The world of subscriptions holds a plethora of advantages for both consumers and merchants. Projections suggest that the subscription economy is set to reach the $1.5 trillion milestone by 2025. Amid this dynamic landscape, subscription-based businesses are contemplating the integration of cryptocurrencies as a means of payment. The aim is to enhance customer-centricity and expand their market reach. But, is this innovative approach even feasible? Join us as we delve into the possibilities.
In this article, we will embark on a journey to unravel the relationship between cryptocurrencies and subscriptions. We will explore whether cryptocurrencies can serve as a viable method for subscription payments, while also dissecting the advantages and obstacles inherent in embracing cryptocurrencies for subscription-based models.
What is Cryptocurrency?
Cryptocurrency, a decentralized digital or virtual currency tailored for online use, stands in stark contrast to traditional fiat currencies like the Rupee or Dollar. Cryptocurrencies operate without the regulation or control of a central authority, relying instead on a decentralized public ledger known as the blockchain to record transactions.
Examples of cryptocurrencies include notable names such as Bitcoin, Ethereum, and Tether, ranked by their market capitalization. In recent years, cryptocurrencies, especially Bitcoin and Ethereum, have gained traction as an increasing number of businesses accept them as a form of payment for their goods and services.
Now, the question arises: Can subscription payments be facilitated with cryptocurrencies? Join us on this journey for the answer.
How Do Subscriptions Function?
Think of subscriptions as a contractual agreement between you (the merchant) and your customers. In this arrangement, customers make recurring payments, and in return, they gain access to your products or services for a specified duration.
Customers have the flexibility to select a subscription plan, based on the options offered by the merchant, and determine the duration and frequency of their service or product deliveries. Upon the contract’s completion, they can choose to renew or cancel their subscription. Should they opt for renewal, the cycle commences anew.
For instance, consider Netflix, a popular example. A customer purchases a monthly plan at a fixed cost (denoted as ‘X’). Each month, they make a payment of ‘X’ to access Netflix’s content. However, if a month passes without payment, Netflix restricts the customer’s access to their content. Furthermore, customers can terminate their membership at any time, with services promptly ceasing. This encapsulates the typical workings of a subscription model.
The Advantages of Using Cryptocurrency for Payments
Swift Transactions
Conventional payment methods, such as UPI or debit/credit cards, offer instant transfers, yet they come with certain limitations. For instance, UPI may function well in India but remains unavailable in other countries. Furthermore, not everyone possesses an international debit or credit card. When dealing with international customers, merchants often have to incorporate payment gateways, which incur fees and time delays in depositing funds into the merchant’s account.
However, accepting cryptocurrency payments can circumvent these challenges. Irrespective of your customer’s location, you can promptly receive cryptocurrency payments, thus saving both you and your customers valuable time and resources.
Enhanced Security
One of the most significant benefits of accepting cryptocurrencies as payment is the heightened security they offer, courtesy of their underlying blockchain technology. Consider the following:
Cryptocurrency payments maintain the anonymity of customers, safeguarding their identities.
Blockchain technology enables the verification of high-risk products, which may have expiration dates and identity verification requirements.
With no intermediaries in the picture, customers can only file chargebacks directly with the merchant, ensuring that only legitimate claims are processed and reducing the overall number of chargebacks.
Cost Reduction
Online payment wallets, such as PayPal and credit cards, levy substantial fees on both customers and merchants. These fees may be flat or vary based on transaction amounts and geographical locations. In essence, these costs can accumulate for merchants over time.
By embracing cryptocurrency, you can alleviate the financial burden. While there may be a nominal initial fee associated with setting up cryptocurrency payment processes, the overall transaction fees for cryptocurrency are considerably lower than those imposed by credit card companies and wallets. This, in turn, enables both the merchant and the customer to save money.
Instant Access to Funds
For online merchants, the standard practice involves utilizing a payment gateway or payment aggregator to accept payments. Unfortunately, this conventional process takes between 3 to 5 business days for payments to be credited to the merchant’s account after the customer has made a payment. This delay hampers access to funds.
Cryptocurrency payments eliminate this delay, as the merchant’s wallet can be instantly credited once the customer initiates the payment. This swift access allows merchants to utilize their funds more promptly.
Enhanced Loyalty and Trust
When it comes to online payments, customers prioritize their security due to the growing instances of identity theft and other online frauds. By embracing cryptocurrency payments, you can provide the security and peace of mind that customers seek. This, in turn, fosters loyalty and trust, which can benefit your business in the long run.
Access to New Markets and Demographics
A significant portion of the global population lacks access to traditional banking services and, consequently, conventional payment systems. Opening a bank account typically requires valid identification, Know Your Customer (KYC) processes, and minimum balance requirements, which many people cannot meet.
Traditional payment methods limit your outreach to a specific audience. In contrast, cryptocurrencies offer a lifeline. Many individuals find cryptocurrency payments more secure and convenient for obvious reasons. By incorporating cryptocurrency payments, you can tap into a broader audience, potentially boosting your revenue.
Challenges of Accepting Cryptocurrencies for Subscription Payments
While cryptocurrencies offer an array of benefits, they also present complex challenges. Some of the key hurdles include:
Tracking Customers
Recurring payments are designed to streamline the customer experience. However, cryptocurrencies operate on a ‘push’ system, requiring customers to initiate each payment. This approach contradicts the seamless nature of recurring payments, leaving control in the hands of customers and making it challenging for merchants to monitor customers who cancel or renew their subscriptions.
Inability to Adjust Prices
Presently, subscription-based businesses have the flexibility to alter the prices of their subscription packages and charge customers’ cards without explicit notification. Accepting cryptocurrency payments for subscriptions will curtail this flexibility. Merchants will be obligated to inform consumers of any price adjustments before charging the new amount, potentially leading to customer churn.
Implementation of Smart Contracts
Smart contracts, which operate on the blockchain, execute when specific conditions are met. For example, when a customer pays a specific amount (‘X’), they gain access to a service (‘S’). However, every time a merchant changes the price of their offering, a new contract must be created, a cumbersome and inconvenient process.
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Can Subscription Payments Be Made Using Cryptocurrencies?
Yes, it is indeed possible. However, the pivotal question pertains to whether cryptocurrencies should be employed for subscription payments.
Cryptocurrencies, despite their merits, bring forth a slew of formidable challenges that can potentially compromise the customer experience. These obstacles have the potential to drive customers and subscribers away from your business. Hence, it may be advisable to continue relying on traditional payment systems for subscription payments.
How Can Web Technology Expert Help?
Web Technology Expert is a payment aggregator that offers comprehensive subscription management software, enabling businesses to expand globally. In addition to facilitating subscriptions in the traditional manner, Web Technology Expert can seamlessly integrate cryptocurrency payment gateways, such as Xanpool and Transfi, with various payment processors to accept and process cryptocurrencies for subscription payments across diverse geographical locations.
Furthermore, Web Technology Expert can assist with fund disbursements. Upon receiving cryptocurrency payments, they can facilitate conversions into regular fiat currencies for transactions spanning multiple global regions. During these transfers, Web Technology Expert connects you with the most cost-effective payment rails, resulting in substantial cost savings. The platform boasts a unified front-end that adapts to diverse fields as payment methods evolve, simplifying integration.
In conclusion, the integration of cryptocurrencies for subscription payments offers promising advantages, but it also comes with notable challenges. A careful assessment of your business’s needs and the expectations of your customer base should guide your decision on whether to adopt this innovative payment method. By collaborating with Web Technology Expert, you can navigate this intricate landscape and tailor your approach to best meet your business objectives.