Cash, Charge or Bitcoin: Is the aftermarket ready for cryptocurrency?

Jan. 30, 2019
Cryptocurrencies have received a lot of hype and attention as alternative payment methods on the Internet and elsewhere. Can cryptocurrencies be a fit for the aftermarket?

Cryptocurrencies have received a lot of hype and attention as alternative payment methods on the Internet and elsewhere. The most famous is bitcoin, a digital currency that has ballooned in value through speculation (a single bitcoin is worth roughly $3,430 as of this post). Cryptocurrencies don’t exist physically and are not backed by governments or central banks. In the case of bitcoin, the currency is managed through a blockchain network, which serves as a secure, online ledger of every transaction.

In bitcoin’s wake, additional cryptocurrencies have emerged – Ethereum, Litecoin, Ripple, EOS, Bitcoin Cash, and others. Online retailers (and even some brick-and-mortar locations) have begun accepting bitcoin and other digital currencies.

Can cryptocurrencies be a fit for the aftermarket? A few companies in the auto parts sector have experimented with bitcoin, but so far there aren’t many companies actually processing transactions that way. There are also concerns that we’re in the midst of a cryptocurrency bubble that could send values plummeting in the near future.

Traverse City, Mich.-based MIBearings began accepting Bitcoin in 2013. To begin using cryptocurrencies, the company signed up with the Coinbase and BitPay services so that it could accept bitcoin transactions. “We originally decided to accept bitcoin to test out this niche market and see if anyone was interested in paying for automotive parts with Bitcoin,” says owner Luke Rehmann. He adds that the company would consider accepting other currencies depending on volatility, transaction fees and exchange rates.

“We implemented a receiving payment wallet for BTC and integrated BitPay with our ZenCart setup at the time. All customer transactions would be sent to a single wallet where we would verify the transaction,” Rehmann says.

While the implementation went smoothly, Rehmann repots that MIBearings has yet to receive any payments with bitcoin. That said, there are some benefits to using cryptocurrencies, including low transaction fees and no chance of chargebacks. On the downside, there is currently low demand and the currencies are highly volatile.

Another company, online auto parts retailer NewParts, announced cryptocurrency support in October 2018 using the Shopping Cart Elite platform. 

"NewParts is committed to making our massive inventory of auto parts as accessible as possible to our customers," said CEO Dano Ramovich. "That's why we decided to allow our customers to pay with cryptocurrency – it opens up our business to international markets and enables us to accept and process transactions more quickly and affordably."

Cryptocurrency Market in Decline?
According to most online sources, there are now hundreds of thousands of merchants accepting bitcoin or other cryptocurrencies for payment. The biggest among them is probably Overstock.com, which began accepting bitcoin in 2014 and issued a blockchain stock in 2016 (blockchain is the underlying security technology in bitcoin). Last year, Overstock.com announced it would integrate with the digital asset exchange ShapeShift so that customers could use all major cryptocurrencies on its site. ShapeShift allows digital currencies to be quickly converted to other currencies. 

“Overstock is pro-freedom, including the freedom of individuals to communicate information about value and scarcity without relying on a medium created through the fiat of unaccountable government mandarins. For that reason, we have been an early proponent and adopter of cryptocurrencies,” said company CEO and founder Patrick M. Byrne in a press release.

Overstock also announced it would pay part of its state business taxes via Ohio’s cryptocurrency payment system, OhioCrypto.com.

