The media has been buzzing on Bitcoin. Bitcoin this, Bitcoin that. For today, I thought it would be valuable to take a dive down the Bitcoin lane from the eyes of the Brion Bonkowski, CEO of ROI Payments. ROI Payments processes billions of dollars in annual transactions and given that Overstock started taking Bitcoin and did over $100,000 in Bitcoin transactions in its first day, it seemed fitting to sit down with a payment processor and see what really is going on!
First let’s talk for a few minutes on what Bitcoin is. Bitcoin is a virtual crypto-currency. In english is it digital money. People are making a case for Bitcoin to be used as a Reserve Currency or a global currency, however as of today, there is one primary benefit of Bitcoin and that is what we’ll focus on today. Bitcoin allows people anywhere to transact with lower processing costs than say credit cards. It can do this because the system is setup for it to cost technically nothing to transfer Bitcoins. This means it can significantly increase margins for merchants, which can be a transformative retail, especially in categories with very low margin such as electronics.
Richie: Brion, Thank you for sitting down with us and sharing your perspective on Bitcoin.
Richie: What does ROIPayments do?
Brion: ROIPayments is a NYC-based tech consultancy that implements cutting-edge payment solutions for demanding, growing and global businesses.
Richie: ROIPayments is the enterprise consulting division of MerchantPlus, an eCommerce focused payment processor (ISO) started in 2003. I personally got into the payments space in 2010 after spending of 10 years in enterprise software.Richie: How much volume does ROIPayments process?
Brion: Billions of dollars / year.
Richie: What is your view of Bitcoin?
Brion: This view has evolved. We see the US agencies and authorities moderating and enforce regulation as a positive step for Bitcoin. The FBI has continues to crack down on those using Bitcoin for illegal purposes. The Fed too is putting their hat in the ring working toward keeping tabs on the currency in an effort to potentially endorse.
Richie: What has been feedback from your customers?
Brion: A handful of our clients are making inquiries but nobody has outright asked if we can implement it for them. Granted most of the inquiries are typically start-ups selling digital goods and services – but many of which are doing significant volume. Some took note Overstock & Tiger Direct now accept Bitcoin- but people say this may be more of a political statement with a message that the current 4 party payments network operated by the major card brands is expensive, inefficient, and puts all the liability on the merchant. Bitcoin passes the liability from the merchant to the customer as there is no chance of chargebacks- AND- it is dramatically less expensive to use as a payment vehicle.
Richie: Do you see it as a viable alternative form of payment processing?
Brion: If there are individuals willing to buy and sell goods and services with Bitcoin- then yes, by definition, it is a viable form of payment. The real question is whether this will (or can) reach a point of critical mass and gain enough liquidity / stability to be not be considered speculative. In the payments world, we see Bitcoin as a step in the right direction; whether it is Bitcoin, Amazon Coins, or Facebook Credits. By offering additional payment methods outside the traditional card and banking networks, businesses are opening up doors to customers who may not have access to or choose not to use conventional financial instruments. If this results in additional revenue for the businesses we serve, that’s a win.
Richie: What issues do you see with Bitcoin?
Brion: Many analysts have noted the issues of liquidity with Bitcoin as its Achilles Heel. Once the currency rises to a certain level- others say hoarding will take hold which will halt the velocity- dramatically reducing its use in normal commerce. These are some pretty serious issues.
Richie: What do you think would make Bitcoin a success?
Brion: The exchange rate between USD and Bitcoin needs to stabilize before it can be considered a success.
Richie: How do you think Bitcoin can reach critical mass?
Brion: Awareness and regulated/trustworthy exchange(s). Due to the 21 million maximum # of Bitcoin – it will be hard for it to reach *real critical mass. That’s not to say another cryptocurrency with a different set of algorithms and perhaps a larger distribution potential may not be feasible in the coming years. Bitcoin could be the catalyst for virtual currencies to hit the mainstream- though may end up a sacrificial lamb in the process.
Richie: If you were to start a bitcoin company, what would it do ?
Brion: Being risk adverse, the only safe Bitcoin business type would be a platform play that would not be vulnerable to the liquidity issue; perhaps an exchange or some other service to help people move Bitcoin.
According to Brion, while Bitcoin is promising it is still very early as merchants have not yet adapted it. However with the rise of folks like Overstock accepting Bitcoins, we could very well see adoption in the next few months.