Bitcoin has strong opportunities for mainstream businesses, but it’s hard to understand from listening to techies explain it. Here is what a company’s management needs to know about Bitcoin.
Bitcoin is a better way to do transactions. Forget about Bitcoin as an investment vehicle, or Bitcoin as a way to end the Federal Reserve. Its benefit to business comes from payments.
If your payments are occasional and in large amounts, don’t bother with Bitcoin. Let’s say that you’re Boeing. Once or twice a day someone sends you $100,000,000 for an airplane. Stick with your current practices.
However, say you run a coffee shop with an average ticket of six dollars, and nobody carries cash. You can collect an electronic payment with zero cost per transaction.
Say you’re a dentist who takes plastic. Occasionally someone disputes payment with his credit card issuer because his tooth is still hurting. Not only do you lose money, but you lose valuable time dealing with the dispute.
Or you sell specialized things on the Internet. A Nigerian company wants some parts, but you’re hesitant to ship until you receive payment. You don’t even know how to collect funds from Nigeria.
For all of these businesses, Bitcoin might help.
The inner workings are complicated, but here is a basic example. The coffee shop owner has a phone, iPad or computer with optical scanner. The customer gets her latte, places her cell phone (with the Bitcoin app working) in front of the shop’s scanner. Beep. Bitcoin passes from the customer to the shop owner. The customer pays a 3 cent fee (though the merchant might offer a discount to users.) The shop owner will probably accumulate Bitcoin through the day, then convert all of his Bitcoin into dollars at the close of business. He pays nothing to accept Bitcoin, and with the largest processors no fee to convert into dollars.
The customer probably had a relationship with an exchange company, in which she periodically reloaded her Bitcoin electronic wallet with dollars from her bank account.
