Small Businesses Looking to Bitcoin

Virtual currency avoids steep swipe fees and cash handling concerns.

June 28, 2013

NEW YORK – Earlier this week, the Wall Street Journal highlighted the rising popularity of the Bitcoin among small businesses.

The lure for businesses for accepting the virtual currency is its avoidance of credit card processing fees. Additionally, its acceptance attracts customers who appreciate the technological novelty of paying for products with virtual currency.

Adam Sah, co-owner of a specialty grocery business, began accepting Bitcoin in April. He posted “Bitcoin Accepted Here” stickers on his three store windows, and two months later, at least one customers purchases items with the digital money every day at each location, he said.

The novelty has not yet resonated among mainstream retailers. Tom Litchford, vice president of retail technology for the National Retail Federation, said Bitcoin has not yet come up for discussion at industry meetings. "Where is the motivation for the consumer?" he asked. "Why would I not use my credit card where I get [airline] miles?"

Small merchants take a different view. Not only due Bitcoins offer lower swipe fees (less than 1%) than traditional credit cards, a Bitcoin transaction is final and cannot be disputed. And some merchants favor it over cash because transactions are completed quickly via the Internet and avoid cash handling hassles. 

"Cash is a pain," said Aaron Rollins, a cosmetic surgeon in Beverly Hills, Calif. "I got to count [cash] and bring it to the bank."

A critical risk for merchants using Bitcoin is that the virtual currency could become worthless if it doesn’t catch on (it is traded via online exchanges). However, some merchants say they aren’t holding on to the digital money as an investment. Rather, they are quickly converting it into traditional currency.

An additional concern involves banking regulators, who recently issued warnings to virtual currency exchanges and others dealing with the bitcoin that they could be closed down if their activities breach money-transmission laws.

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