Getting paid is always the most important part of keeping a business afloat and, if you are to believe the local companies, getting paid in France can be even more of a challenge given some companies’ lackluster payment practices. So it falls upon us to make payment as simple, and as frictionless as possible.
The simplest approach is using some sort of credit card clearing house such as Paypal or its up-and-coming competition like Stripe (disclaimer, we use Stripe for SmartNotify™ and really like them compared to the competition).
But there is another form of payment looming. One that could either be a game changer or the next Tizen: Bitcoin.
Bitcoin is a currency that isn’t issued by a central government nor does it have a physical form. We’re talking about a digital currency. And it requires some seriously complex algorithms to produce a single bitcoin. The system is set up so that, over time, it becomes harder to produce new bitcoins, to keep inflation in check.
For online merchants, Bitcoins have a great upside: You can get paid without being brutalized with the fees associated with credit card transactions. However, Bitcoins do have some downfalls.
The biggest one, from a merchant standpoint, is volatility. The “exchange rate” has been fluctuating tremendously and it could quickly become an exposure risks for people doing month-to-month billing transactions. You can read more about the volatility and exposure risks in this great article.
Quentin Adam is the CEO of clever-cloud, one of the few French Tech Companies that accept payments in Bitcoins. To handle any liquidity issue and lower the exposure risk, Quentin takes the following approach: “We use bitpay to convert into dollars or Euros immediately. This step helps us assess how viable Bitcoins can be for payments, and help me assess how efficient the system is. This helps gather data, reassure the team, and lower (even remove) the risk from the transaction. Also we setup our system so that we can block this type of payment immediately should it become too volatile.”;
Quentin’s approach is clever (no pun intended) and could be duplicated by most companies that take one-time payments or longer-term subscription. For companies that live on month-to-month billing, the volatility of Bitcoins will remain an issue for a while and I doubt that Coface is going to help French Start-ups lower their exposure with this payment method. Though to be fair no one from Coface returned my calls or emails on the topic so it may be in the works!
One intriguing question is whether a company should offer a lower price for people paying in Bitcoin: Given that the transaction costs are lower, would it make sense to pass the savings to the customer and be even more different from the competition? Currently people paying in Bitcoins are, in essence, paying more for the same product than people who pay via credit card, changing this scenario could lead to a great acceptance rate of Bitcoins.
Of course Bitcoins could also go the way of the Dutch Tulips quickly. The recent collapse of Mt. Gox clearly highlights some of the growing pains the currency has to overcome to become stable enough. Volatility is the greatest concern and should be the main driver towards deciding whether or not you want to accept being paid in this currency.
Are you using bitcoins? What has been your experience so far?