Startup Challenges and How Bitcoin Can Help

Date:   Thursday , March 24, 2016

Headquartered in Hyderabad, BTCXIndia is India\'s largest Bitcoin exchange platform that enables the customers to trade the crypto-currency Bitcoin for Indian Rupees.

Starting a business is a challenging process. To create a successful business the entrepreneur must overcome many obstacles including devising the right strategy, hiring talent, raising finance, promoting their business and differentiating themselves from the competition to name but a few. An often overlooked area of difficulty lies in the ability to secure payments, particularly overseas payments. With below standard solutions to this problem, the startups can face a loss of revenue, low profit margin and liquidity, reduced timeliness of payments and may even result in an inability to serve customers and clients. What may, at face value, seem like a small obstacle can actually present an existential risk to the operations of the business as a whole.

Focus: Indian customers and the state of the unbanked.

India is a nation which favours transacting in cash and most Indians are unbanked - they do not have access to a bank account of any type. According to professional services firm PriceWaterhouseCoopers, the number of unbanked in India stands at 233 million, and of those who own a bank account, 43 percent made no deposits or withdrawals in the past year!

What payment options exist? Are they acceptable solutions?

Evidently, tech companies who wish to receive online payments from their customers will face major challenges operating in India. Let\'s say that a customer signs up on your site and then wants to pay for whatever goods or service it is that you are offering. How can they pay? They could send the money via PayPal. This solution if often not preferable to the startup due to the risk of having the payment reversed and the high fees incurred. Often a payment of $2000 dollars can become $1800 to the business after PayPal takes its significant chunk, particularly if this is an international payment. Also, PayPal requires bank account integration and as result, excludes millions of potential customers in India. What else could they do? The go-to solution for many unbanked are services such as Western Union. They could go offline and visit a retail office or other \'traditional\' money transfer service to pay, but this often incurs large fees. In addition, there is the issue of knowing which offline customer payments should be matched with which online accounts, an extra unnecessary headache for any startup.

Can Bitcoin help provide a better solution?

Bitcoin could be the solution to the problems faced by both consumers and startups. Any individual or company can create a Bitcoin wallet to send or receive payment with no bank account required. Accepting Bitcoin means opening up to millions of additional customers who may not have been able to pay for your goods or services previously.
Furthermore, Bitcoin can be sent with zero to very low fees, a benefit which is of particular significance when it comes to paying or sending money internationally. Relating back to our previous example with PayPal, a startup receiving $2000 dollars worth of Bitcoin would receive all or almost all of the $2000. As mentioned, small fees are sometimes charged on Bitcoin transactions, but this goes to incentivise the miners who keep the ecosystem going rather than being funnelled into the coffers of a company taking advantage of the current difficulty surrounding payments.

Bitcoin transactions are also much quicker than traditional banking transfers, taking around 10 minutes on average even on international payments. Another benefit of Bitcoin is that when a payment has been made there is no reversal. Whilst it could be implemented as a company policy, the Bitcoin payment protocol does not allow \'chargebacks\' as credit cards and PayPal do. This prevents the abuse that can be seen when a customer orders and receives a good and then submits a chargeback claiming that they have been a victim of fraud.

Looking ahead

Going forward, I predict that we will see many people move towards paying with Bitcoin and other forms of digital currency. In countries such as Kenya, mobile money services have been adopted as a solution to the problem of many people being unbanked.
As Bitcoin and its ecosystem develops, it is likely that we will see customers using Bitcoin wallets on their mobiles to pay for on and offline goods. This can be done with great speed and low fees; a win for both the customer and the merchant. Startups should strongly consider accepting Bitcoin as it just may open up a whole new range of customers and help them navigate a challenge which could threaten their chances of success.