The Potential of Blockchain Technology for Small and Medium-sized Enterprises
Quite a few years ago, if you told someone that you knew what this new kind of technology called “blockchain” was, people weren’t as likely to take both you, and blockchain of course, as seriously. Forbes called it a fad about 4 years ago!
But times changed and Bitcoin, blockchain’s best creation humanity has seen thus far, went all the way up to $60,000 a piece! So clearly, this technology is no longer a “fad”, but a tool that can help small and medium-sized businesses with their finances.
But before we dive into what blockchain is and how it can help your business, let’s first talk about what blockchain really is?
So What is Blockchain?
Think of blockchain like a gigantic ledger that is tracking multiple assets in your business. The ledger is shared, and only people who have the required access to it may update it from time-to-time. The assets can be whatever you want, from intangible ones like branding and copyrights to tangible items like cash and the vehicles that your company owns.
So blockchain isn’t just used to create bitcoins, but does much more than that. How does it work you ask? Well it’s a long chain of blocks that contains vital information. That information can be either about tangible assets, like cash, or intangible ones, like copyrights.
Everything imaginable can be recorded in the “block”. When, by whom, where, what and even how was this information stored.
Now comes the best part, the security. Every single block is a new piece of information that is added to the chain. All of the information that is present, no matter in which block it is within the chain, cannot be tampered with or changed. Even if one, or more than one block has errors, new blocks will be created to cancel-out the error. Both the old and new transactions will be then visible in those blocks.
Problems Faced by Small and Medium-sized Businesses
You might be wondering about the potential of blockchain for small and medium-sized enterprises. Well before we get to it, you may also want to know the issues that typical small and medium-sized businesses face on a daily basis.
1. Not Enough Cash!
Simply put, businesses of these sizes don’t really have much cash on their hands, and even JP Morgan Chase agrees with this notion. An SME business is considered as risky by big banks because SMEs usually struggle with having enough cash to stay afloat. This was seen first in the 2008 crash, and later in the COVID-era.
Other than that but also related to being short on cash is the limited access that SMEs face are less financial options that they have, compared to large and multinational organizations that won’t have to scrape the barrel for every last dollar to pay in hefty fees!
2. Hefty Fees!
Speaking of those fees, they indeed can get pretty daunting to pay if a bank does decide to go and borrow from a large bank. These can range from card issues, card-network assessment and even payment processors. You may read this article from the Bank of America to get a good grip on how to get rid of these fees.
3. Delayed Payments
Big businesses like P&G and Walmart buy from their suppliers on a “buy now and pay later” basis. What this means is that these giants are basically borrowing goods that are worth hundreds of thousands of dollars, for days that can easily be up to 120. This hurts the cash inflow of SMEs, who, as we’ve mentioned already, are usually short in cash.
And that’s just the start. Ecommerce stores like Shopify and Amazon have even more fees in place for SMEs to sell as vendors. Payments from these sites are delayed, which means that they spend fast and get paid pretty late.
4. Cross-border Payments
And just as technical and complex this whole situation might appear to be for the average SME, it just gets murkier when you take it more “internationally”. It should come as a surprise to absolutely no one that international trade comes with a boatload of tariffs, fees, and of course, delays.
SWIFT payments take anywhere between one and five days. And that does not even take into consideration more unexpected delays as the number of banks increase. Businesses will end up increasing the cost of their products or services because there are numerous banks and financial services that stand between them and the final consumer.
To add to this entire complexity, frauds and scams are a real threat for any business, SMEs included. The World Bank says that, as of the second quarter of 2021, 5.45 is the average cost of sending just one cross-border payment. And this might just increase in the future given the recent developments that have taken place in Ukraine.
5. Diminishing Returns
While companies like Costco have a tremendous negotiating power that enables them to pay SMEs significantly less when compared to the market price. The end result is that the average SMEs costs get increased dramatically, which ends up hurting the end-consumer in the long-run.
The reason for this is very simple, since the SME cannot afford massive costs, they have no other option left but to increase their prices. This hurts them in another way as well, that they are then unable to compete with giants in their own industries/niches. The increased cost deters the public from buying from them, and this results in people eventually preferring the “deep pocket manufacturers” compared to the average SME.
The Solution: Blockchain’s Potential
The HSB conducted a survey in 2020 which said that at least ⅓ of all SMEs in the US are conducting payments in cryptocurrencies. That number says quite a lot about the potential of blockchain. Blockchain is no longer a trendy “fad” that will die out in a couple of months, it is the newest and most useful technology that man has created. And it is here to stay.
SpaceX and Tesla’s CEO and the world’s richest man, Elon Musk has said that both of these two companies will soon be accepting DogeCoin as a legitimate form of payment. The aforementioned companies also have held stock as bitcoins for multiple months by now.
But you might consider this as a publicity move as well. After all, Elon is the richest man on the face of the Earth at the time we are writing this. And it comes as a surprise to absolutely no one that SpaceX and Tesla are two of the biggest companies that have ever existed. So you might think, does any other company also accept cryptocurrency, that my SME can take some ideas from? Well guess what, we have an entire list for you!
But if you’re interested in searching and knowing for yourself if a specific company uses bitcoins as a form of payment, you may use spendabit to search between hundreds of such stores!
1. AT&T
AT&T announced way back in late-May of 2019 that they will be accepting bitcoins from now on. Becoming the first cellular service in history to do so was surely a landmark moment in the history of not just bitcoin and cryptocurrency, but also in the history of blockchain.
2. Microsoft
Microsoft’s decision to take bitcoin as a proper method of payment instilled and brought about a whole new wave of confidence in the crypto and blockchain communities. It must be noted, however, that Microsoft was accepting cryptocurrencies from 2014 but had put a stop to it, only to resume it in 2018.
3. Overstock
Overstock is a renowned American retailer that specializes in selling high-value stuff at lower the price of the market because of, you guessed it, overstocking. They have been accepting cryptocurrencies since 2017. By 2020, the value of Overstock had increased to a whopping 800%, as they had already been investing in blockchain.
4. Shopify
Shopify has been, for quite a damn long time, the second-biggest ecommerce store that exists. And they too have been at the forefront with adopting new payment systems like cryptocurrency. Strike, which is an American digital payments system, announced back in April of 2022 that they were integrating their services with Shopify.
This will be of immense help to sellers on that site, as it allows for currencies like Bitcoin and Ethereum to enter ecommerce in more force than ever.
Summing it All Up
The future and potential for blockchain and its spawn, cryptocurrency, seems very promising, given the importance of this technology on a year-on-year basis, even for SMEs. While BTC does take a plunge in the market every year, and there have been instances where companies like Wikipedia have stopped taking crypto as a form of donations, the future, given the current trend, seems very promising.
