How to Talk to Businesses about Bitcoin and Cryptocurrencies

[Titcoin]

I've had the luxury of speaking to hundreds of businesses over the last 18 months about the role cryptocurrencies could play in their business models. Naturally, as one of the creators of Titcoin, my focus has been primarily on the adult entertainment industry. However, I have to believe that the questions and skepticism I've heard would equally apply to traditional businesses who have yet to embrace digital currencies including Bitcoin. I'd like to share some of my insights to hopefully help the crypto community by shedding light on some of our collective challenges and potential talking points when engaging businesses.

If there's one thing that I learned, I realized there's a lot of misinformation out in the ether that can only be resolved through better education. The general sentiment that I've heard from businesses (both large and small) is that Bitcoin and cryptocurrencies are a ponzi scheme that primarily facilitates illegal activities. Naturally, negative news such that of Ross Ulbricht and the recent conviction of Trendon Shavers only reinforces this perception. As such, educating businesses (and the media) is an uphill battle from the very beginning.

Since we all know there are tons of inherent benefits, the tricky part when talking to businesses is essentially speaking their language and highlighting the benefits of cryptocurrencies as they relate to their specific business model. I've had some luck convincing businesses to 'entertain' the idea of cryptocurrencies. However, for us, this hasn't lead to much adoption mainly from a development cost and business priority perspective. On the other hand, I've managed to convince a handful of mainstream adult websites to 'experiment' with Bitcoin just so they can see how it works.

Businesses typically focus on 3 core goals: 1) Increase Revenue; 2) Reduce Costs; and 3) Provide Value to Consumers. These goals are also in order of business priorities, but they are not necessarily mutually exclusive from each other. Understanding these goals will help create a framework for discussion if you happen to be chatting next to someone in the elevator or in a bar. So let's examine each of these individually to pick apart key talking points that could earn some head nodding (and not in an adult industry way).

INCREASE REVENUE
This is by far the most important business goal to talk about. In an ideal futuristic world, everyone would have Bitcoins or cryptocurrencies in their wallet to spend. Increased revenue would be achieved by simply opening up a new channel for consumers to spend money. Unfortunately right now this isn't the case which is why it's been very hard to snowball business adoption. They want to know how much increased revenue (or traffic) they will receive today if they start accepting cryptocurrencies. The answer isn't easy since it involves future speculation of consumer adoption.

However, there are many signs that point to increasing (albeit slow) adoption which serves as great ammunition to debate the topic. For starters, some of the early adopting businesses are starting to find some success and increased sales by offering Bitcoin payments. TigerDirect is an excellent example of a company that has increased revenue by simply accepting Bitcoin. They recently claimed that 46% of all Bitcoin sales are from brand new customers which is a clear indication that they're growing their consumer base. Furthermore, they also claimed that Bitcoin sales are on average 30% larger than traditional sales. So here we have case study that points to potential increased revenue through additional new customers coupled with larger sales.

To further demonstrate the potential growth of consumer adoption, one only needs to review a handful of recent statistics and surveys that particularly target millennials. Millennials are generally classified as individuals between the ages of 20-30 years old who will eventually become the main consumer group in the mass market. A recent study shows that a whopping 60% of millennials do not have a credit card. This generation is very wary of credit and loan debts of the early 2000's which is one of the main reasons why they are shying away from credit based payment systems. This audience still does buy products online but their methods are most likely using a debit based system such as a debit or pre-paid credit card. This is an audience that wants to remain debt-free and prefers to pay with a mechanism that similarly works like cash in your pocket.

On a side note, it is a scary notion to think that millennials are paying for things online using a debit card. Almost every financial advisor will say that's a very bad idea because the recourse for getting your money back if your card number is stolen is very different than a normal credit card. If you report a stolen debit card number immediately before it can be used, you are fully covered. If you report a stolen debit card number within 2 business days and it has been used, you are liable for only $50. After 2 business days, your liability jumps up to $500. Now if you're really careless and you don't report a stolen debit card number after 60 days, you lose everything which could include your entire life savings. Since we're talking about online payments, it's unlikely you'll be able to realize your card number was stolen until you check your bank account which most people don't do every day. So the moral of this story, don't use your debit card to pay for things especially over the internet.

And this is where we turn back to Bitcoin. Another recent study performed by Goldman Sachs specifically looked at the level of interest and adoption of Bitcoin by millennials. They found that 22% of millennials are actually using Bitcoin and another 22% intend to use Bitcoin in the future. When you think about the reluctance of millennials in adopting a credit based payment system, it seems almost logical that digital 'cash' would become a very attractive option for this audience. The statistics are proving this to be true indicating a growing market for Bitcoin adoption by an increasingly influential millennial consumer market.

