but they typically charge only about point six percent. But again that’s depending on the services you have taken and who your provider is. But anyway, you look at it as much more attractive than the fees charge by a credit card payment made or even by Paypal.
Some point of sale services will levy additional fees if you use their hardware if they have a dedicated POS terminal or if you use their debit card to get you money out of the system. But then again these are typically optional services and you can make these decisions when you choose your vendor. The low fees also make taking deposits in Bitcoin very attractive, because if you have to issue a refund of that deposit you only going to incur nominal fees. And then the big one for a lot of people, particularly if you are in the food and beverage business, there are no chargebacks. Bitcoin transactions when the’re done, they’re done. It’s like handing cash to somebody. Chargebacks costs literally billions of dollars per year in the United States alone, so this is potentially a huge area for you and if your business is in narrow margin business or is susceptible to a large amount of chargebacks, Bitcoin is extremely attractive.
One additional point we should mention here and this is only going to apply to people in the extreme ends of the scale. If you are doing a very high value transactions, one of the attractive parts of Bitcoin is that transaction fee remains constant. That makes large transactions extremely predictable and that makes them very affordable. In contrast, for the very first time, micro payments are now practical. These low transaction fees means that if you want to charge like you know ten cents every time somebody access a piece of content in your website, you can do that without being eaten by the transaction fees. Many people predict that one of the big revolutions that will come out Bitcoin is the rise of micro payments systems.
Another advantage of Bitcoin is the transaction times. If you are not using a point of sales services, transactions settle with confidence in about ten minutes. If you are using a point of sale service, many of them offer immediate settlement so your transactions will settle within literally seconds.
Now it doesn’t matter if it is local or international small sale there is no difference, no matter what their national currency is or what you national currency is, they’re all settle with more speed. That’s it. For large amounts, you want to take a more conservative approach to settlement times.
Now, that’s actually a good way for us to the second lesson where we talk about understanding the risk. So if you would please join us for lesson two. Thank you very much.