E-commerce is the recent and upcoming trend of the 21st century. Especially, the last decade has seen a surge in online shopping. Online shopping has made it easy to buy goods and services with the click of a button. There are many companies that sell online products. Consumers can choose from a variety of sellers and even order products from overseas retailers. This has become possible owing to the recent development in technology.
There are many software’s and applications to help consumers purchase goods and services online. Developers are competing to innovate better quality websites and mobile applications. New technological frameworks like Angular JS are being used to create interactive e-commerce websites. Many tech companies are coming up with applications that support both the iOS and Android platforms. Artificial intelligence is also being employed to create chatbots that guide users with their shopping needs. Innovations in the field of fintech and blockchain have also transformed online data handling.
E-Commerce and Digital Money
Undoubtedly, E-commerce has been a revolution from day one. The option to purchase essentials and luxury items from the comfort of your home is too lucrative to pass. This coupled with the choice to get the product home delivered is just the icing on the cake. But this became a reality only after the sellers were assured of receiving the payments online. The sellers faced little risk once the online payment facility was implemented in the E-commerce industry. One of the factors was the emergence of financial technology. Financial technology or Fintech refers to applications and pieces of software that allow a user to make financial transactions online. Users can use secure payment gateways to access their savings accounts and make online fund transfers. Banks have improved their online security to a great extent to maintain the integrity of online transactions.
E-commerce and CryptoCurrencies
Cryptocurrencies are virtual currencies. Virtual currencies are different from digital money. Digital money refers to the user’s funds in the bank account which can be accessed through online mediums. Virtual currencies, on the other hand, refer to currencies that are mined over the internet. The most notable example of a cryptocurrency is the Bitcoin. Bitcoin is a virtual currency that has value in the virtual world, but it is not physically present. It exists only in the digital world. Savings accounts and banking transactions are subject to government regulations and monitoring. However, this is not the case with virtual currencies.
Cryptocurrencies are well recognized to have the potential to disrupt the economy. However, from the viewpoint of E-commerce business, cryptocurrencies seem to be the next logical step for evolution. Cryptocurrencies are operated on a platform called as Blockchain. The blockchain is a highly efficient mode for online data storage. Using blockchain and cryptocurrencies in the e-Commerce sector is highly advantageous. This technology dramatically reduces data storage and data handling costs. The benefits of low-cost transactions can be shared by the business as well as the consumer. This is extremely enticing for online merchants and shoppers alike.
Volatility in Cryptocurrencies
Many new cryptocurrencies are being launched every day. But not all of them are effective in raising funds. Bitcoin has become viral and is probably the face of all cryptocurrencies. It is the highly sought digital currency across the globe. However, it is also an extremely volatile currency quite similar to every other virtual currency. The rate of these currencies keeps fluctuating rapidly. Every action taken by the federal government to control the virtual economy tends to cause huge waves in the crypto exchanges. This is definitely a cause of concern for online merchants who accept Bitcoins or other similar cryptos.
The most daunting question would be – Wouldn’t an online merchant benefit if the currency rates fluctuate? Not necessarily. It is true that an online merchant stands to make a profit if the value of the crypto rises. But this profit has its limits. But if in case, the currency rate plummets then the potential loss can be overwhelming. Even government regulations are a risk to the crypto economy. For instance, if an online merchant accepts bitcoins today when the market is higher by 10%. The merchant will receive 10% more value of coins. But there is a risk that the crypto market might come crashing down by 15% because of a fed imposed guideline. The merchant will incur a loss of 5% without even having a chance to react to this change. A stable crypto exchange is definitely needed to persuade online merchants to accept cryptocurrencies as a mode of payment.
Merchants who accept Cryptocoins
Not all e-commerce business and online merchants shy away from cryptocurrencies. There are some who do offer products and services for digital currencies. Some of these transactions are discretionary, but they cannot be deemed as illicit or illegal. There are some instances where merchants accept fungible coins for sex toys. Many users would prefer to keep such discretionary purchases a secret. This is not what they would want in their credit card statements. Paying off the merchant with a cryptocoin does seem more practical. Although not all discretionary transactions are done by crypto coins.
In Europe, many merchants accept digital currencies for their products. These products include luxury goods ranging from clothing apparel and other accessories. In some cases, even property can be purchased through bitcoins. Many online VPN service providers and laptop manufacturers also accept crypto coins in lieu of their products. These merchants do not restrict themselves to Bitcoin alone. They also accept other versions of cryptocurrencies like LiteCoin and Dogecoin. Some online merchant use services from crypto exchanges like Coinbase and Bitpay. These platforms allow users to lock a specific exchange rate for the digital coin. This way the risk faced by the merchants is considerably reduced.
Cryptocurrencies offer a multitude of benefits for online merchants. Generally, the funds are transferred to a third party account before they are disbursed to the merchant. They allow merchants to directly receive the funds in their own wallets instead of a third party account. The elimination of the third party reduces associated transaction costs and processing fees. However, the biggest risk for any e-commerce merchant for using digital currency is the unstable rates and the volatile market.
Harsh Arora is a Content Consultant at Enuke Software, a pioneering Blockchain and Mobile App Development Company and Blockchain Development Company in India and USA. A techie at heart, Harsh is passionate about the start-up ecosystem, entrepreneurship, latest tech innovations, and all that makes this digital world.