Should I Include Cryptocurrencies for my Business Transactions?
The future of Global Exchange
Yes or maybe not…….
The answer is more complicated than its seems.
Our network of businesses is expanding beyond domestic borders and every industry is definitely looking for an untapped market. Amazon, for instance, is planning on conquering India’s e-commerce market that is to reach a staggering $200 billion in the next seven years. Whereas, Netflix had already expanded and failed in India. So, where did they go wrong, and what can Amazon learn from it?
The prime reason for its failure according to many analysts is the high subscription cost of Netflix. For the average population of India, it is definitely a premium product when its domestic competitors provide similar service at a lower cost . We are all familiar with the two basic rules for business success: (i) product differentiation and (ii) cost competitiveness. Unfortunately, the harsh reality of global business expansion is : your product has to be comparable to the domestic competitive rate.
We can all learn a lesson from Netflix’s failure in India
So why I ask for cryptocurrency to be an example for global transactions? The answer is obvious. Cryptocurrency is definitely the future for dominating the day-to-day transactions in global and domestic businesses. For a digital currency it offers flexibility for transactions across a global platform. It offers several benefits including immunity against (i) currency fluctuations, (ii) the speed at which transactions are taking place and (iii) security.
That means with a standard digital currency system the cost is “standardized” globally (at least in theory). This issue is of course reassuring for many countries that suffer their currency depreciation against US dollars.
Cryptocurrency can be the next PayPal or even better?
We all know how PayPal revolutionized business payments. PayPal is among a few platforms that offer businesses an opportunity to accept payment from overseas in more than 25 different currencies from over 200 million customers. This is good news for global online businesses. But there is a catch with PayPal. In addition to other transaction fees there is a standard mandatory fee of $30 per month. Yeah, it doesn’t sound much but can definitely make a difference, when compounded and also in lieu with global market ,currency depreciation is an important factor for market penetration.
Cryptocurrency can be a savior is various ways. This is because (i) it can be traded in fractions and (ii) serves as a global digital currency exchange. Also it completely eliminates the hefty bank -to-bank processing fees, which is more likely to put a dent on your profit. Being a decentralized non-government regulated virtual currency platform, cryptocurrency can easily help businesses to save a fortune by avoiding such banking costs.
Remember, customer satisfaction is an inevitable rule. The reason why PayPal took off in spite of similar payment systems, is simply because its cost of transaction was lower than any of its competitor at the time. Now imagine a platform with no associated cost and a standard currency of exchange: cryptocurrency can undoubtedly take over PayPal. Also, the transaction time for cryptocurrencies can be in real-time compared to PayPal requiring 3–5 business days.
Global Enterprises are already planning on issuing their own cryptocurrency and it is more likely to succeed in customer acquisition due to its “mind games”.
Walmart, the famous chain store has already applied for a patent on its cryptocurrency. It is planning on using it as a replacement for credit/debit cards used by its regular customers to pay for their purchases. Amazon, is also following this footstep by registering for cryptocurrency related domains. Heard about Amazon coins? It has a digital exchange rate of $1 =100 coins. It allows you to make purchases on Android apps, games and similar such items from its Amazon app store. So how is that benefiting Amazon’s business, you ask?
Pay close attention to the exchange rate: $1=100 coins. At a glance, it might not seem much. Do you understand the mind games these numbers are playing? You are more likely to make a purchase thinking it is only a few hundred coins and also the denomination is not constant for all companies. This tactic is used by many online gaming and dating platforms where they trade in digital coins rather than using real monetary currency. The denomination of exchange is not uniform and people are more likely not to understand the terms of exchange and make an impulsive buying decision.
Secondly, companies are creating a brand loyalty by holding on to their customer’s money. The Amazon coins are only available for exchange across amazon platform and cannot be used to make a purchase elsewhere even from Walmart(which is definitely not the case if customers were using US dollars for their purchases). By locking the customer’s loyalty in terms of cryptocurrency, companies are being able to generate revenues. I personally believe this is how Apple makes most of its revenues. Apple products are designed to be only compatible with each other and in a way they are subconsciously creating brand loyalty.
In spite of all the positive attributes, the integration of cryptocurrency into our businesses will initially face many challenges.
Cryptocurrency is still very vague among the general population. You can read more about technical aspects about cryptocurrency at Cryptocurrency, where I explained the concept in layman terms. Like Warren Buffett, many are simply shy on investing in cryptocurrency because they are skeptic about this technology and do not understand how it works. “You have to learn how to value businesses and the ones that are within your circle of competence and the ones that are outside ”. : Warren Buffet.
Just fully integrate cryptocurrency into our payment method and it will not be able to attract many potential customers. Perhaps, a hybrid platform where both traditional currency and cryptocurrency can co-exist simultaneously will attract a range of potential customers.
The high volatility of Bitcoin value can also be another disappointing factor for its complete integration as a payment method . In the mid of March 2020 it was trading at approximately $6000= 1 bitcoin, which jumped to around $12000 in late July, 2020. Previously, it was almost $20,000=1 bitcoin around December 2017. This high volatility might not be ideal when making regular purchases. Hence a standard cryptocurrency valuation is required for commercial purchases.
However, as we move towards globalization and digitization, the future of cryptocurrency seems to be strong.Widespread adoption may take years, but this trend has emerged as many large companies begin to realize the potential of cryptocurrencies.
