The latest addition to our portfolio are our payment modules for Bitcoin Payment Provider „Coinsnap“. Effective immediately, you can access the payment modules in our online shop. But what is Bitcoin and how can you as a merchant accept Bitcoins in your webshop easily and risk free?
What is Bitcoin and How Does it Work?
Bitcoin is a decentralized peer-to-peer payment network without middlemen or authority. It is solely maintained by the peers. Bitcoin is a digital currency which can be used to make real-life transactions. The amount of Bitcoins is limited to 21 million to avoid inflation, similar to gold. However, Bitcoin had a lot of bad press lately: since its value is highly volatile and its anonymous nature has been misused to make illegal transactions, Bitcoins public image has been widely negative. What is less well known is the fact that the network is incredibly secure since it uses the same encryption methods employed in online banking.
Paying with Bitcoins is as easy as it can get. The user has a wallet which enables him to receive and give away Bitcoins. During checkout, Bitcoin can be selected as the payment method and the transaction is processed through the wallet. A bank account is not necessary. All Bitcoin transactions are saved which makes payments transparent and prevents fraud. Once a transaction is completed, it is irreversible. Bitcoin has even more advantages: payment processing fees are low and payments are effective immediately.
Bitcoins Advantages and Disadvantages for Merchants
Even though Bitcoin is very secure there are weak points, especially concerning Bitcoin exchange platforms, but for merchants, other aspects are more relevant. Bitcoin does not process credit card data which means that PCI does not apply. Additionally, there is no chargeback risk because transactions are irreversible. Bitcoin can also lead to higher margins because transaction fees are much lower than for credit cards which can add up to 2% while processing a Bitcoin transaction only costs a few cents. Furthermore, Bitcoin as a digital currency is not bound by borders which makes global payments faster and easier. There is no fraud risk for merchants and Bitcoins can simply be treated like cash. Also, providing Bitcoin payments as an option can help merchants reach new customers from the Bitcoin community worldwide.
However, there are certain disadvantages to be taken into account. As mentioned earlier, the currency value is highly volatile which makes is difficult to display prices in an online shop. It also makes the refund process more complex. This problem is enhanced by the fact that Bitcoins are traded at different rates depending on the platform. Another drawback is the fact that only few merchants offer this payment method as of yet. Regardless, experts expect the currency to gain popularity as people become more informed about the advantages and disadvantages of Bitcoin. As of now, the largest source of error is the user. For example, wallet data can be deleted accidentally or the user forgets his password which makes the Bitcoins in the wallet inaccessible.
Most of the disadvantages mentioned here can be eliminated by consulting a PSP as a middleman. All in all, the advantages dominate since Bitcoin is a way around security concerns in the context of online payments, such as identity theft or credit card fraud because the currency is forgery-proof and payments are anonymous.
Accepting Bitcoins Through a Payment Service Provider
The easiest way to start accepting Bitcoins is to use a Payment Service Provider which offers Bitcoin. At the time of writing, our sellXed payment modules are available for Coinsnap.
The Payment Service Provider is responsible for the Bitcoin transaction, i.e. the conversion to the merchant’s preferred currency at a guaranteed exchange rate. This means that payments are directly settled in the desired currency. This is also an advantage for the customer because he does not have to exchange Bitcoins into a fiat currency before making a purchase. The PSP takes on the exchange rate risk for the merchant in exchange for a small processing fee.
The Bitcoin Payment Module
We partnered up with Coinsnap to create payment modules which allow merchants to accept Bitcoin. Coinsnap converts the cart into Bitcoin and guarantees the exchange rate during the checkout. The customer pays the calculated amount in Bitcoins and Coinsnap transfers the amount in your preferred currency to your account. The exchange rate risk is thus covered by Coinsnap.