GUEST COMMENT Online retailers can’t afford to ignore bitcoin
Where do you want your business to be three years from now? If you are one of the 86% of retailers planning to expand into new markets and establish a strong mobile presence, then chances are you’re having a long hard look at how you evolve your online payment methods to match this.
Retailers want and need to make it easy for people to buy from them regardless of market or device, and this means being able to handle a growing range of traditional and digital payment solutions. Expanding the options on offer while at the same time reducing the complexity, cost and confusion often associated with online payment transactions can be a significant challenge for retailers.
For example, consumers in developed markets like their credit and debit cards. They understand them and want to use them when shopping online. But different markets have different card preferences, currencies and regulatory environments. Managing this can be a resource-intensive and expensive process – and that’s before the retailer has factored in the card transaction fees and the impact of chargebacks if goods are returned.
Then there are the customers in emerging markets. These are less likely to have the bank accounts required for traditional payment cards. They are, however, increasingly likely to own and use a smartphone. Taken together, these trends are driving a growing appetite for mobile and digital payments.
So what can retailers do? One option that is proving increasingly popular is to offer consumers the chance to pay using a digital currency such as bitcoin. Bitcoin is based on a decentralised global network of users, with no issuing or controlling bank or owner.
Introduced seven years ago, bitcoin was quickly branded by some commentators as a solution for twenty-to-thirtysomething, tech-savvy men to fund their gaming and gadgets online.
Such association, combined with a lack of understanding about how bitcoins are created and used has resulted in a number of myths about the currency. Dispelling these myths is long overdue. Fortunately, the facts speak for themselves.
There are currently around nine million bitcoin wallets in circulation. An estimated 100,000 merchants worldwide accept the currency, including Rakuten, Microsoft, Dell, Overstock and Expedia.com; and about £50 million worth of bitcoin transactions are made every day.
Europe accounts for around a third of global bitcoin usage ; with the United Kingdom, Finland, the Netherlands, Spain and Poland, together with other central and eastern European countries, all backing the currency. Acceptance is growing in France, and the recent economic upheaval in Greece resulted in a number of merchants taking a closer look at bitcoin as a more stable financial alternative.
The underlying technology that powers and supports bitcoin is called the ‘blockchain’. The blockchain is complex, robust and brilliant. In fact, its unique, distributed infrastructure is so good at enabling fast, trusted money transfers without the burden of a central authority that it is not just ramping up the adoption of bitcoin by retailers, it is attracting the serious interest of financial exchanges such as NASDAQ and banking groups such as Santander . It features prominently in a new paper by the World Economic Forum on the future of financial services.
This alone is deeply reassuring for internet retailers, and there’s more. Bitcoin makes sound financial sense. Accepting a bitcoin transaction online typically costs less than one per cent of the purchase price, significantly less than a traditional card transaction once all supporting costs are factored in. And unlike credit and debit cards it has no chargeback mechanism. Further, its borderless nature means that there are no unnecessary costs or delays incurred when making international transactions.
As with any innovation, a number of concerns remain. The currency value of bitcoin can fluctuate significantly, which can disrupt price consistency, and there is an inevitable vulnerability to new types of fraud. Fortunately these can be addressed easily by using an intermediary specialising in bitcoin payments. Our own solution, for example, helps merchants to charge and receive payment in their local currency while the user pays in bitcoin. Transactions are also scanned for potential fraud and backed by financial guarantees, rather like a bank’s authorisation process.
All this makes the acceptance of bitcoin simpler and more secure for retailers – helping the currency to mature and make its way further into the mainstream. This in turn will reinforce its security and stability. The distance it has already covered is best shown by looking at the item now purchased most frequently with bitcoin on Overstock.com. It’s bed linen.Akif Khan is chief commercial officer at Bitnet.