GUEST POST: Introducing bitcoin for SME payments – 7 tips
By Mark Thomasson, business developer at Invoicebus, an online invoicing service based in Macedonia.
Making payments on time and without any friction is one of the key elements in the world of business. As the power of the Internet is spreading to various fields, owners of small and medium-sized enterprises (SMEs) can enjoy numerous benefits of this global network. One of its crucial advantages is the ability to make payments online. By this we don’t only mean paying via payment gateways and credit cards, but using a genuine digital currency, e.g. bitcoin (also known as XBT). Although being an online currency without a tangible version, bitcoin has gained popularity since its conception in 2009. As of December 2016, the total sum of bitcoin in circulation reached $14bn. Since this is a promising currency of the future, SME owners should learn how to make it work for their enterprises.
1. Bitcoin in a nutshell
The status of bitcoin, unlike that of official national currencies, is predominantly determined by the market itself. This is so because it’s a cryptocurrency, based on clusters of letters and numbers that create unique keys. These keys are divided into public and private keys. Your public key can be compared to your bank account number, whereas your private key is the code which enables you to access your public key. Each company or individual that joins the bitcoin community (thereby becoming what is known as a “miner”) is rewarded with these keys. Since every transaction you make here is based on peer-to-peer technology, it’s an unregulated market that lives its own life, without any interference of financial institutions.
2. Exchanging bitcoins for dollars
The first thing a John/Jane Doe business owner needs to know is that bitcoins can easily be exchanged for other currencies. The current bitcoin-dollar exchange rate is 1 XBT per $2,568.82. Only in April 2017, this rate was 1 XBT per $1,223. As you can see, bitcoin constantly fluctuates in value, just like any other currency.
However, when using bitcoins, you become a part of a self-regulated market that completely depends on demand and supply, as well as on other participants.
As a result, you can exchange your bitcoins for dollars whenever you want. However, entrepreneurs who decide to add bitcoins to their monetary assortments should regularly follow what may be significant fluctuations of exchange rates due to the unregulated character of the bitcoin market. This will help them anticipate any bigger changes and react on time to save their assets.
3. Global applicability
In this day and age, you can count on different payment-enhancing options on the Web. From estimate forms and invoice templates to credit cards and payment gateways, you can make financial transactions in a smooth and fast way. And the cherry on the top of this array of entrepreneur-friendly options are bitcoins.
One of their greatest advantages lies in their global applicability. They are beyond any boundaries, both political and geographical. What’s more, credit cards and e-banking accounts will be in danger if bitcoins continue to develop at the current pace, since bitcoin makes payments faster than credit cards do.
The only prerequisite to pay with this digital currency is that your business collaborators accept it. As it seems today, far-sighted businesspeople will be looking for similar entrepreneurs in the years to come, so as to make SME payments with bitcoins.
4. Instantaneous payments
Unlike what was the case only ten or fifteen years ago, we can say that modern businesspeople can transfer money at incredible speeds. Nevertheless, tech innovations keep pushing the envelope, introducing faster and faster ways of making payments. This is where bitcoin as a concept and bitcoins as the means of payment get ahead of the curve and cross the finish line at full gallop.
Due to their peer-to-peer nature, the process of using bitcoins for payments depends only on the two parties that make a deal. No banks, no governments and no financial authorities interfere with this e-currency. As a result, what you pay to your client or provider is instantaneously transferred to their bitcoin wallet. Nobody mediates between you and there are no fees for middlemen.
5. Saving when paying
Although today you can make your payments via various online solutions, all of them have at least some fee. Be it account fees or additional payments upon transactions, those expenses gradually nibble your budget. So, why would you cover those bonus costs if you can turn to more efficient and yet least expensive ways of paying online? This is where bitcoins come on stage.
First of all, the payments you make in bitcoins will cost you nothing owing to the above-mentioned independence of this payment system. As a result, you can save some money when you’re paying for products or services.
Furthermore, when you calculate the number of transactions your business does annually, you come to a significant amount of money you can save using bitcoins. These assets can be used to improve your business or to increase your savings fund.
6. Investing in bitcoins
Apart from being a payment option, bitcoins also have a certain investment potential. Just like any other currency, commodity or bond, Bitcoin is a living monetary unit that has its ups and downs. This gives businesspeople a great opportunity to invest in bitcoins. The closest equivalent to such an investment would be trading stocks. It requires some time and knowledge to learn the tricks of trade when it comes to investing in bitcoins. A rule of thumb is that you don’t expose your business to risks and use bitcoins mainly as a payment option.
Moreover, what makes this kind of investment justified is the prediction of the future of the Internet. Namely, there will be more than 4 billion Internet users by 2020. Therefore, it’s highly likely that the number of bitcoin users will grow as well. Those who invest some of their earnings in this market in the near future might reap the fruits of such a decision in a few years’ time.
7. Avoiding risks
Despite being a swift and effective option for SME owners, paying with bitcoins still hides some risks. However, they can be avoided if you follow some simple rules. For starters, it’s vital to understand that bitcoins are mere money, just like dollars, euros etc. Therefore, don’t make any riskier moves with them than you would do with other, established currencies.
Apart from that, always use a non-digital currency as a reference when you’re making your payments with bitcoins. What you can do is establish real-time communication with the other party to check if you both agree to the exchange rate at that moment. Otherwise, you might trick a client without even knowing it. Follow the same pattern with all your clients and you’ll soon embrace bitcoin as your major currency.
Bitcoin is definitely one of the most interesting business assets. It can serve a great purpose for millions of business owners on a global scale. However, it also demands rational use and a certain level of knowledge of both economics and technology. Hopefully, this concise guide will help entrepreneurs start using bitcoins for online payments and advance their businesses in the future.