Pros and Cons of Accepting Crypto

Cryptocurrency is slowly gaining popularity as a payment method throughout the world. Although companies were originally hesitant to adapt to the futuristic trend, it has proven over the last few years that it is a viable payment option that is definitely here to stay. As well, early adopters have been in a unique position to reap the financial benefits of the growing technology as cryptocurrencies are increasing in value at an exponential rate. If a hotel had taken a 1 Bitcoin booking in October 2015, valued around $230USD, that Bitcoin today would be worth over $30,000USD! But how does it benefit the hospitality industry?

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Let’s talk about what accepting crypto as a payment option really means for your hospitality business. As with any frontier, there may be strong incentives but at the same time there are also lingering dangers.

PROS

More Available Payment Options

With cryptocurrency becoming more widely accessible, companies must stay current to keep up with the demand of consumers. By adding another payment option, businesses will be able to be more accommodating to customers, in turn creating more 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 for your services as they will be able to avoid the extra fees associated with converting the amount into a foreign currency.

Processing Time

If a customer pays with a credit card, authorization may be issued immediately for a transaction. That being said, for larger purchases it may take between 2-5 days for the traditional banking method to process a transaction and for your business to properly receive the funds. The network hosting crypto is enforced by a disparate network of computers rather than a centralized system like a bank. Cryptocurrency is verified with the use of blockchain technology, a low-value transaction could be verified and confirmed in as little as 10 minutes! While larger transactions take longer to verify, you could still expect a transaction to be completed in the average processing time of 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 in comparison to other payment methods. For example, companies like Square & Stripe offer processing rates of around 2.9% per transaction and most major credit card companies charge anywhere from 1.3% to 3.5% per transaction. In contrast, crypto payment processors will 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 asks their card-issuing bank to reverse the payment. These payment disputes may be granted in favor of the card holder meaning the funds may have to be returned to the client or the funds may never actually be received by the merchant. 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 although it will be considered a new transaction and refunds will only be authorized by the party that received the payment.

CONS

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 ie: selling, trading, or using as a means to purchase. If you accept cryptocurrency, you must report it as gross income based on its fair market value when it was received, meaning the value of a cryptocurrency transaction is based on its actual dollar value at the time of the transaction. That being said, a company must keep track of the value for each cryptocurrency on the day it was received, and the day it was sold, which can get complicated very quickly 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, changing without any notice unlike the more stable counterpart of a government-issued currency. This volatility hosts many risks for companies holding and using cryptocurrency as the value that is received may be worth more or less in as little as hours. 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 in order to build an infrastructure that is easy to monitor and maintain. This may include front-end tools, back-end tools and connectivity applications. Although there are existing technologies that host the necessary tools in order to expand into the crypto market, it will be in addition to the other systems already in place.

With the rise of cryptocurrencies, 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 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 but come at a cost to set up and maintain. Although crypto has been deemed the future of finance it is still extremely controversial, boosting 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 altogether, but as a business owner, you must make the decision if it is better for your organization to jump on board with the trend while risking the value of your potential 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.