When asked his opinion on cryptocurrency, Stephen Colbert’s swift comeback was, “It’s gold for nerds.” With the world on the verge of a cryptocurrency domination, one big question looms: Should businesses accept client payments in cryptocurrency?
As companies globally strive to break free from stringent government regulations and interference in financial markets, the world awaits the mass adoption of cryptocurrency. Have you been thinking of getting on board the crypto hype train too? It might be a good idea to catch up, for Elon Musk might well be right when he says, “Paper currency is going away.”
It is best to be aware of the pros and cons of every shiny new object like cryptocurrency. There are risks and benefits alike associated with doing business in crypto. Here’s what you need to bear in mind before plunging into the world of crypto.
Widen the scope of your business
It is always best to have as many payment options as possible. Your clients must have ample room to navigate, and having crypto payment as an option opens up a whole new world of opportunities. As per this Business Insider Report, the number of global crypto users crossed 100 million in February 2021 itself!
It follows naturally that higher flexibility in your company’s receivables methods might just bring down your receivable days. Is there any CEO or CFO on this planet who doesn’t like that? We don’t think so!
Credit Notes/Chargebacks, say what?
How many times, as an enterprise, have you feared a credit note or a chargeback? Well, with crypto transactions, bid adieu to credit notes or chargebacks for good. With its peer-to-peer module, no third party has permission to return a payment to the customers.
You are looking at some stellar investment opportunities
If you have a small business, you have the option to accept Bitcoin as a viable payment mode and then convert it into fiat currency in a few hours. Alternatively, as a large business, you can choose to hold on to your bitcoins. That way, the value of bitcoins can be stored until the cryptocurrency market is at a high and you can book some neat profit. Treasury departments got to love this, no two ways!
Be wary of currency fluctuations and security risks
You have been living under a rock for the past few months, if you haven’t come across the news of numerous cryptocurrencies plummeting drastically. Amidst the cryptocurrency crackdown in China, the value of bitcoins has taken a huge hit, affecting markets worldwide.
You should know that there is only a limited number of coins that are available at one period of time. Cryptocurrency is a double-edged sword and if you are planning to adopt it, keep the fluctuations in mind.
Remember territorial regulations
Cryptocurrency guidelines vary from country to country, and with each new territory, the transactional fees and miscellaneous taxes may seem discouraging. With the entirely digital nature of cryptocurrencies, governments globally are yet to implement their guidelines properly. In many countries, like India, regulations are not clearly formulated yet and the current scenario is that of a near ban.
If you decide to adopt cryptocurrency, you will be forced to navigate a myriad of regulations related to your revenue in this currency.
How shall you pay your employees and vendors if all your client transactions are in crypto?
Well, that is one of the biggest concerns. More so in service industries like IT-ITeS and consulting which are people intensive. While organizations might be comfortable and excited even to get paid in crypto, your employees and vendors might not share that sentiment. Take our industry i.e. IT consulting for instance. India and its vast workforce are key to this industry. With the current regulatory framework (or lack of it) around cryptocurrency in India, its acceptance as salary or as payment is highly unlikely. Add to it, the risk of fluctuating value, and we have a challenging situation on this front indeed.
Cryptocurrency, much like anything else, is a double-edged sword. If you are planning to expand your payment gateways to include cryptocurrency, you should hedge the risks too. It is key to keep an eye on what percentage of your total revenue, from a concentration risk perspective, is in cryptocurrency.
Can you shut the door on cryptocurrency entirely? We don’t think so. As per SoftwareFindr, no less than 4.68% of millennials have recently invested in cryptocurrency acquisition in some form or another. Nearly 78.95% of crypto owners have acquired their crypto assets via peer-to-peer purchases. As per Business Insider, even boomers are getting attracted to bitcoin. The statistics clearly underline increasing adoption. So, if you want to be forward-looking, you might have to consider the tour de force i.e. cryptocurrency, as a viable transaction method very soon. With solid risk management, of course.
Want to have a discussion on cryptocurrencies? Especially, in the services industry? Well, we are always up for a chat. Reach out to us here!