Cryptocurrency adoption and payment growth have flatlined a bit in recent years because of low consumer adoption, but there are still several important benefits that could be appealing to distributors:

  • Faster transactions: Payment can be instantaneous because there are no clearances involving banks or credit card companies. There are also no fees, because most of these currencies operate in a decentralized manner that doesn’t involve third-party organizations.
  • Security: Blockchain technology and other security tools make these digital currency transactions highly resistant to fraud. These transactions also don’t require Payment Card Industry (PCI) compliance.
  • No Chargebacks: Bitcoin disallows payment reversal or chargebacks. Payments are only a one-way transaction. The anti-fraud technology inherent in the cryptocurrency can help reduce the risk of losses due to credit card or identity theft.
  • New Markets: In developing countries that lack a central bank infrastructure, cryptocurrencies can help create a reliable payment infrastructure even without the presence of trusted banks or government agencies to ensure reliable access to funds.
  • Ease of Use: To accept bitcoin and other currencies, merchants just have to set up accounts with a service like BitPay or CoinBase. These services integrate fairly easily with most of the major ecommerce platforms. These services also provide a way to convert digital currencies back to regular cash. In some cases, though retailers are holding onto bitcoins as an investment opportunity. Overstock.com, for example, keeps roughly 50 percent of its digital currency payments, banking on cryptocurrency appreciation.

There are also some downsides, which is why adoption rates are low in many markets:

  • Crime: the anonymity afforded by bitcoin and other digital currencies has made them appealing to criminals – cryptocurrencies have become popular for illegal payments and money laundering. And because of that anonymity, you’ll know less about exactly who is purchasing your products using cryptocurrencies. For some merchants, that customer data can be as valuable as the payment.
  • Security: Yes, we just noted above that bitcoin transactions are highly secure. However, that doesn’t mean every marketplace or e-wallet service is secure – they are just as vulnerable to cybercrime as any other entity. For e-commerce, merchants should use a well-known processor with a reliable security track record. The cryptocurrency space is largely unregulated and if bitcoins are stolen, there’s no recourse for recouping those funds.
  • Market Volatility: Accepting bitcoin payments means accepting the fluctuating value of the currency, which can swing by thousands of dollars pretty rapidly. Converting to local currency immediately after the transaction is the best way to protect yourself against that volatility.
  • Problems with Blockchain: The technology underlying bitcoin (and other currencies) is secure, but also wildly inefficient and expensive in many ways. Bitcoin operations specifically consume a tremendous amount of electricity and compute power, to such a degree that they may not be sustainable past the next few decades (other cryptocurrencies have developed a variety of solutions to this problem). While blockchains are easy to audit, that’s no guarantee the people entering data into them are being truthful. These issues aren’t necessarily relevant to a specific merchant accepting bitcoin, but they do hinder widespread adoption of blockchain-based currencies.

There may also be some additional market volatility in the future. Last year, Juniper Research released a report (The Future of Cryptocurrency: Bitcoin & Altcoin Trends & Challenges 2018-2023) that warned of a potential cryptocurrency market implosion. Transaction volumes are falling along with transaction values. National and state governments have begun imposing restrictions on cryptocurrencies as well.

“Bitcoin has no intrinsic value,” said report author Windsor Holden. “Like any asset, it is worth whatever someone is prepared to pay for it, but it has no meaning or existence beyond the confines of the ledger. It is a bubble, and there is a strong possibility that this bubble could burst in the near future.”

About the Author

Brian Albright

Brian Albright is a freelance journalist based in Columbus, Ohio, who has been writing about manufacturing, technology and automotive issues since 1997. As an editor with Frontline Solutions magazine, he covered the supply chain automation industry for nearly eight years, and he has been a regular contributor to both Automotive Body Repair News and Aftermarket Business World.

Sponsored Recommendations

The impact of electric vehicles on the automotive market

Steps to help prepare your shop for electric vehicles.

The benefits of digital inspection tools

A good diagnostic tool arsenal should help you complete jobs faster and more efficiently.

Tool Review: Mayhew Tools 14-pc Micro Hand Tool Set

Reviewed by Benedict Grubner, technician at Mercedez-Benz of Burlington in Burlington, Massachusetts.

Big-Time Boxes: Korey Wong, Mac Tools

Although this technician works out of his service truck most days, he’ll never give up on his customized jack-o'-lantern-colored Macsimizer.

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!