We look at the impact Bitcoin payments are making on trade and hear from three British businesses about their decision to embrace this new digital currency.
What exactly is Bitcoin?
Bitcoin is a new online source of money, often referred to as cryptocurrency or digital currency. It’s not a physical product you can fold into your wallet or drop into your back pocket; the currency is pure electronic data that can be used to buy or be exchanged for goods and services. The value of the currency fluctuates; there were over 13 million Bitcoins in circulation and individual coins were worth about £240 each at the time of writing¹.
The idea behind Bitcoin is to take the power of a currency’s value away from a centralised financial institution or single government agency and give the power to the people who use it. By cutting out the middleman, Bitcoin businesses can take advantage of the saving in transaction fees of the average credit or debit card.
Bitcoin is generally considered to be secure. An exchange is made between two parties, which can be seen publicly, although users remain anonymous which helps protect against identity threats. Users keep their Bitcoins in an online wallet, which is designed to make transactions easier and offers strong protection from hacking and other cyber-theft.
What does Bitcoin mean for small businesses?
Currently only a small percentage of purchases are made using Bitcoin, yet an increasing number of businesses are starting to adopt this digital currency. An estimated 80,000 businesses now take Bitcoin payments throughout various countries around the globe². There are a variety of reasons why an increasing number of businesses are choosing to accept the digital currency. For small businesses the main benefits are that it offers lower transaction fees, it’s speedy and it opens up an avenue in which to reach out to more tech-savvy customers. Using Bitcoin as a small business owner also takes out the middleman (the bank) from your financial transactions, so there are no interest rates on the Bitcoins you have in your digital ‘wallet’.
Generating brand awareness
One florist in Newcastle, the Cosmic Flower Shop, has seen potential in the new currency. Owner, Flemming Arnott, explains why he started to accept the digital currency for his business: “I first heard a lot about it on the news, but it was my son who encouraged me to get involved. He is really interested in the latest technologies and was fascinated by the idea of a new digital currency, so we decided to buy a fraction of a Bitcoin each [a single Bitcoin can be divided down to eight decimal places, so you don’t have to buy a whole Bitcoin if you don’t want to].
It was such an exciting feeling to be part of this new digital revolution and we were thrilled when we finally did it! We wanted to spread the word and show our support for this alternative currency, so we thought the next obvious step was to start accepting Bitcoin payments in the shop.
We get a lot more people visiting our website now. Our analytics have indicated that we get a lot more people visiting our website now and we have been receiving extra traffic via wheretospendbitcoins.co.uk. This shows us there are people out there interested in this new currency and actively looking for places to spend their Bitcoins. Not all of the visits turn into sales for us, but it generates brand awareness and it’s great to see that people are interested in using such an innovative form of payment.
For me, accepting Bitcoin payments has been an important move for our brand and for our customers. It has helped us to stand out online from other florists by adopting some of the latest technologies and digital advancements. I would also add that Bitcoin is absolutely brilliant for small businesses because as well as creating priceless brand awareness, the transaction fee is so small – it’s miniscule in fact. I still wonder why more people aren’t using it!”
Staying ahead of the curve
Sushi cookery school, Your Sushi, have also started to accept Bitcoin payments on their website. Chef Kiyoko Hay tells us why: “Our director Emmanuel Letellier used to work in IT. He is always interested in staying ahead and getting involved with new technology and he alerted us to the new method of payment.
We chose to accept Bitcoin payments to improve our brand image rather than to increase sales. We want to show that we are a brand who is always willing to move forward and try new things. We don’t expect this new currency to take off straight away and bring in lots of orders, but it’s great to have it available.”
Being more accessible
Former tech journalist and founder of bespoke bike shop 8 Ball Bikes, James Middleton, believes small businesses should not ignore the possibilities the digital currency can bring: “I was a tech journalist for over ten years before I started 8 Ball Bikes, so I had a personal interest in Bitcoin since its early inception. When I launched my website, I wanted to make sure that I was as accessible as possible for all my customers by making all forms of payment possible.
The Bitcoin community has shown a lot of support for merchants that use it, so it has worked well as a free form of marketing for my small business and has driven more business my way.
As it is still in its infancy, there are a few ongoing issues with Bitcoin payments – namely around the volatility of its value, as the sterling pound to Bitcoin exchange rate is unstable. This means that I could accept a Bitcoin payment of £1,000 one day that may only amount to £600 the next if the value crashed overnight. I was fully aware of this problem but I went ahead anyway as I strongly believe supporting a new form of currency is more important.
From a business perspective, we’ve got a long way to go before more payments begin to be made using this method, but I thoroughly support Bitcoin and what it represents.”
With advocates growing in number and larger businesses like Expedia and eBay moving towards Bitcoin, there is real potential for the digital currency to become a popular payment method in the future. One day we may even ask ourselves how we ever lived without it!
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(1) Source: http://po.st/bitcoinforbeginners
(2) Source: http://www.entrepreneur.com/article/237026