Western Union CEO Hikmet Ersek offered a strong criticism of bitcoin and other virtual currencies today, calling the payment methods “first-world in nature” and suggesting they do not currently have practical uses for consumers in underdeveloped nations.
The statements echo previous concerns from the Colorado-based global remittance giant issued last year, in which it first stated digital currencies were not yet ready for cross-border, international money transfer.
In the post, the first of what will be a three-part series for Fortune, Ersek offered his take on why bitcoin and other digital currencies may struggle to take hold in the remittance market, choosing to focus on the issue of whether recipients would be able to use the funds.
Said Ersek:
“Up to this point, the digital currency conversation has not addressed the practicalities on the receive-side.”
Ersek indicated that while bitcoin has made a more practical use case as a payments vehicle in the developed world, adoption will need to become more widespread there before nations with less tech-savvy consumers are encouraged to develop an infrastructure.
Unanswered questions
Ersek also listed three major questions he believes the digital currency community has yet to answer when it comes to the technology’s use in cross-border payments.
These included such concerns as whether persons receiving digital currency outside first-world countries would be able to use it, whether small or medium-sized enterprise recipients in these areas would be equipped to spend or transfer it and whether these consumers and businesses would not prefer another option even if bitcoin was usable for this purpose.
Ultimately, Ersek indicated that the industry’s ability to enact and follow consumer protection best practices will be the deciding factor.
“Without continued enhancements to ensure consumer protection, which ultimately translates to increased reliability, I believe consumers and businesses will continue to gravitate to cash, bank accounts and cards.”
Untapped potential
Despite these issues, Ersek suggested that he is watching virtual currency developments with “great interest”, a fact that is evidenced by his analysis of the topic as part of a larger work.
The benefits of digital currencies clearing these hurdles, Ersek suggests, make them worthy of consideration. In particular, he noted their ability to potentially transform business models and promote financial inclusion
Still, even with consumer adoption questions resolved, Ersek suggested regulation and compliance would likely remain significant hurdles, even to their use in first-world nations, potentially hinting at topics for future articles to come.
Image credit: Money transfer via Shutterstock