What to Know About Bitcoin and POS SystemsWeigh the pros and cons before you decide to help your customers embrace the digital currency revolution.
Bitcoin enthusiasts hope we are entering a disruptive time in which the digital-only currency will start to see widespread adoption. With mainstream availability of POS services that now accept it, you might be wondering if you should help your customers embrace the revolution.
Here’s what you need to know before you decide.
If you don’t know much about bitcoin, don’t feel bad; few people do. Bitcoin is a form of “cryptocurrency,” made by computer software that follows a mathematical formula. It’s protected and transacted using encryption techniques.
The currency is not printed or even backed by any government, nor is it tied in any way to the value of precious metals. Rather, it’s “mined” by people in a community anyone can join.
There is a fixed quantity of bitcoin. By 2040, after it’s completely “mined” using computer processing power to “unlock” encrypted “stores” of the currency, there will be a total of 21 million bitcoins, and never any more.
Putting the pieces together
Consumers can make purchases via a mobile app like Bitcoin Wallet, available for both iOS and Android devices. But you’ll need to combine a few ingredients to accept bitcoin payments.
Even if you’re using a POS system like NCR Silver that’s bitcoin compatible, you need need to work with a credit card processor that accepts bitcoin. A few mainstream processors support bitcoin, including Braintree and Worldpay.
Ellen Cunningham, marketing manager at CardFellow, said, “Businesses that are already using NCR Silver can either contact their current credit card processor to find out if that processor supports bitcoin, or they can locate a bitcoin provider that integrates with NCR Silver to see if it can be run simultaneously.”
There may also be some local regulation to contend with. In a burgeoning space like bitcoin payment, regulation may be inevitable, and New York is at the leading edge. Braden Perry, cryptocurrency attorney and partner at Kennyhertz Perry, said, “All companies engaged in virtual currency business activity in New York are required to apply for a BitLicense… to address money laundering concerns.”
Weighing the pros and cons
Bitcoin is a new kind of currency and has its own unique pros and cons.
First and foremost, since there’s no paper trail, chargebacks aren’t possible on typical bitcoin transactions. “If an item isn’t what you thought it’d be or you otherwise want your money back, there’s no third party protection like there is with credit cards or PayPal,” said Cunningham.
While that’s not great for consumers, it’s a plus for retailers who might be wary of the rise of illegitimate chargebacks in recent years.
Bitcoin has other upsides for small businesses. It’s less expensive to process than credit cards, for example. Said Cunningham, “Some services, like Braintree, offer no fees on the first $1,000,000 you accept in bitcoin.” And bitcoin conversion fees are currently hovering around 1 percent, lower than card acceptance fees.
Don’t discount the possibility of increased sales. “Bitcoin users tend to be very loyal and may seek out bitcoin-accepting businesses,” said Cunningham. Businesses that take bitcoin can find themselves in lists of bitcoin-accepting merchants and on bitcoin-acceptance maps.
It’s not all roses and low fees, though. Volatility is a major concern.
Bitcoin has proven to be incredibly unpredictable. In the space of two years, its exchange rate spiked from $10 to $1200 and then plummeted to under $400. (Today it was valued at close to $600.) This is not a currency you want to leave lying around unconverted to dollars.
Ofir Beigel, general manager of 99 Bitcoins, is not concerned. “The beauty of today’s bitcoin technology is that you can accept bitcoins without being exposed to the actual currency. You can use a service like Bitpay to accept bitcoins and have them converted into USD the second someone sends them to you.” (Bitpay integrates directly with NCR Silver.)
In the end, the effort needed to integrate bitcoin into your POS isn’t substantial — but not every business needs to go through the trouble. It’s really about satisfying customer need, so listen to your customers to know if this is the right move for you.
Author and journalist Heidi Hecht told NCR, “Bitcoin is an easy way to accept payment, and it might make sense if you have customers who are nervous after recent news of hackers who stole credit card information.”
If you do choose to take the leap, you’ll join a not insubstantial number of businesses dealing in bitcoin, from Overstock.com to dozens of Etsy vendors to pizzerias and pubs.