Is Bitcoin Right for You?

Assessing the benefits and risks of accepting Bitcoin as currency

Over the last few months, at presentations on the future of retail experiences, at least a dozen audience members have asked Rosetta experts, “what’s the deal with Bitcoin?” Retailers want to know whether they should accept it and, if so, how it will affect their commerce performance. Every day brings a new announcement that yet another retailer is accepting Bitcoin – from large online brands like Expedia and to small brick and mortar retailers and nonprofits.

Since 2009, hundreds of cryptocurrencies have emerged, but with a market cap of $8.5 billion and 5 million digital wallets, Bitcoin remains by far the largest, and it’s the only one with significant market penetration. And, given the accelerating rate of adoption in just the past five years, it is likely here to stay. It bears noting that credit cards were first developed in the 1950s but didn’t become a staple in most Americans’ wallets until the 80s.

Pros: publicity, savings and privacy

So, why are so many companies jumping on the Bitcoin bandwagon? For now, novelty and publicity are the major factors. If your brand is the first in its industry to accept cryptocurrency, you get to send out a press release touting how innovative and tech savvy you are. In addition, with Bitcoin values rising, some companies see accepting this currency as a form of speculation – $100 in revenue today could be worth $150 tomorrow.

In the long run, the major benefits of cryptocurrency lie in skirting third-party payment processors, such as credit card companies and banks. Since Bitcoins are exchanged directly, merchants can avoid 2% to 4% transaction costs and eliminate processing delays – even for international transactions. In addition, in light of recent high-profile data breaches, customers who are concerned about identity theft may prefer to use this anonymous form of payment since it does not put credit card information at risk. This could lift conversion rates for consumers concerned about fraud. Finally, because cryptocurrency transactions are nonrefundable, retailers do not have to worry about chargebacks.

Cons: fluctuation, utility

However, like any innovation, cryptocurrencies carry risks and costs. The most significant risk is the extremely high volatility. Because these currencies are not linked to a central bank, their value can fluctuate dramatically in the space of hours, much less days and weeks. This may not be much of an issue today, because these transactions represent a small share of total transactions, but risk management could become a significant issue as Bitcoin-based sales gain prevalence.

In addition to the risks associated with volatility, there are also practical concerns. If the value of a cryptocurrency is constantly changing, how does that affect pricing? If you price your product or service in Bitcoins, will you update your prices daily? Hourly? Another method is to price in local currency and convert to the current Bitcoin price during checkout. Either method likely involves significant changes to your commerce platform.

Finally, once you have received cryptocurrency from your customers, what do you do with it? You can try to spend it with vendors, although B2B options are still pretty limited; you can pay a fee to convert it to local currency, although this cost is much less than the transaction fee you would have incurred had you accepted payment via credit card or PayPal; you can locate one of the six hundred or so Bitcoin ATMs that are planned to be launched before the end of the year; or you can hold on to it and hope the value goes up.

The most important question is how Bitcoin aligns with the needs of your best customers.  While there aren’t definitive studies on the Bitcoin users, the industry at large is operating on the assumption that the typical “Bitcoiner” is an English- speaking, 29-year-old man with an income of about $50,000 per year and a sharp technology orientation.

Does this sound like the makeup of your target audience?  If not, prioritizing the acceptance of Bitcoin is likely the wrong investment to make. If this is your customer, accepting Bitcoin can further demonstrate your understanding of their needs and desires, which is key to creating lasting customer engagement.

If you do decide to move forward, think it through and have a plan. One major area to focus on is your return policy. The volatility of Bitcoin can make returns tricky. Companies need to strike a balance between pleasing customers and losing out to Bitcoin speculators.

For instance, if a customer returns a product paid for with Bitcoin, what currency will you use to issue a refund? If you refund in Bitcoin, do you return the original number of Bitcoins or the current equivalent of the original purchase price? If you refund in cash, do you refund the purchase price or what the Bitcoins the customer paid with are worth now? You don’t want to find yourself in the position of customers returning products just to cash in on a change in Bitcoin’s value, nor do you want customers to use you as a way of cashing out the currency.

Several companies, including, have solved this issue by offering store credit for the amount of the original purchase. Once you have developed your policies, you need to make those terms are crystal clear to customers prior to purchase to avoid bad feelings down the road.

Bitcoin can be a great tool or an expensive distraction – the difference lies in implementing it in the right way for the right audience rather than just hopping on the bandwagon. Retailers must move beyond the focus of delivering a “cool experience” and instead place their emphasis on those investments that will deepen brand engagement with their best customers.

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