One of the biggest challenges any business faces is cash flow, and marketing agencies are no exception. With most agencies getting paid on Net 30 terms, there is a huge opportunity to improve cash flow by shortening the payment cycle. This can be accomplished in a variety of ways, from changing terms (which isn’t very client friendly) to providing clients with an expanded menu of payment options (more client friendly, but sometimes costly for the agency). Most agencies opt for the latter, choosing to offer clients the option of paying via credit card, ACH, or check. While these are all very convenient for clients, there are costs and risks associated with each:
Merchant fees for credit card transactions typically range between 2.5% and 3%, which can be significant for clients on large retainers. In addition, credit card companies typically hold payments for two to three days before they are transferred into your account.
ACH transactions allow banks to transfer payments directly from one bank account to another using entirely electronic methods. ACH fees are usually flat fees levied on a per transaction basis, making them less expensive for the transaction sizes most agencies are processing. But while costs are lower, the time to process an ACH is longer (between three and five days).
While there is no cost to process a check, there is a significant time lag in getting paid. Between the time it takes for a client to mail the check and then the time required for your bank to clear payment, it can take weeks to see a check payment hit your bank account.
Both credit card and ACH transactions sometimes incur “charge backs” or disputes from customers. Customers may claim that the charge was false, unauthorized, or that their account information was misappropriated. When this happens, agencies have little choice but to absorb the loss.
In addition, companies that accept credit card or ACH payments are obligated to safeguard clients’ payment information (including credit card and bank account numbers), and if this information is mishandled, it can pose a serious risk to the agency.
For marketing agencies struggling to improve cash flow, reduce risks, and improve the customer experience, bitcoin offers a number of advantages.
Growth of Bitcoin as a Trusted Payment Method
Since its emergence in 2009, bitcoin has grown to become the world’s most widely used cryptocurrency. It is now accepted by a number of notable vendors including Overstock.com, Amazon, Dish Network, Target, CVS, Dell Computers, Paypal and eBay, Expedia, Home Depot, the Sacramento Kings, Kmart, and Sears. The biggest challenge to wider adoption of bitcoin is the lack of understanding about what it is and how it works.
Bitcoin is considered a “cryptocurrency” because payments work peer-to-peer. There's no central repository or single administrator, such as a government or national treasury. The bitcoin peer-to-peer network is made up of thousands of computers run by individuals around the world. Think BitTorrent (a file-sharing system), Napster (music sharing), or Skype (audio, video, and chat) -- all of these platforms operate on similar peer-to-peer electronic networks.
When someone wants to make a payment using bitcoins, he must initiate the transaction using a private key (much like a password). Once the transaction has been processed (which occurs almost immediately), the payment cannot be taken back or refunded. The person or company who accepts the payment can choose to either accept it in the form of bitcoins or can use a third-party processor to convert the bitcoins into cash.
Because bitcoins are not regulated by any central government authority, and are therefore difficult to trace, they have been used in some cases to facilitate illegal or black market transactions. As a result, much of the press surrounding bitcoin has been negative and this has led to a reluctance on the part of many businesses to accept it as a form of payment.
In reality, for legitimate businesses, there is very little risk in accepting bitcoins and a big upside both in terms of the potential to boost customer satisfaction and improve the company’s cash flow.
Why Marketing Agencies Should Accept Bitcoin
Agencies that wish to get paid via bitcoin can either accept actual bitcoins or work with a third-party payment processor that will turn bitcoins into cash, much like credit card companies do. From a risk management standpoint, the latter approach is much safer and the only way I would recommend agencies consider accepting bitcoin for payment because it eliminates exchange risk as well as the risk that the bitcoins will be stolen if the company experiences a data breach or gets hacked.
Agencies that accept bitcoins stand to benefit in several ways:
Because payments are processed immediately, agencies get paid faster.
There are no processing fees to accept payments in bitcoin, and if you are exchanging bitcoin into U.S. currency, most third-party processors do not charge a fee unless your transactions exceed a very high amount (for example, Coinbase, one of the most popular and more widely used processors, charges 1% to convert bitcoins to dollars only after total transactions per year exceed $1 million).
Because bitcoin payments are “push” transactions, meaning they are initiated by the purchaser, chargebacks are not possible.
In addition, the “push” nature of the transaction means that agencies don’t need to hold or safeguard sensitive customer payment information such as credit card or bank account numbers, and therefore are not at risk of this information being leaked or stolen.
When you use a third-party processor to convert bitcoins into dollars, there is virtually no exchange risk (the transaction happens so quickly that there is little chance of fluctuation between the time of purchase to the time of payment), and the risk that bitcoins can be stolen via a cyber attack is eliminated.
In addition to the financial benefits, there are other, less tangible reasons that marketing agencies should consider accepting bitcoin. Chief amongst these is increased customer satisfaction. By including bitcoin amongst the accepted forms of payment, agencies can offer their clients more options and allow them to pay for the services they are receiving in the way that is easiest and most convenient for them. While bitcoin use is not as widespread as credit cards, it is gaining traction amongst dot-com and high-tech firms, which can be very lucrative clients for the agencies that represent them.
For the reasons outlined above, there is a small but growing cadre of advertising, marketing, and PR agencies that have chosen to accept bitcoin. My firm, Quintain Marketing, is one of them. Others include KCD PR in San Diego, DiMassimo Goldstein in New York, and 5ivecanons in Jacksonville, Florida. Because there are so few agencies are taking bitcoin at this time, those that do are enjoying significant press coverage.
Get Set Up to Accept Payments
Getting started is surprisingly easy and fast, and there are plenty of companies dedicated to helping businesses that want to accept bitcoin get set up. In our case, we worked with Baltimore, Maryland-based Bitsie, an agency that helps businesses navigate the process of establishing a bitcoin merchant account. All it took was a quick, 15-minute phone call with a representative and five minutes to set up an account. Bitsie then connected us with Bitpay, a third-party payment processor that will convert our bitcoin transactions into cash which will then be deposited into our bank account. Creating our account with Bitpay was equally easy and took about 15 minutes.
Bitpay isn’t the only payment processor out there. Other popular payment processors include Coinbase and GoCoin. Take some time to browse their sites, and find the one that’s right for you. And if you can, work with a local bitcoin agency. It will help simplify the process, and you’ll have someone you can turn to for help if you have questions.
Originally published Nov 25, 2014 4:00:00 AM, updated March 30 2018