Live at APEX | Exploring the Right Bitcoin Applications for Retailers

Live at Apex: Exploring the Right Bitcoin Application for Retailers

By: Matt Gertler

 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 (TechCafé), Judd Bagley (Overstock.com), 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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Businesses Struggle with Bitcoin Tax Questions

Accountant Prefers Payment in Bitcoin to Credit Cards

By Marc Dresner, Senior Editor, IIR

Until fairly recently, the only people who had to be concerned with the potential tax implications of using bitcoin were those buying, selling and “mining” the cryptocurrency—a niche population of highly tech savvy individuals.

But increasingly, companies are accepting bitcoin as payment and even paying their employees in it, which has opened an entirely new stream of prospective clients for accountants who can help them negotiate the persistent tax uncertainty surrounding cryptocurrencies.

Ryan Lazanis

“People and companies are having a difficult time navigating the tax environment since there is still so little guidance,” said Ryan Lazanis, CPA, CA and principal of Montreal-based Xen Accounting.

“Digital currency is a completely new concept. A lot of these new concepts are not applicable to existing tax law.”

“The regulatory environment is definitely tricky,” Lazanis added. “Digital currency, on the whole, is a completely new concept. And a lot of these new concepts are not applicable to existing tax law.”

In 2014, a high-profile string of major companies—Microsoft, Dell, Expedia, PayPal and even Time, Inc., among others—announced they would accept payment from customers in bitcoin.

And last month, Overstock.com, which had already been taking payment in bitcoin for a year, announced it would offer employees the option of being paid in the cryptocurrency.

To be precise, none of these companies accepts bitcoin payment directly; they accept it through intermediaries like Coinbase and BitPay, who convert it to cash for them—a pretty clear indication that there’s still not much faith in the currency, whose value plummeted more than 54% in 2014.

Bitcoin-related inquiries have tapered in tandem with the currency’s drop in value.

Moreover, Lazanis says the volume of bitcoin-related inquiries his firm receives has tapered in tandem with the currency’s decline in value.

“[Bitcoin queries] come in waves. Back when Bitcoin prices were spiking, we were getting a ton of inquiries,” Lazanis told On Payments in a podcast interview.

Instability will doubtless continue to dog cryptocurrency adoption among businesses, but it may be that smaller companies realize the benefits and move the needle first.

Lazanis says that his firm enthusiastically accepts bitcoin because of its advantages over credit cards.

“We prefer to be paid in bitcoin over credit cards.”

“We prefer to be paid in bitcoin over credit cards,” Lazanis said.

“For most small businesses there are a few percentage points and fees attached to credit card payments that actually make a big impact at the end of the year,” he explained, “and some credit card gateways take up to seven business days to put that money in your bank.”

“With bitcoin there are zero fees and you receive that money immediately,” he added.

Lazanis, whose clients tend toward techier types, reports that Xen Accounting continues to receive inquiries from both tech-forward and more traditional companies that want to open themselves up to new markets.

These markets may need a nudge…

In some economies in the less developed world with fewer entrenched interests and infrastructure impediments, digital currency markets are rapidly growing.

But in the First World, these markets may need a nudge.

(Editor’s note: For more on the impact of digital currency in emerging markets, check out episode four of On Payments.)

Patrick Byrne

Indeed, one of bitcoin’s most outspoken corporate proponents, Overstock.com CEO Patrick Byrne—who recently had a bitcoin ATM installed in the company’s Salt Lake City headquarters—conceded as much when the company announced it would offer employees the option to be paid in bitcoin.

“Moving cryptocurrencies out of the realm of geeks and into the realm of the rest of us requires making changes.” 

– Patrick Byrne, CEO, Overstock.com

“Moving cryptocurrencies out of the realm of geeks and into the realm of the rest of us requires making changes at all levels of the financial ecosystem,” Byrne said in a press release.

Come April, those employees who take Byrne up on his offer will likely need some tax advice from people like Ryan Lazanis…

In this podcast for On Payments—the All Payments Expo (APEX) interview series—Ryan Lazanis discusses the potential tax implications around using cryptocurrencies and offers tips for individuals and companies interested in expanding into digital currency payments.

Access the podcast and a transcript here!

Editor’s note: Ryan Lazanis will be a featured speaker at APEX 2015—the All Payments Expo—taking place February 23-25 in Las Vegas.

Click here for an agenda or here to register for APEX, or visit www.allpaymentsexpo.com.

Ps. SAVE $100 on registration with promo code XU2848BLOG

ABOUT THE AUTHOR / INTERVIEWER
Marc Dresner is IIR USA’s sr. editor and special communication project lead. He is the former executive editor of Research Business Report, a confidential newsletter for the market and consumer research industry. He may be reached at mdresner@iirusa.com. Follow him @mdrezz.

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Reddit AMA with Patrick Byrne, CEO, Overstock.com & APEX: Digital Currency Partnerships Keynote Speaker

Introducing APEX: Digital Currency Partnerships, September 8-9 in San Francisco, CA. Our mission is to bring digital currency to the forefront of financial services. At APEX: Digital Currency Partnerships, you'll engage in new conversation, bridging Bitcoin philosophy and business development. We'll cover digital currencies as transactional currency, investment vehicles, protocol platforms and the underpinning of financial services for mainstream and underserved consumers.

The keynote address at APEX: Digital Currency Partnerships will be given by Patrick Byrne, CEO, Overstock.com. Mr. Byrne recently sat down are did a Reddit; Ask Me Anything (AMA). Below are a few answers that dive into digital currency and topics we will be covering in Septmeber

Register by Friday, June 6th to lock in the early bird rates!



What would you say to other CEOs and decision makers who are hesitant to utilize bitcoin?

It depends upon what their hesitancy is...There are business reasons to do it: save on transaction fees, eliminate fraud and chargebacks, etc. There may be business reasons not to do it as well, such as the risk of volatility (but this concern can be obviated by trading out of Bitcoin immediately upon receipt, a service that the firms like Bitpay, Coinapult, and Coinbase all offer, I believe). But if they are pro-freedom, they should want to get behind it on principle alone. Ghandi said, "Be the change you wish to see in the world."


Clearly bitcoin and other cryptocurrencies have the potential to change how our world does money for the better. What made you such a strong believer in bitcoin, and how would you spread this knowledge to other CEOs like yourself?

I became a strong believer in several ways.

1) As a grad student at Stanford I studied computation thory, which underlies public key encryption, and so when cryptocurrencies came along it was not as magical-sounding to me as it might have been.

2) I am a proponent of the Austrian School of Economics, which, in general, eschews fiat currency in favor of a gold standard. The goal is not really the gold standard, however: the goal is to have a form of money that is intrinsically limited. Bitcoin et. al. accomplishes that.

In addition, cryptocurrencies are SpaceCash (a word I think I just made up) that can be beamed across the galaxy! (Henceforth in my answers I will use "SpaceCash" top refer to all cryptocurrencies.)


To read more from Mr. Byrne's Reddit AMA, click here.

And to hear him speak at APEX: Digital Currency Partnerships. Make sure you book your ticket today!

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