The panel for this session consists of Josh Metnick (Chicago Sun Times) , Pierre Noizat (Paymium Founder) , Todd Edelbohls (Coinbase) , Michael Gronager (COO of Payward Inc) and Radoslav Albrecht (BitBond Founder)
This Bitcoin 2014 panel will be looking at the competitive advantages provided by merchant services using Bitcoin as opposed to the traditional players in the merchant services market. Current and future innovations to put bitcoin ahead of the game will be discussed.
Josh Metnick has some experience implementing backend services in regards to Bitcoin payment integration, as he is the CTO of Chicago Sun Times.
What competitive advantages are provided by using Bitcoin payments?
– Selling goods and profits as easily as possible. Not everyone wants to pay cash. Checks bounce often. Credit and debit card payment fees are outrageous. Bitcoin transaction fees are a lot lower, thus there is more profit for the person accepting Bitcoin payments.
– Completely new business model. People are scared of setting up an account to just do a one-time purchase, which reminds them of a subscription service. Pay walls for newspapers really profit from accept Bitcoin.
– For emerging markets, where only 25% of people have a bank account, having a cashless payment system not relying on banks is a great advantage. Not everyone can get a bank account in quite a few countries in the world.
– 0% fees on merchant side, and transaction fees are being paid by the buyer. Merchants can receive fiat currency instantly while using Paymium
What are your views on the evolution of transaction fees in regards to microtransaction?
Further and continuing development will be needed. In the long run, the fees can be removed as the rewards go down. At the moment, when there are a lot of transactions, fees go up. We need to move off the blockchain for transactions, but further development will be needed.
Kraken wants to stay the biggest Bitcoin exchange in Europe, but a lot of feature requests have been made. For example, having the same amount of euros on their account every day, and not necessarily the same amount of Bitcoins.
Focus in technology and compliance is important to keep attracting merchants. The playing field is very black and white at the moment. Experts are needed to get compliance sorted, but it remains a substantial and difficult challenge.
People might switch from Bitcoin to alt coins in 5 to 10 years, if Bitcoin can’t manage to keep the transaction fees low. It’s a bit premature to say this actually will happen, but it is a possibility.
Multiple alt coins doing the same thing as Bitcoin are not useful, according to Pierre. Splitting the hashing power over several networks results in many unsecure networks, and in the end, Bitcoin will still be there.
VISA and Mastercard can only lower their fees by so much, because of the immense infrastructure they need to support. Even the lowest fees will still be higher than Bitcoin transaction fees.
Thoughts on merchant services converting Bitcoin into fiat in emerging markets?
First step is raising awareness, as a lot of people still don’t know this option exists. Step two would be to show how Bitcoin works, We are still a few years away from seeing people converting a big portion of their income through LocalBitcoins or other sources;
Overstock used to do an instant cashout after receiving a Bitcoin transaction at the end of the day. Currently, 10% of all received Bitcoins are being kept by Overstock. Peer pressure is working as an encouragement to start accepting Bitcoin.
What’s the ratio between US merchants and International merchants for CoinBase?
CoinBase’s client webpage includes all-US brands and stores, servicing customers in any environment. For example, flight tickets can go to people outside of the US, but the company itself is US-based. CoinBase will aim to be compliant in every country out of respect for the nations.
What kind of growth opportunities are there in B2B?
The first challenge is education, not just for the users, but also for CEO’s of companies. A lot of companies rely on wire transfers, at the cost of 25-50 $ per wire transfer. Volatility of Bitcoin plays a key role, so hedging might be a necessary feature.
Larger corporations are more conservative before implementing new technology, even if they can save tons of money on costs.
Paymium is a combination between an exchange and merchant services. For now, the main focus is still on the exchange part, while the merchant services part is still in beta. The plan is to compete with CoinBase and BitPay.
Merchants accepting Bitcoin as a payment option, and who are not exchanging 100% of their Bitcoins to fiat currency. A form of “Bitcoin loan” could become an interesting and viable option for merchants.
Are merchants holding their Bitcoin received from transactions, or are they converting them to fiat as soon as possible?
Merchants have the options between cash and credit card payments to receive their fiat. Consumers will still be able to pay in Bitcoin. Down the road, CoinBase helps them evolve in order to make them keep a portion of Bitcoin.
Transactions are handled within milliseconds, from Bitcoin to fiat currency conversion. Unless there would be a major price swing in Bitcoin’s value, merchants aren’t losing any income or profits by accepting Bitcoin.
What types of industries accepting Bitcoin are more successful?
Companies where the higher management is educated in the ways of how Bitcoin works, seem to be more successful. More services relying on microtransactions are also popping up. Luxury goods merchants are being avoided by CoinBase.
Bitcoin offers merchants the ability to keep their prices low, because of the low transaction fees.
Paymium makes integration through the API as easy as possible, as it only takes a few lines of code in order to get the service integrated. They do not offer subscription services at this point.
CoinBase does have a subscription models. Paying for access to blogs, donations (on monthly basis) are a few of the possibilities. CoinBase would love to work together with other third parties, in order to invent and develop new things and services. More people developing for Bitcoin is a great thing.
KnC started accepting Litecoin, will Coinbase do the same?
Charlie Lee is also an employee of CoinBase, and he keeps mentioning how useful and wanted Litecoin is compared to Bitcoin. They are thoughtful of maybe integrating Litecoin into Coinbase, but nothing is official yet.
The main value for merchants to accept Bitcoins is to keep at least a portion of the received Bitcoins, and not cash them out immediately, as it will only contribute to the increasing price volatility we’ve seen over the past few months.
Small merchants , who are using a VISA or Mastercard gateway, still have to pay a lot of fees (end-of-month fees, transaction fees,…)and a minimum amount of transactions have to be respected. These fees are making it hard for small merchants to stay in business.
Offering incentives is a good way for frequent customers to start considering using Bitcoin as a payment method. Credit card payments are convenient, because they were made aware of its use. We need to do the same with Bitcoin.