One of the groups positioned to be able to take advantage of Bitcoin the most is small businesses. Monthly fees and transaction fees charged by banks and payment processors can take a big chunk out of sale receipts.
We live in an age of digital currency where the physical transfer of cash is being used less. There is a new market for payment processors where apple pay, google pay and PayPal have found inroads into the market previously dominated by Mastercard and Visa.
Bitcoin offers a unique alternative to these methods of transacting digital currency, with many benefits over the existing options. Offering small business owners the opportunity to cut costs and maintain more control.
Be your own bank
Bitcoin offers the opportunity for small businesses to be their own bank and payment processor. To understand what this means we need to understand the status quo.
Banks and payment providers have their own private networks that they use to transfer digital currency. Users, or third parties in the transaction such as their bank, are registered with the payment processor and given access to that network.
Bitcoin offers a public network that anyone can use without registration and transactions are made on a peer to peer basis so there are no third parties involved.
Visa, Mastercard, PayPay, all charge fees to users for processing their transactions and merchants need to incorporate these fees into their prices, passing them onto customers. This is normally calculated as a percentage of the value. In addition to this Banks will charge fees to their users monthly and/or transaction basis.
Bitcoin still has transaction fees but these are not calculated as a percentage of the payment and dictated by the market based on the demands of the network. There is no fee related to storage of the digital currency.
Using private networks, transactions are confirmed and credited to the merchants account by the payment processor. Confirmation is provided up front but it can take up to 30 days before you are able to withdraw the currency. During this time the transaction may be reversed and the currency recalled from your account.
With Bitcoin, successful completion of a transaction is deterministic but most users will consider a transaction confirmed after a period of around an hour once a transaction has been recorded. This has hindered the use of Bitcoin at point of sale but recent developments in a second tier public payments network called lightning provide the same up front confirmation that is provided by the private networks.
Chicken and the egg
How do we introduce Bitcoin into the market? Businesses will have reluctance to invest in new payment processes without a user base and you can’t build a solid user base without businesses to interact with.
Bitcoin is not a great brand outside of enthusiasts. The mainstream news are quick to associate it with criminals and terrorists, crypto twitter is fraught with fighting factions pushing their ‘better than Bitcoin’ agendas or bringing a new scams to naive investors.
Bringing new users onto the platform has to fight against these negative brand associations and find a way to provide positive associations. I believe that the best way to do this is to have the Bitcoin logo sitting next to Mastercard and Visa in the ‘Accepted Here’ signage in shops and restaurants.
It is because of this that the Bitcoin technical community should be working closely with small businesses to bring Bitcoin into the mainstream. What the Bitcoin space needs are small businesses working at the grass roots with other small businesses to build the user base