In March 2023, several prominent banks collapsed in what was described as “the first bank crisis of the Twitter generation.” In the wake of the collapses, cryptocurrency prices surged, with users looking for ways to beat volatility in traditional banking.
Even before the banking crisis, a growing number of e-commerce businesses were beginning to lean into cryptocurrency. A 2022 Deloitte study found that 75% of retailers planned to accept some form of digital currency within the next two years.
In a world where social media and digital banking lead to quicker and more unpredictable financial disasters, you may wonder whether your e-commerce store should jump on the crypto bandwagon.
In this guide, we’ll cover everything you need to know about accepting crypto payments and help you make the best decision for your business.
The Crypto and E-commerce Essentials
- What Is Cryptocurrency?
- How to Accept and Receive Crypto Payments
- The Pros and Cons of Accepting Cryptocurrency Payments
- How 3 E-commerce Brands Approach Cryptocurrency Payments
What Is Cryptocurrency?
Cryptocurrency, or “crypto,” is a virtual form of currency. It is decentralized, which means users exchange currency directly with each other, rather than going through banks, governments, or other intermediaries.
Crypto isn’t tied directly to an individual’s personal information. Instead, each crypto user gets a key — a long string of letters and numbers — that proves ownership and gives them access to their funds.
Any transaction you make with crypto is permanently recorded on a digital ledger called blockchain. Since data stored with blockchain technology can’t be changed or deleted, crypto is, at least in theory, less susceptible to hacking and fraud than ordinary bank or credit card transactions.
There are over 22,000 cryptocurrencies currently in existence, but the most traded cryptocurrencies are still Bitcoin and Ethereum. Cryptocurrency ATMs, also known as BTMS, can be found at thousands of locations around the world, and businesses ranging from Domino’s and KFC to Gucci and Balenciaga have dipped their toes in the world of crypto payments.
How to Accept and Receive E-commerce Cryptocurrency Payments
If you’re considering accepting crypto payments, you’ll first want to double-check that they won’t land you in any legal hot water. Some countries have strict bans on crypto. Others have implicit or partial bans, meaning banks can’t deal in cryptocurrencies or offer services to businesses that use them.
Assuming crypto is legal in your area, your next move will be to set up a crypto wallet, a place to store your digital currency.
Crypto wallets fall into two basic categories: cold wallets and hot wallets.
- Cold wallets, or offline wallets, can be hardware devices similar to USB sticks, or they can be printed on paper. Cold wallets can’t be hacked, but if they’re lost or stolen, you lose access to all your crypto funds. Cold wallets are typically best for long-term investors and those storing funds that don’t need to be accessed very often.
- Hot wallets are connected to the internet and accessed by logging into a website or app. They are generally simpler to set up and more convenient for frequent traders and business owners — but they’re also more susceptible to hacking or phishing attempts.
Once you’ve got your wallet, you’ll need to partner with a crypto payment gateway. This third-party provider processes your crypto transactions for you, usually for a small percentage-based fee.
Some of the most popular gateways include BitPay, CoinBase, and NOWPayments. These gateways allow you to accept multiple types of cryptocurrency. Some, like BitPay and Coinbase Commerce, also offer hot wallets so you can manage your entire crypto payment infrastructure from the same platform.
Most major crypto payment gateways are integrated with Shopify, BigCommerce, WooCommerce, Squarespace, Wix, and other e-commerce platforms. In these cases, accepting crypto via a payment gateway can be as simple as selecting your provider, clicking an “Activate” button, and following instructions. Alternatively, you may need to integrate crypto payments via a plugin.
Whatever system you use for accepting crypto payments, you’ll almost certainly want to convert them to USD or another fiat currency. The price of a given cryptocurrency can fluctuate much more widely than bank currencies, so holding onto crypto could be a gamble.
The Pros and Cons of Accepting E-commerce Cryptocurrency Payments
When it comes to crypto, like most things, there are pros and cons. Here are some of the most pressing issues to examine when considering accepting crypto payments.
The Good: Advantages of Accepting Cryptocurrency Payments
- Smoother Transactions: Crypto payments often have much lower transaction fees than typical online payment processing systems like credit cards and apps. They’re also processed much faster and aren’t subject to chargebacks or disputes.
- Opportunities for High-Risk Merchants: Crypto payments are an intriguing option for high-risk merchants. If you fall into this camp, you know that payment processors can decline or impose higher transaction fees on you. But because blockchain technology safeguards against chargebacks and fraud, crypto payment processors can take on higher-risk clients and offer the same low transaction fees as other businesses.
