Cryptocurrency is slowly gaining popularity as a payment method throughout the world. Although companies were originally hesitant to adapt to the futuristic trend, crypto has proven is definitely here to stay.
Here's a scenario: If a hotel had accepted a Bitcoin booking in October 2015, valued around $230, today it would be worth $30,000 USD! But how does it benefit the hospitality industry?
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As discussed in a previous article, the blockchain technology associated with crypto hosts many benefits for the hospitality industry. Let’s break it down and talk about what accepting crypto as a payment option really means for your business. As with any frontier, there may be strong incentives but there are also lingering dangers.
PROS of cryptocurrency
More Available Payment Options
With cryptocurrency becoming more widely accessible, companies must stay current to keep up with the demand. By adding another payment option, businesses will accommodate more customers, increasing sales opportunities. As the hospitality business focuses on tourism you must be able to accommodate all clients!
Simple International Transactions
Opposed to regular fiat currencies, crypto is a universal currency that can change hands easily. This makes it easier for international clients to pay and avoid extra conversion fees.
Processing Time
If a customer pays with a credit card, authorization may be issued immediately for a transaction. For larger purchases it may take between 2-5 days for the bank to process and receive the funds. The network hosting crypto is enforced by a disparate network of computers rather than a centralized system. As crypto currency is verified with the use of blockchain technology, low value transactions could be confirmed in 10 minutes! While larger transactions take longer, you could still expect it to be completed in approximately 90 minutes.
Processing Fees
Most payment services charge merchants to process payments. Although crypto currencies still have processing fees associated with their transactions, they are extremely competitive. Companies like Square & Stripe offer processing rates of 2.9% per transaction, while major companies charge from 1.3% to 3.5%. In contrast, crypto payment processors only charge around 1%, saving your business huge amounts of money in the long term.
No Risk of Chargebacks
A chargeback occurs when a cardholder questions a transaction and requests their bank to reverse the payment. These payment disputes may be granted in favor of the card holder. Hence the funds may have to be returned to the client or they're never actually be received. As crypto transactions are irreversible, a customer is unable to cancel the transaction or dispute the payment. A refund may still be requested by a consumer, but it will be considered a new transaction. Refunds will only be authorized by the party that received the payment.
CONS of cryptocurrency
Tax Time
The IRS classifies cryptocurrency as property and cryptocurrency transactions are taxable by law. You are required to pay a capital gains tax when disposing of your crypto in any way. If you accept cryptocurrency, you must report it as gross income based on its fair market value when received. This means the value of a transaction is based on its actual dollar value at the time of the transaction. A company must keep track of the value for each cryptocurrency when received, and the day it was sold. This can get complicated while managing many daily transactions within an ever changing market.
Volatile Market
On average, the value of cryptocurrencies fluctuates rapidly and the market is extremely volatile. It changes without any notice unlike the more stable counterpart of a government-issued currency. This volatility hosts risks for companies holding and using cryptocurrency, as the value received may be worth more or less. With this unpredictable valuation, companies are greatly susceptible to the exchange rate at the time of sale. Just as cryptocurrencies rise at an incredible pace, they could just as easily lose that value.
Setup & Maintenance
The acceptance of cryptocurrency requires an additional tech stack in order to run your day to day business. To introduce this payment method, a business needs to acquire a suite of tools to build an easily maintained infrastructure. This includes front-end tools, back-end tools and connectivity applications.
A business must weigh the benefits while considering the risks.
Crypto payments allow businesses to stay ahead of the competition by offering fast and easy international transactions. Although, they do come with the risk of a volatile market. By accepting this new payment method, a business is able to create more sales opportunities and boost overall conversion rates. Although crypto has been deemed the future of finance, it is still extremely controversial. It boosts unknown regulatory laws that are still to be put in place. Cryptocurrency is an ever-evolving rollercoaster ride that may someday erase government regulated money all together. As a business owner, you must make the decision for your organization to jump on board while risking the value of your earnings. The hospitality industry must be flexible to embrace new concepts so they are able to stay ahead of the curve and adapt to all opportunities.
