Should Manufacturers Accept Bitcoin and Other Cryptocurrency Payments?
Cryptocurrencies and especially Bitcoin, are now the rage. I mean, you can even pay for a Tesla with Bitcoin today. But it’s not just the Elon Musks of the world--others like Burger King, Whole Foods Market, Starbucks, and more are doing the same, reaffirming the fact that cryptocurrencies are more than just a novelty.
So, should manufacturers accept cryptocurrency payments? Or should they stick to fiat?
Businesses should offer a variety of payment options to customers. So, why not cryptocurrencies?
While digital currencies are not quite mainstream yet, they are certainly making some inroads. Although some businesses might use it as an opportunity for a PR stunt, others are laying the foundation to maintain a competitive advantage in a highly digitized future.
At the same time, establishing cryptocurrency as a payment method is a challenging move. This can be attributed to market volatility that could lead to significant losses.
But cryptocurrencies aren’t going anywhere and some stablecoins have emerged to address market volatility. Manufacturers that accept crypto payments today are more likely to reap better returns down the road. There are also plenty of other benefits.
Cryptocurrencies Enable Rapid Payments
As digital currencies cut out the “man in the middle,” crypto payments happen a lot faster than traditional bank transfers across borders. What once took days to get to the other side of the planet would occur in a matter of seconds.
This could be critical when working with outsourcing partners. It could also help accelerate products and deliveries.
Protection against Commodity and Currency Fluctuations
Stablecoins (backed by a reserve asset) will protect manufacturers from currency and commodity fluctuations. To hedge against commodity and foreign currency exchange rate risk, you can tie it to a CPI basket of cryptocurrencies.
Furthermore, crypto conversions happen almost immediately, eliminating the immediate risk of currency fluctuations.
Low Transaction Fees
If you add up all the transaction fees you have been paying financial institutions over the years, the number will be significant. However, crypto coins come with the benefit of no to low fees.
Unlike banks that charge a percentage in commission, digital currencies charge a fixed rate regardless of how many zeros are on the invoice. For example, transferring funds from one digital wallet to another usually costs about $1 (however, this can vary depending on current market conditions).
As major cryptocurrencies leverage a decentralized system, you don’t have to pay any third parties. This will keep your transaction costs down, and your savings can be reinvested into the business.
Fights Fraud and Chargebacks
As your transactions are all on a decentralized ledger (like the blockchain), there’s little to no room for fraud. You also don’t have to deal with those frustrating chargebacks that take time to resolve.
For example, once a crypto payment is made, you can’t get it back. Period. These transactions can’t be manipulated, making it an excellent candidate to fight fraud.
But before you rush to discuss cryptocurrency payment options with your customers, partners, and vendors, you also have to take the negative aspects of digital currencies into account.
Crypto Cons to Consider
Because there are no chargebacks, there is no room for error. This makes it critical to build trust before making any transactions.
As every transaction is public, anyone who knows your wallet address will have access to this information.
If you lose the access keys to your wallets, those keys are unrecoverable and lost forever. There is no such thing as a central record of cryptographic access keys, so the responsibility ultimately falls on you to keep it safe.
Cryptocurrency markets are also inherently volatile, and you have to factor in potential nightmare scenarios.
Finally, you also have to make sure that the digital currency you’re using is legal and accepted where your vendor or partner is based.
However, regardless of what the naysayers might tell you, cryptocurrencies and the blockchain will play a significant role in modern business. As such, early adoption may help manufacturers maintain a competitive advantage.
At MMI, we have helped leading brands leverage our extensive network and sub-brands to overcome manufacturing and supply chain challenges. Our decades of experience will help you bring products to market on time both domestically and abroad.
To learn more about our manufacturing and our supply chain management experience, reach out to our in-house expert, Julie!
Sales Manager (West)