Why We’re Offering Cryptocurrency Solutions to Merchants

Solutions are coming for slow speeds and high fees, says Eric Brown, who argues that even now the advantages for merchants are too good to pass up.

Unless you spent last year living under a rock, you know that cryptocurrency is a sizzling-hot topic right now. Bitcoin’s price and daily transaction count reached new heights in 2017, with the number of people with Coinbase accounts going from 5.5 million in January to 13.3 million at the end of November, according to data from the Altana Digital Currency Fund.

Still, if you’re like most people, you probably don’t recognize how cryptocurrency is changing payments. For the first time ever, transactions and power are being taken away from traditional financial institutions. An increasing distrust of banks has created a climate that is ideal for the rise of alternative payment options like Bitcoin and other digital currencies, which are secure and put users in control.

Cryptocurrency is also a highly accessible means of payment. All a person needs to create an account and acquire cryptocurrency is access to a smart phone or the Internet. This levels the playing field for the approximately 2 billion people worldwide who lack a bank account but do have Internet access or a smart phone.

I personally realized that cryptocurrency and blockchain technology were at the forefront of our industry when my company, Aliant Payment Systems, was working on a large merchant account and the subject of cryptocurrency repeatedly came up. It hit me that we’re in the alternative-payment space, and we work with high-risk and e-commerce accounts, so why shouldn’t our merchants accept Bitcoin as an alternative payment? These clients look to us for ways to transfer money safely, securely, and cost effectively, and cryptocurrency allows us to move money in all of these ways.

At that time, there was only one company processing for merchants: Atlanta-based BitPay. We partnered with BitPay in September and became one of the first third-party acquirers to offer merchants the ability to accept payments in Bitcoin.

Benefits

Merchants are turning to cryptocurrency payments to enjoy a multitude of benefits that traditional payment methods don’t offer, including:

– The ability to transfer funds quickly and inexpensively. No more domestic and international transfer fees and traditional bank-wait times;

– Simplified payments. Merchants can receive payments from anywhere in the world, from any computer or mobile device, with no foreign-exchange fees or currency conversions;

– No more chargeback fraud and identity theft. With Aliant’s cryptocurrency-processing platform, once the transaction hits the blockchain, there’s no reversing it or stopping it, and no charging it back. There are no rules in place that allow a transaction to be reversed by a consumer—a huge win for merchants;

– A competitive edge. Merchants can embrace the rising demand for alternative payment methods by being among the first to accept cryptocurrency payments. Merchants also gain a competitive edge when catering to a millennial clientele that’s accustomed to digital wallets, Apple Pay, and person-to-person payments. According to Blockchain Capital, 30% of millennials would rather own $1,000 worth of Bitcoin than $1,000 of government bonds or stocks.

– A great option for high risk, e-commerce, and merchants with big-ticket items. In other words, those that are looking for secure transactions, no chargebacks, and lower costs, and no limitations on transaction size.

Major Growth

Some of the larger merchants accepting Bitcoin payments today are Lord & Taylor, Expedia, TigerDirect, Virgin Galactic, NewEgg, and Dish Network. One notable merchant that accepts a variety of cryptocurrency payments is Overstock. In August 2017, the online retail giant partnered with blockchain startup ShapeShift to accept more than 60 cryptocurrencies as payment at its online stores.

BitPay reported major growth in 2017, with a 328% increase in their payment dollar volume year-over-year from 2016. The company’s merchants received a total of over $110 million in Bitcoin payments per month, with precious metals broker JM Bullion gaining nearly $4 million in Bitcoin sales in the month of June 2017 alone.

Their competitive nature will lead more large retailers to offer alternative payments, bringing us closer to mass adoption. While more merchants are signing up for cryptocurrency solutions, processing volume remains low overall. But as consumers become more comfortable making cryptocurrency transactions on Web sites they trust, it’s only a matter of time before they use digital currency in other environments, and processing volume will increase.

Expected Challenges

Our biggest challenge with cryptocurrency payments today is that they need to be faster. The closest thing I’ve seen to a solution is the Lightning Network, a system of smart contracts built on top of the base Bitcoin blockchain that allows for fast, cheap payments directly between two parties. Lightning introduces coins that are set up for faster transactions with smaller-ticket items. These coins are basically the debit card version of digital currency, and I expect to see more coins come out that serve specific purposes like this.

Transaction fees as high as $28 are threatening Bitcoin’s value for small payments, so I can’t wait for a company to offer higher volume and discounted mining. The high fees are a growing pain, like the high cost of minutes in the early cell-phone days, but I expect that some major players will get involved, and fees will come down.

Another challenge will be bringing cryptocurrency payments to the retail counter. A colleague of mine had an interesting experience in Europe recently. He saw someone bring a printed-out quick-response (QR) code to a retail counter. The wheels started turning in our heads: as long as a customer has a smart phone, a terminal could issue a QR code on the screen, from which the customer can scan the code to open their wallet. They then approve the transaction, and money is transferred. My team is currently in development to provide a solution using the Poynt terminal, which we like because it’s high-speed, has Internet access, and is developer-friendly.

—Eric Brown is founder and chief executive of Aliant Payment Systems Inc., Fort Lauderdale, Fla. Reach him at eric@aliant payments.com.