3 Reasons Companies Utilize Digital Currencies in Business Transactions
Updated October 6, 2023
Using digital assets in business transactions has many benefits. These include lower costs and transparency and the ability to reach new demographics and execute transactions across borders. But there are also some disadvantages. Small businesses are a significant part of the U.S. economy and can benefit from more affordable payment systems. In addition, digital assets enable real-time payments, which overcomes a shortcoming in the current U.S. payment system. And digital assets are programmable, allowing for more complex applications and conditional payments.
Cryptocurrencies are a great option for small businesses because they lower transaction costs. Typically, credit card processing companies charge up to 25 cents per swipe, which adds up quickly for small businesses. Cryptocurrencies reduce these costs to less than 1%. Additionally, they open the doors to international sales. One small electronics retailer specializing in electronic components and supplies was able to sell more than $300,000 in 40 different countries. According to OKX, another advantage of using digital currencies is eliminating the need for middlemen. If a customer lives within the same network, they can pay the shopkeeper directly. Because there are no middlemen involved, digital currency transactions are generally cheaper than physical ones. Moreover, there are no physical wallets required. This allows businesses to keep a smaller amount of digital currency on their premises and lowers overall transaction costs.
Transparency when using digital currencies in business is an important issue to consider. As a result, financial institutions should begin planning now for their future in the industry. Unlike traditional financial transactions, which can be subject to fraud, digital currency transactions are entirely transparent. But they do pose some risks, including the potential for money laundering. One of the most common concerns about cryptocurrency is privacy. There is also the issue of security. This is why global regulatory oversight of digital currencies is necessary to avoid regulatory arbitrage. Some countries, such as India, have begun exploring the idea of a national digital currency. This would help ensure the safety and transparency of transactions.
Ability To Execute Transactions Across Borders
For businesses that want to expand internationally, the ability to execute business transactions across borders is a critical element. It will allow them to provide the best possible payment experience for their customers and attract their return business. The process can be complex and involves working with a PSP who understands the intricacies of international payments. To facilitate business transactions across borders, PSPs can help merchants set up multiple bank accounts, enabling seamless payment processes for both customers and merchants. PSPs that offer more payment options help reduce the cost of international payment processing. They also ensure that the payment transaction is secure and comply with PCI DSS Level 1 standards. Cross-border payments allow companies to participate in the global economy, whether it’s buying raw materials, contracting skilled workers, or partnering with another company. Whether it’s a large or small international business, the ability to accept payments from multiple countries helps maintain the integrity of professional relationships across the world.