Should You Offer Cryptocurrency as an Online Payment Option?
Cryptocurrency has been rising in popularity over the last couple of years, especially in South Africa. Recent research has shown that 34% of South Africans have some knowledge of cryptocurrency, and, of those, most are keen to get involved in some way.
But is this technology mature enough for you to consider accepting cryptocurrency as payment on your eCommerce platform? We’ll cover what it is, what the situation is like in South Africa, and the benefits and risks of accepting it.
What is Cryptocurrency?
At its heart, cryptocurrency focuses on removing the middleman (ie. financial institutions) from financial transaction. It is currency, traded on software platforms.
It is supported by Blockchain technology, which is essentially a way of ensuring that any false transactions are recognised and rejected, adding security to the currency. Imagine thousands of copies of a single leger across a big network of computers. This leger is regularly updated throughout the network. If an entry seems false on one leger, the others can be compared for consensus, rendering a false transaction null and void.
Cryptocurrency in South Africa
Although South Africans are interested in cryptocurrency and trading it, there is a significant knowledge gap between knowing what cryptocurrency is and having enough knowledge to feel confident enough to take the leap to trading it. Scam artists have taken advantage of this gap and stolen millions of Rands from those who didn’t understand the technology.
The South African Reserve Bank does have a dedicated programme for research in fintech (which includes cryptocurrency) but they currently do not guarantee cryptocurrencies. This means that there is no protection for those participating in trading, and no legal recourse should their money be stolen somehow.
The most popular platforms for trading cryptocurrencies in South Africa are Luno and iceCUBED, and the most popular investment platform is Bitfund. Several South African companies are using cryptocurrency, including Bankymoon, a blockchain enabled electricity meter, and Centbee, a mobile bitcoin wallet that allows merchants to accept bitcoin.
What are the benefits of accepting cryptocurrency?
The most obvious benefit of accepting cryptocurrency is that you’re making your site more inclusive to potential customers. It’s generally good practice to offer a wide range of payment options, and, particularly if your customers tend to be tech-savvy, it could be worthwhile to ensure they don’t leave simply because their preferred payment method isn’t available.
Cryptocurrency transactions occur almost immediately and currencies like Bitcoin do not allow reversals or changebacks. This reduces the risk of the customer reversing the charge once you have already shipped the product. This also speeds up your cash flow.
The transaction fees for cryptocurrency also tend to be much lower than traditional bank fees. With Bitcoin, the amount you pay in transaction fees is determined by how quickly you want to receive your money, so the fees can be even lower if you don’t mind waiting a bit.
What are the risks associated with accepting cryptocurrency?
One of the first things you learn about cryptocurrency is that the market is volatile. The value can shift significantly within a couple of hours, potentially losing you money. Moreover, in spite of the virtues of blockchain technology being extolled everywhere, cryptocurrency isn’t always secure. One savvy hacker could clear your wallet in a matter of minutes, and you would have no legal recourse in South Africa.
It’s therefore recommended that, if you do offer cryptocurrency payment options, you ensure that the currency you earn is converted back into local currency for safe, stable storage with a trusted financial services provider.
As cryptocurrency gains popularity, it may have to change in order to satisfy government scrutiny or regulating bodies. These changes may be in direct conflict with the original intention of cryptocurrency – money trading without third party interference. It’s important to keep this in mind and stay informed as cryptocurrency grows, especially if you want to incorporate it into your platform.
Cryptocurrency is exciting new technology that doesn’t seem to be going anywhere. However, it may well look very different within the next decade. As with any move in your business, make sure that you carefully research your options before taking the leap.