How can blockchain help my small business?
If you are new to blockchain technology, understanding what it is and how it can be of use to your small business means learning about it. Technology aside, the fundamental question is: How can blockchain benefit my small business?
How did blockchain start?
Blockchain started in cryptocurrency, specifically with bitcoin. Users can transfer funds without the need for a centralized governing function like an online banking system. This eliminates the need for a middle person or organization.
The blockchain is decentralized, meaning each computer or node (as they are known) connects one to the other and forms a chain. Once a transaction or function is completed, that action is recorded as part of that chain and cannot be erased. The blockchain updates itself every 10 minutes so any incorrect data can be corrected.
Benefits for small businesses
1. Transfer funds securely to your suppliers in an instant with very low fees.
With bitcoin, you will be able to save time and fees as there is no need to go through a bank. This practice is especially useful if you have remote employees or if you trade in the global marketplace. For instance, Abra and Bitwage are already using blockchain to handle their payrolls.
Blockchain allows almost-zero transaction costs—even on small transactions.
Small business owners pay credit card companies between 2% to 2.5% payment processing fees. Vendors using eBay and Shopify pay listing and sales fees, and consumers pay transaction fees on portals like PayPal and Stripe. These fees are typically passed on to customers.
Currently, Mastercard and Visa offer the ability to send money in any local currency over a blockchain rather than by swiping a credit card. This leverages the additional layers of security and transparency. Additionally, by cutting out third parties such as clearing houses and connecting directly the banks of both ends of each transaction, fees for international transactions can be eliminated.
2. Incentivize your mobile marketing.
If you have your own mobile app, you can pay users a few cents (up to $1) for installing the app in their phones, plus an extra $1 if they enable location tracking. Each time customers open the app and spend at least a minute on it, pay them a few cents or give them loyalty points in store credit, up to a fixed maximum per day.
The app can push deals and special offers customized to the user. This approach has the potential to reduce fraud and minimize inaccurate or incomplete customer information that currently plague these programs.
3. Authenticate identity and manage company data.
Smart Contracts, a form of distributed ledger, can perform simple functions like paying out when something reaches an agreed benchmark. This offers full transparency, so transacting parties can see the source of any information and whether or not it has been tampered with.
In this way, small businesses can also be a trusted source (especially for new or potential customers) for data. Once it’s set up, this process is automated and frees up your time from management. This makes you more efficient in data analytics, system efficiency, and cost monitoring.
Blockchain will enable transparency and build trust for online transactions. It will enable you to connect directly with your customers.
4. Expand loyalty partnerships and programs.
You can do this without adding complexity to drive brand awareness and program adoption. Use tokens to simplify the tracking and management of loyalty points, reward cards, and paper and/or digital coupons. For customers juggling an array of loyalty programs, blockchain could provide instant redemption and exchange for multiple loyalty point currencies on a single platform. This means there is only one “wallet” for points. There will be no need to hunt for individual program rewards, rules, and limitations.
How do I start?
Will blockchain provide value to how you do business with customers, or would your business needs be better served by using tried and tested systems on the cloud? For a quick, 2-minute explanation of blockchain, check out this video.
Stay tuned to the next issue as we look at how you can adopt blockchain to grow your business without having to fully understand the technology.