Published on the 29/08/2013 | Written by Newsdesk
Early adopters of virtual currencies such as Bitcoin could benefit from lower transaction costs and higher profits – but it’s not for the squeamish….
Merchants which accept payments in virtual currencies could benefit from the lower fees and global reach of such payments instruments, but need to remain mindful of liquidity risks and the chance that the largely unregulated digital currencies may in the future be subjected to new government or tax rules.
There is a range of different virtual currencies in operation, although Bitcoin is the best known with about $US1.5 billion worth currently in circulation. According to virtual currency consultant Keyur Kelkar, organisations such as Amazon Fulfillment, Reddit and WordPress already accept Bitcoin payments.
Virtual currencies are also spawning new business models. Kelkar and his partner Chris Woods for example have set up Bitfash.com to accept Bitcoins for fashion items from US chains Forever 21 and ASOS. While the clothes on the website are listed in $US, users have the option to pay in Bitcoin.
Technically known as a crypto currency Bitcoins are virtual payment units assigned a value and transmitted for peer-to-peer payment. Bitcoin exchanges meanwhile can exchange the virtual currency into fiat currencies (such as the $A).
Speaking at the Future of Digital Payments conference in Sydney, Kelkar said that to begin trading with Bitcoins merchants need to establish an account with a Bitcoin exchange such as Coinbase or BitPay and then load software onto their point of sale system that will allow them to charge in Bitcoins and then collect them in a digital wallet. The merchant can hold the Bitcoins for later use or convert them through one of the exchanges into hard cash within a day and for a transaction fee of 1 percent or less.
Kelkar said that for online retailers there was an additional benefit as it was possible to accept payments for goods and services in Bitcoin without needing to store (and hence secure) private information such as credit card information.
While Kelkar claimed that “We are on the precipice of the next phase of growth in the use of decentralised digital currencies for transferring value,” the youth, volatility and relative opacity of digital currencies means most merchants will need to carefully consider the approach before plunging ahead.
