During the past year, we have seen abundant progress in the development of innovative payment systems, each competing to raise the bar when it comes to security, speed, efficiency or cost-effectiveness.
Strides have been made in mobile payment systems for the unbanked, mobile wallets and other online offerings. Independent of its future prospects of a real currency, Bitcoin has carved out a niche as a payment system. Companies both in and outside the crypto sphere, such as Square, have also been innovating ways of getting Bitcoin to work with other payment technologies in development.
Weighing in on Bitcoin as a means for payment was Antony Lewis, itBit’s head of business development. The following was adapted from Forex Magnates’ Meet the Experts.
To be clear, online payments never existed before Bitcoin. Previously, instructions were made online for offline settlement later, and always through intermediaries. Bitcoin is the first time consumers have truly been able to own a unique unforgivable digital asset without trust that an intermediary keeping good books and records.
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Bitcoin as a means for online payment is one of its most compelling use-cases. Bitcoin is the first time we have had online payments that settle directly from payer to payee. With Bitcoin, online payments can be made to and from anyone in the world faster, cheaper and with no chargebacks. Currently, there are over 100,000 merchants accepting Bitcoin (though in most cases this is somewhat of a marketing ploy as they immediately have the Bitcoins received turned into Fiat for offline settlement) and the use of the cryptocurrency has saved them millions of dollars, in credit card transaction fees and by eliminating fraud and chargebacks.
What mainly differentiates Bitcoin and the traditional means of online payment is that it is truly global. You are not subject to the whims of your third party payment processor supporting a specific country or payment network. Neither merchants nor consumers need to have bank accounts to participate, and transaction fees currently paid to bank intermediaries will be removed.
One compelling use-case I can think of is a group of smart developers in the Philippines who created an addictive online game, trying to monetize it. Previously they may not have had access to a bank account, so there was no way to accept funds. Now with Bitcoin, the bank is less relevant, as they would simply accept bitcoin into their own wallet: from anyone, anywhere in the world. Of course, until local shops accept bitcoin, they would need a way of “cashing out” to pay for expenses and salaries, and this is already possible by using the network of village-to-village salesmen who sell cigarettes, pre-pay phone credit and bitcoin.
Another use-case is at the consumer’s end: People living in countries that have a bad fraud reputation, such as Nigeria, are tarred by the broad-brushed approach taken by payment processors – often entire countries are blacklisted, despite the majority of consumers being honest. Honest consumers can spend bitcoin online, as the payment is final and can’t be unwound. Merchants can be confident that they aren’t being scammed, as opposed to credit-based solutions.