There is one last topic that frequently comes up in discussions with businesses related to increased revenue. They often ask about the price of Bitcoin and its history of volatility. This is a conversation that is best to avoid since it quickly becomes a slippery slope discussion on commodity trading and of the risks involved. It's like being on a first date and talking about your stuffed animal collection. The minute you open up that dialogue, they will forget all of the benefits and only focus on the risk-related elements. It would be best to remind businesses that they are not a hedge fund and their primary goals are to sell a product or provide a service. In other words, for their day-to-day business, they should see cryptocurrency as medium of exchange to increase sales (and revenue) and not as an investment commodity. It is this misconception that drives a majority of reluctance because they worry about the risk of losing money in the long run. In reality, Bitcoin transactions can be automatically converted into fiat currency which makes the current price of Bitcoin irrelevant to most businesses. That's why it would be best to downplay discussions around price related to commodity trading and redirect the the focus on some of the more tangible transactional benefits.

REDUCE COSTS
Cost reduction is another core business goal. However, the value achieved is not always as tangible as other business KPIs such as increased sales and consumers. Nevertheless reducing operating costs is another topic that should be leveraged to sell the idea of adopting cryptocurrency payments. In fact, almost every major financial institution is currently experimenting with the underlying Blockchain technology to see if there are opportunities to reduce costs on internal settlement processes.

So how can Bitcoin help reduce operating costs for a business? The best place to look is at the cost of transactions they currently pay for traditional credit card processing which comes in 2 flavors. The first is the primary cost per transaction that credits cards charge merchants which can range between 2-5% per transaction. The second is the potential cost of a transaction if a payment is disputed by a customer which is called a chargeback that could result in a penalty fee on top of the lost revenue.

Large businesses tend to operate on lower profit margins since they rely on volume sales. Simply reducing the transaction fees by several percentage points on high volume sales would easily lead to a significant amount of cost savings for large businesses. Smaller businesses on the other hand tend to rely on higher profit margins on every sale making each transaction critical to their sustainability. In this case, chargebacks tend to be a burdensome cost to small businesses through the lost sale and potential fees involved.

As we know, Bitcoin and cryptocurrency transaction fees are relatively negligible and the concept of chargebacks do not exist because of the mechanics of how transactions are performed. It would be appropriate to remind businesses that reducing such operating costs will have a positive impact on their overall profit margins.

PROVIDE VALUE TO CONSUMERS
This last business goal typically takes a backseat to the first two goals mentioned above since businesses usually only look at their bottom numbers to assess success. However, progressive and forward-thinking companies will also look at the value they are providing their consumers beyond the product or service that they are actually selling. Values such as ease of use and customer support are equally as important to a consumer as is the product they are purchasing.

Bitcoin and cryptocurrencies provide one often overlooked benefit to consumers which has become a hot topic in recent months. This value is customer privacy. All we have to do is point to the recent Ashley Madison hack to demonstrate that no computer platform is immune to cyber theft. Even more pointed, in the case of Ashley Madison, they are now subject to heaps of lawsuits because of their security breach which will inevitably put them out of business.

Consumer privacy protection is a legitimate consumer interest that shouldn't be taken lightly. The obvious benefit is avoiding both bad publicity and lawsuits. But from a consumer perspective, it earns trust which will strengthens loyalty leading to a long-term business-to-consumer relationship. Since cryptocurrency transactions can be accomplished without providing any personally identifiable information, it offers a way to guarantee that sensitive customer information will not be leaked to the public nor hacker regardless of any existing counter-cyberattack mechanisms in place. All computer servers are vulnerable to attack and consumers are fully aware of that now. Offering consumers a method of payment that practically guarantees their privacy is a huge value to consumers that should be touted.

With that said, hopefully I've shed some light on the lessons we've learned over the past year while talking to businesses. It is a bit of an artful craft to say the right things to businesses that fully registers in their minds why Bitcoin and cryptocurrency is a logical option. It simply makes sense from a business perspective for many reasons. The overall challenge for all of us is to help educate and inform businesses (and the public and media) that all of the negative perceptions are merely the result of a small group of individuals using the technology in a regulation-free environment to their advantage. In reality, the technology has far more positive benefits which will eventually be realized as we continue to move forward and raise awareness.

Please let me know below if you find any of our insights valuable. I'm honored to be a part of this particular community, and proud to be on the forefront of helping raise public awareness as we all are doing.

Cheers.

Edward Mansfield
Co-creator Titcoin Digital Currency