Save Money, Engage Customers with Bitcoins

640px-Bitcoin_banknoteIt seems like there is more news about currencies today than ever before. The US dollar is being challenged as the global currency of record and at the same time Bitcoin is mounting an increasingly serious challenge to all national currencies.

Recently Dell announced that it would accept Bitcoins as payment. The computer-making behemoth joins a group that includes Overstock, Newegg, Expedia, Dish Networks and CheapAir. For web retailers, offering a Bitcoin payment option is another way to enhance the customer experience.

Bitcoin is a peer-to-peer decentralized digital currency which purports to be secure and low-risk. For merchants it has the added advantage of offering very low or even no transaction charges. Try finding that with a standard credit card processor.

Although it is certainly gaining popularity among merchants, Bitcoin is even more popular as an investment. Many individuals are buying Bitcoins and holding on to them just as they would gold. Bitcoins hit a high of nearly $1,150 in 2011 and today are hovering above $600.

Merchant payment options

If you’re a merchant and would like to give your customers the option of paying in Bitcoin, there are really two ways to do it and these essentially correspond to whether you’re an online or brick-and-mortar merchant. We’ll start with a physical store location.

Last year on an ESPN College Game Day broadcast, a fan held up a sign that read, “Hi Mom Send” followed by a Bitcoin graphic and the QR code for his Bitcoin account. He netted $24,000 from people who saw him on TV and transferred Bitcoins to his account.

That illustrates all a store needs to get started with Bitcoins: an account and a QR code for the account. With those two things, your customers who want to use Bitcoins would scan the QR code with their smartphones, transfer their Bitcoins to your account and they show up immediately.

Processing fees: zero.

That’s a very rudimentary system. For more integrated solutions, companies such as Coin of Sale offer systems and charge fees well under one percent.

Bitcoins in e-commerce

For Internet transactions, you absolutely need a third party processor to facilitate the transaction. You’ll find fees of one percent and less when you shop around as well as the ability to immediately transfer the Bitcoin value to your traditional bank account in a standard currency. You can also find flat-fee plans. Players include BitPay, Coinbase, BitcoinPay, BIPS and Polycoin.

You’ll need to know a lot more to establish your comfort level and decide when, if and how you want to enable Bitcoin transaction, but even traditional payment processors are taking note. In a recent blog, San Francisco-based Stripe – which is in a Bitcoin beta – concluded:

“We’re still in the very early days, but we can already start to see the shape of the potential impact of Bitcoin and other cryptocurrencies. If we get things right, life is going to be much better for billions of people.”

Image: “Bitcoin banknote” by CASASCIUS – CASASCIUS. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons.