Why Payments Companies are Seizing the Bitcoin Opportunity

The payments space is constantly evolving, and the most successful payments companies are always adapting to stay ahead of the curve. Consumers want more than seamless convenience and ironclad security – these are table-stakes requirements when it comes to payments. Consumers want lots of options at the point of sale. They want to choose how to pay depending on their mood and the circumstances. And they’re increasingly calling for widespread Bitcoin acceptance at the point of sale. After all, Bitcoin transactions are increasing on a daily basis, and market capitalization (that is, the dollar value of all the Bitcoin in circulation), while much lower than its all-time peak, has jumped 270% since last January. Consumer demand for payments options and the sustained growth of digital currencies make investing in Bitcoin acceptance an imperative for acquirers and ISOs who want to stay at the cutting edge of commerce.

Goldman Sachs partnered with ETA to survey the merchant acquirer and ISO community on the major trends affecting their businesses. Bitcoin acceptance proved to be a common theme in most of the responses, with 11% of merchant acquirers and ISOs reporting that they currently enable Bitcoin acceptance for their merchant customers, and another 12% planning to enable it within the next year. In our October 2014 survey, only 2% of merchant acquirers and ISOs supported Bitcoin, so there’s clear evidence of growing interest in Bitcoin. In total, a little under half of our 2015 respondents said they currently enable Bitcoin or plan to enable it in the near future. For many merchant acquirers, Bitcoin’s main draw is that it costs little to install and enable relative to more traditional debit and credit payments methods. 17.6% of respondents also cited its ease of use for cross-border transactions. Reactions were mixed regarding the lack of a regulatory authority or central bank: 23.5% saw the absence of a central bank as a positive, while 14.7% saw it as an obstacle to mass acceptance. As digital currencies grow and become more commonplace, these uncertainties are likely to fade.

The biggest takeaway from our acquirer survey is that the low cost of enabling Bitcoin, even on a trial basis, means that ISOs have little to lose and much to gain from attracting new consumer demographics. The second take-away is that Bitcoin acceptance is a must-have for merchants with a lot of cross-border business, because their consumers will expect to be able to use Bitcoin for those transactions. Early surveys show that Bitcoin users tend to be predominantly white and male, but the reality is that there’s no such thing as a “typical” or “average” Bitcoin user – they’re all over the map.

The list of companies and merchants that accept Bitcoin is similarly diverse. Digital content companies, like online news services and mobile gaming platforms, are among the early adopters of the technology. There’s a lot of room for creativity here. For instance, newspapers like the Chicago Sun-Times are experimenting with Bitcoin micropayments in lieu of subscriptions. Transacting in Bitcoin does not incur any fixed fees (so there’s no minimum required amount), and so publishers can now profitably charge very small amounts for access to one article at a time. Consumers are increasingly opting for on-demand media consumption rather than paying for subscriptions. Bitcoin makes it easy – and profitable – for content providers to attract these consumers.

Kristen Stone of Bitcoin processor Coinbase explains that digital currencies are perfectly suited to digital sales. Many of Coinbase’s partners have a tech-savvy consumer base, like Dell. However, she notes that offering Bitcoin acceptance has also helped draw younger, more digitally-minded consumers to some of Coinbase’s more traditional retail partners, like Overstock, for whom half of its Bitcoin sales are to new customers.

Bitcoin and other digital currencies – or cryptocurrencies as they’re often called – can solve problems that have seemed insurmountable up to now. Electronic micropayments are one possibility. Another, potentially bigger application is cross-border payments. In a sense, Bitcoin is the only truly global currency – it’s not tied to any one central bank. This makes it ideal for people who send remittances to their families in other countries. Global remittances were a nearly 600 billion dollar market in 2014, according to the World Bank. There is tremendous opportunity for startups like Abra and Rebit to facilitate cross-border remittances using digital currencies.

We still don’t know what the future of Bitcoin will look like – and that’s a wonderful thing. The possible applications of Bitcoin – not to mention the underlying blockchain technology – are limitless. A year from now, digital currencies might be synonymous with remittances. Or digital content on demand. Or something we can’t even conceive of just yet. We’ll be eagerly awaiting the next development.