- More Customers: Crypto is considered borderless because it can be accessed from virtually any internet-connected device anywhere in the world. It also isn’t subject to international exchange rates or regulations that can delay or restrict transactions. This means crypto can open your business up to more international clients.
To recap, accepting crypto payments can lead to smoother transactions, lower fees, and more customers.
Since you don’t need a bank account to use it, accepting crypto makes your business more accessible to folks without access to traditional banking. Accepting crypto payments may be a great way to attract Web3 enthusiasts and others seeking novel ways to pay. But what about the potential risks?
The Maybe-Not-So-Good: Potential Drawbacks of Accepting Cryptocurrency in E-commerce
- Environmental Concerns: You probably already know that crypto is environmentally friendly. The computers used to “mine” crypto consume massive amounts of energy — more than the electricity consumption of all of Argentina by some estimates. The Crypto Climate Accord seeks to turn this around and aims to reduce the industry’s carbon emissions to net zero by 2040. If your focus is sustainable e-commerce, you may consider avoiding crypto for now.
- “Crypto Winters”: Many online businesses have quietly removed crypto checkout options from their online stores during periods of “Crypto Winter,” when volatile crypto values plummet. The income from crypto payments during these periods may not be enough to justify the cost of payment gateways or other logistics.
- False Perception of Privacy: Because crypto funds and transactions aren’t directly associated with individuals’ personal information, users remain anonymous — or at least pseudonymous. Though it’s tricky, it’s not impossible to trace a user’s crypto transactions back to their real-life identity. If someone can connect the dots, the blockchain can expose that user’s entire crypto purchase history to the public.
- Customer Experience: The more payment methods you accept, the more accessible your products are to your customer. But accepting crypto payments can open you up to customer service issues. If your crypto payment gateway’s customer service isn’t perfect, it can reflect poorly on your brand.
More on Crypto Drawbacks
E-commerce retailers who stop accepting crypto payments typically cite reasons like environmental concerns, shareholder disinterest, and market volatility.
On the other hand, there’s always light even in the darkest crypto winter. The spending surges that typically accompany crypto devaluations could be great for your sales. Payment gateways may also shield you from most of the direct financial risks. And while potentially harming the environment is never a good look, partnering with the right carbon-friendly crypto group could be great for the planet and your PR.
How 3 E-commerce Brands Approach Cryptocurrency Payments
Case-Mate’s Expansion-Focused Crypto Play
Case-Mate, the popular phone accessories brand, began accepting crypto payments via BitPay in 2021, citing the ability to “reach new customers, particularly outside the United States” as the main reason for the shift.
Customers of CaseMate’s DTC store can pay for their purchases with Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies as well as some stablecoins.
Jomashop’s Bid to Better Serve Global Customers
Brooklyn-based fashion retailer Jomashop partnered with BitPay in 2021. The brand cited the prospect of new customer acquisition as a motivator for accepting crypto payments.
But the company also had another big target: providing more options for its existing global customer base. The company sells over 650 brands in at least 150 countries.
TAG Heuer’s Move into the Luxury Metaverse
Watchmaker TAG Heuer accepts at least 12 cryptocurrencies, including Bitcoin, Dogecoin, Ethereum, and Shiba Inu. As a luxury brand, TAG Heuer was less concerned with new customer acquisition, and more interested in reputation and innovation.
“As a luxury brand, we had to ensure that our entrance into Web3 would meet our standards of excellence,” said Frédéric Arnault, CEO of TAG Heuer. “This new crypto payment feature is just the beginning of many exciting projects for TAG Heuer in the Web3 universes.”
When a customer reaches the checkout page on any of these brands’ online stores, they can select BitPay as their payment method, select their crypto wallet provider, and choose the currency they want to pay in.
From here, customers can choose between scanning a QR code or manually inputting the seller’s receiving address into their wallet. From start to finish, the process takes no longer than a typical online credit card transaction.
Are Crypto Payments Right for Your E-commerce Business?
The cryptocurrency world can seem intimidating, but it doesn’t have to be. With the right partnerships and resources, it can be easier than ever to crack the (metaphorical) code.
At SellersFi, we’re here to help you reach the next level in your business, no matter your goals. Explore our growing library of e-commerce success stories or learn more about our best-in-class Working Capital solution custom-built for growing brands. Ready to start? Register today for a no-obligation funding proposal.