Everyone is talking about diversification of payment methods, ever since we mentioned it in our January articles. From the speakers at congresses like the BTC2B in Brussels to the Inside Bitcoins conferences, nearly every speaker is mentioning diversification in their presentations.
“Digital currencies are so easy to use, so every small and middle sized business should jump on the digital currency train”. It is all good and fine on how people are picking up on the “diversification issue” , but it is not enough to talk the talk if you do not walk the walk so to speak.
Just because people are throwing “diversification” around all the time, we feel obligated to explain the term a bit more. Diversification means using diverse methods and strategies to reduce and limit the risk of a foreseeable or unforeseeable upheaval. By reducing the risk, you can react faster on the events that are unfolding and as such you as a company are better insulated against economic problems and events such as a financial crisis.
It is funny to hear speakers talking about “diversification” without actually giving examples on the how, why etc. It is without question that digital currencies are easy to implement, so the next question is: why don’t small and middle sized companies incorporate this in their strategies? Again we are having a cliché day so here it goes: “Someone should do a study…”. Luckily someone did it.
Dr. Noel Radley from Software Advice made a good comprehensive study. Granted, we need to be a bit hesitant about the volume of information. However, we need to frame it in the digital currency setting. Let’s face it ; the Digital currency community is still in the very early stages of its development. Some experts at various conferences concluded that we are at the same time and place as the internet was nearly two decades ago. The fact that Dr. Radley and her team found enough people to work with is an accomplishment on its own.
So yes, the data Software Advice collected is valuable because it shows what needs to be done to convince people to use digital currency and what the benefits are for their company. An added, though pleasant surprise, is the modus operandi that Dr. Radley included at the end of her analysis. This shows another great form of professionalism that adds a lot of weight to the research she had done.
· Conclusions of the research.
The first very interesting conclusion is that 55% of the people that participated in this survey didn’t use any of the services that were proposed in the study. So that leaves 45% that uses online payment services in one form or another.
Those 45% that do use online payment systems are viewed as a whole 100%. The most popular are Paypal with 28%, which is closely followed by online bank transfers/payments that are 25%. This means that nearly 53% of all people that use online payment systems are stuck with high fees and are open for scams (mostly for the PayPal users).
There are thousands, possibly hundreds of thousands, which have had bad experiences with PayPal and eBay as well (since they are working together and are basically the same company). Seller protection is non-existent and everyone should avoid PayPal like the plague. You do not have to take our word for it. Look at the thousands of pages were PayPal practices are being exposed, where decent sellers are getting robbed by crafty buyers, even if the buyers are providing enough official evidence, etc. PayPal even helps these scammers getting away with it. Most people on the Bitcointalk forum know that using Paypal to sell or buy Bitcoins or altcoins is a big “no-no”.
Now the second conclusion is that people will use digital currencies if it is more generally accepted. A bit obvious yes but true nonetheless. We would like to point out that some legislation and positive promotions would be a great start. Let’s face it : digital currencies have been it by bad press and even worse reporting ever since it was created. Even then 51% of the people are willing to give digital currencies a try. So there are more people willing to use digital currencies than people using online payments systems like PayPal and online bank transfers.
The third conclusion focuses in on the small and medium sized businesses. Most of them do not like to pay all kind of high fees and percentages on their products they are offering to the consumers. That is why 50% of the SMB’s are reluctant use existing online payment systems like Paypal. You have to understand it from their point of view. The risk of loss, loss of product, profit, etc, increases when using certain online services. Add to that an even worse seller “protection” most of these small and medium sized businesses are sticking to online bank transfers, provided they accept online payments at all.
Here is something where the Crypto currencies can come in. Low to no fees, easy to use and other positive aspects are some of the best perks digital currencies have to offer. However most SMB’s are still reluctant to use Bitcoin and altcoins because of security reasons and bad press the crypto currencies received over the years. The volatility of let’s say Bitcoin is also another concern. So the risk is pretty high from a SMB’s standpoint. There is potential for great profit but the probability of that occurring in a day’s, weeks or a months’ time is highly unlikely. The businesses have to keep up with the digital currency price and there is a high chance that if they sell the digital coin too soon they risk losing a substantial amount of money.
· Our own conclusions and how this data can be used.
This research is innovative and had to be done in order to get some feedback on what the small and medium sized businesses want. However due to the fact that the fewer people and businesses you include in your statistical analysis the higher probability of mistakes that can occur in your conclusions. Does this mean that this data is completely and utterly worthless? No of course not! It is a great “snapshot” in time where we, as a crypto community, can focus in on. What are the concerns people have? What can we do to negate these fears? Can we get involved in the policy making, because every government is thinking about it, and how should we proceed with that?
So yes, this research that Dr. Radley has done is an invaluable “snapshot in time”. It does show, for those who know what to look for, the way we need to approach certain “obstacles”. However what we did not find all that interesting was the suggestion that “people’s paychecks need to be in Bitcoin”. That is forcing people to accept Bitcoin or other digital currency and that practice will guaranteed backfire. For us in the crypto community it is business as usual but for an average Joe or Jane that is a novice to the whole digital currency concept it is a hard to understand.
We suggest that we first try to get rid of the negative image that has been haunting the digital currency for a long time, mainly due to bad reporting from people that call
themselves “journalists”. This can only be achieved by educating people. A great example is the College Cryptocurrency Network. They are uniting colleges and university students from all around the world to learn about digital currency.
Another thing we as a community should focus on are the legislative initiatives of governments. The Belgian Bitcoin Association is doing this already and has had very positive results so far. Does this mean we need to roll over, fetch, or play dead whenever a government asks us to? No of course not! However if we want to be serious about it we need to be smart and sometimes less confrontational. Be confrontational when it is necessary (like a ridiculously restrictive law proposal or licence).
As a closing note we like to stress that a less confrontational approach will benefit the entire community. So far it has paid off in certain countries. “Know your enemy, know your surroundings and know yourself and you will always be victorious”. This is a quote from Sun Tsu that some business CEO’s have implemented with great success. We should do the same. Be confrontational only as a last resort and do not “fly off the handle” so to speak.
Statistical data and the conclusions. http://www.softwareadvice.com/accounting/industryview/SMB-digital-payments-report-2014/
Consumer organisation in the Netherlands about paypal: https://forum.www.opgelicht.nl/viewtopic.php?t=1163&npo_cc=na&npo_rnd=871019775
Another anti-paypal organisation: http://www.paypalsucks.com/
An older article of the Guardian, but the practises have continued ever since: http://www.theguardian.com/money/2012/jan/27/is-paypal-safe-protection
There are many articles about the scams and scammers that are happening with PayPal. There have been actually lawsuits against PayPal in the past, but they settled it (basically buying people NOT to go further with the lawsuits…)
College Cryptocurrency Network: http://collegecrypto.org/
Belgian Bitcoin Association: http://www.bitcoinassociation.be/#/home