Overstock.com: Accepting cryptocurrency is good business
Cryptocurrency payments are growing despite, or because of, slumping prices.
Jonathan Johnson, board member at Overstock.com, recently said that cryptocurrency is accounting for a growing proportion of the company's earnings, and has proven to be an exceptionally cost-effective payment option for the online retailer.
"We have somewhere between $68,000 and $120,000 a week in cryptocurrency revenues; people buying sheets and toasters using bitcoin or ethereum or other coins," he said.
The figure currently only accounts for about 0.2% of the company's revenue, but is growing despite, or more likely because of, declining cryptocurrency values.
The benefits of cryptocurrency payments
Johnson's comments echoed those of other online retailers who have come to appreciate the benefits of cryptocurrency payments, and are wishing more customers would use it rather than credit cards, volatility and all.
The most immediate benefit is that it lets merchants take online payments from anywhere in the world without going through high fee third parties like credit card providers or services like PayPal, or contend with exchange rates.
If a store directly accepts cryptocurrency to their own wallet, the fees can be as low as the actual cost of a single cryptocurrency transfer. This is potentially as low as a fraction of a cent or completely free. Even if a store goes through a third party provider like Coinbase's merchant payment system, there's a good chance the fees will be much lower, especially for international payments.
One of the less obvious benefits that Johnson highlighted is that it reduces the cost of fraud prevention, which is regarded as one of the inherent costs of accepting credit card payments.
These costs take the form of unlawful charge-backs which have to be contested, and all the shopping done through stolen credit card numbers. If your card number is stolen and used online, and you later contest those charges, the merchant typically has to eat the costs.
"We pay a processing fee for credit cards, and we employ about 40 people in our fraud department. That's a cost of doing business with credit cards," Johnson said.
"When we take cryptocurrency, we have a very small transaction fee with Coinbase, much smaller than our credit card processing fee, and we have no fraud prevention department. It's like a cash transaction. For us, that is a much cheaper way of doing business."
The benefits might be even more pronounced for the smaller e-tailers that can't afford to maintain a full office of fraud prevention employees, allowing them to safely ship to regions they would normally avoid as a matter of course due to credit card fraud concerns.
A capital idea
In the same presentation, Johnson also noted the benefits of blockchain land registries for unlocking capital in property, especially in developing countries where inadequate formal procedures for recognising and transferring property ownership prevents people from accessing the capital locked up in those assets.
"Today, so many of us can't participate in the capital markets the way accredited investors or well-connected investors can. And those of us that are trying to raise money have a hard time crowdfunding or raising money in a democratized way," he said.
Cryptocurrency and blockchain technology is typically at its best wherever legacy systems are at their worst, and many countries around South East Asia, South America and Africa which are hobbled by poorly developed legacy financial systems are among the keenest early adopters of cryptocurrency in the real world.
Overstock shares jumped by 11% following Johnson's remarks, suggesting that despite all the cryptocurrency price concerns in recent months, there's still a lot of bubbliness and crypto appetite in the markets.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO