Wednesday, February 25, 2015

Live at APEX | Exploring the Right Bitcoin Applications for Retailers

Live at Apex: Exploring the Right Bitcoin Application for Retailers

 Welcome back to the official All Payments Expo Blog. We just wrapped up the “Omnichannel Forum: Exploring the Right Bitcoin Application for Retailers.” The forum addressed how technological innovation will change the face of retail by considering the latest experiments in point-of-sale (“POS”), loyalty, and gift card applications. I would like to thank our panel, Brad Chun (TechCaf√©), Judd Bagley (, and Sony Singh (Bitpay), and our moderator, Steve Beauregard (GoCoin) for joining us today.

POS transactions are going to undergo a massive overhaul in the coming years. Beginning in October 2015, merchants that do not switch to the Europay-MasterCard-Visa (EMV) chip standard will be liable for any resulting credit fraud. This is coinciding with a switch from Windows XP based systems to cloud based POS solutions. A significant benefit of storing the system on the cloud is that it is much easier to change or add more functionality. For example, if the system is stored in the cloud, merchants can begin accepting Bitcoin almost immediately. Such a change previously would have required getting new hardware if not completely replacing the old system.

But why would a retailer want to accept bitcoin? Traditional payment processors charge 2-3% whereas bitcoin merchant service providers provide this service for 1%. This does not take into account credit fraud, which increases the 2-3% cost to merchants. Bitcoin is also fully secure, so there is no concern for many credit frauds, such as charge backs. Additionally, Bagley shared statistics from Overstock, showing that the average Bitcoin transaction is three-times greater than the average USD transaction. He suggested that Overstock’s most loyal customers are those that pay in Bitcoin.

Once the EMV standard is implemented, the new POS systems will be NFC-enabled. This will allow retailers to accept mobile payments such as Apple Pay and Google Wallet. When you consider beaconing and push notifications alongside these new payment methods, retailers can interact with customers in new ways. Communication does not end when customers leave the store, but may be triggered when they or near it, or even at home when watching a retailer’s commercial. While the last idea might only be an idea currently, it is not a stretch of the imagination that future generation televisions will have the capability to share this information.

Bill Ready (PayPal) explains the importance of mobile in the retail space is that consumers are looking to fill spare moments throughout the day with their mobile devices. He says that “if a retailer can get an app on a consumer’s phone, [it has a] tremendous opportunity to interact with that consumer,” regardless of the customer’s location. This allows retailers to create contextualized experiences tailored to individual customers. Presumably this will increase sales. Considering that both Apple Pay and Google Wallet still rely on the credit card networks, and still suffer with the same 2-3% processing fee, the question remains of how Bitcoin can be implemented alongside a mobile strategy.

We are probably still a few years away. Ideally, customers would be able to link a debit or credit card to a Bitcoin wallet and behind the scenes have the payment processor convert the USD into Bitcoin seamlessly. While we are not quite there yet, Xapo has created a Bitcoin debit card that may solve this problem. However, it is currently in beta testing and not available in the U.S. or India. A solution that is available in the U.S. is provided by one of our sponsors, Gyft. Gyft purchases gift cards as a wholesaler and resells them to its customers. While they can pay by credit card or Bitcoin, customers are encouraged to pay by Bitcoin by being offered an extra 3% in reward points because there are no transaction fees. A Forbes article explains how this method was vital in the author only paying in Bitcoin for a week.
Matt Gertler is the Head of Strategy at the Digital Currency Council (“DCC”) and is pursuing his JD/MBA at USC. He is experienced in FinTech, having worked for Venmo, Braintree Payment Solutions, and Earnest before joining the DCC. If you have any questions, please tweet @magertler using, #APEXLV15, and they may be included in a future post.

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