Ed Boyle is CEO at Blade, a payment processing platform that brings digital currencies onto traditional payment rails. In this article, co-authored by co-founder Daniel Delshad, he argues that, in order to cross the chasm into mass adoption, bitcoin needs to connect with existing debit card networks.
The amount of active bitcoin wallets and the number of daily transactions have increased significantly over the past year, but, still, most people have never used bitcoin (nor have plans to, as per a recent Goldman Sachs survey).
While the bitcoin adoption curve is arguably better than that for the Internet, it is slower than that for cell phones. The Internet was under the radar for years and didn’t really take off until a network started to develop and the network effect kicked in.
Cell phone adoption was quicker and steeper, largely because a new network of users wasn’t needed. Cell phones, from the beginning, were interoperable with legacy telecom rails (ie landlines).
To date, the bitcoin industry has been focused on creating a new, distributed network for applications like mining, storage, exchange and commerce.
Arguably, it has fallen short in its efforts to enable bitcoin to be spent like sovereign money. Not one of the top 100 global merchants accepts bitcoin. In fact, according to CoinDesk’s most recent State of Bitcoin report, 100,000 merchants accept payment in bitcoin, which is just 0.3% of the number that accept payment by credit card.
The rate of merchant acquisition is not increasing rapidly, despite the extremely small baseline costs associated and the number of funded merchant processors, such as Coinbase and BitPay, pursuing them.
Without the ability to spend bitcoins at most merchants, it will never reach mass adoption as a currency. American Express, Discover Card and PayPal each still battle the perception of their lack of merchant acceptance, despite being accepted at 100 to 250 times the number of merchants as bitcoin.
The reality is, 99.9% of the world’s population does not own bitcoin and why should they? You simply can’t spend it everywhere you can spend money today.
Crossing the chasm
To cross the chasm from early adopters to mass adoption, merchant acceptance has to be the norm, not the exception.
When bitcoin can be used to buy groceries and pay bills where people live and work, it will start to have utility for the masses. Until then, it will remain a niche application.
It’s time to consider inter-operability and connect bitcoin to existing debit card networks. By linking bitcoin to these networks, consumers get immediate access to over 28 million merchants around the world.
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Users don’t need a new app or behavior at point-of-sale and there is no need for merchants to be sold into a new program. Give users the ability to spend their bitcoin whenever and wherever they want and watch the adoption curve greatly steepen.
But, issuing debit cards is not easy. Virtually all banks outsource their card programs to specialists. Further, there are ever-changing regulations that vary from state to state and country to country.
For bitcoin companies, which are generally multinational by nature, it’s quite risky to deploy a card program. Many attempts have been shut down for lack of compliance and some well-funded companies have made high-profile mistakes getting a card program to market.
The same way you might not expect to see bankers setting up wallets and mining operations, we should not expect bitcoin companies to build card programs in-house.
It makes more sense to leverage outsourcing professionals with experience in the space who can expertly manage chargebacks, refunds, fraud, KYC, AML, velocity limits and risk management.
Bitcoin debit cards are still uncommon and many programs have been unsanctioned and short-lived, often cobbled together by companies with little or no experience in this (regulated and conservative) space.
Cards can become a key enabler for bitcoin companies, especially if they become long-standing offerings.
Great potential
Bitcoin and the blockchain both have the potential to be the greatest financial and technological breakthroughs ever.
As history shows with the Internet, it takes years for major technology shifts to reach mass adoption and for the benefits to affect our daily lives.
While mass adoption of bitcoin and the blockchain may still be years away, enabling near-ubiquitous payments acceptance will greatly improve the utility of bitcoin and, therefore, increase its underlying value and accelerate its proliferation.
While numerous companies are working on developing end-to-end solutions for the blockchain and bitcoin, debit cards will have an immediate impact on accelerating adoption to mass adoption.
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