If Bitcoin becomes “too big to fail”, who will be at the rescue table?

Posted on August 20, 2014 by Charmaine Oak

As we continue to experience regular occurrences of Bitcoin volatility, I wonder if and when Bitcoin might become too big too fail. As it continues to go mainstream if its Achilles Heel of Volatility gets further exposed, and the worst happens, who will care? If we visualise the rescue meeting, who is likely to accept a seat at the table?

Bitcoin, together with Altcoins and alternative currencies continues to excite interest across multiple segments around the world. In spite of warnings from CFPB, FATF, EBA and other regulators, news of Bitcoin related conquests continue to come thick and fast.

One thing that experts seem to agree about is that this is not going away any time soon. But as the movement gathers momentum and becomes increasingly entwined with mainstream ecosystems, a lot more businesses and consumers could potentially stand to lose if the services were to fail.

Reportedly Bitcoin is making strides in Australia. Living Room of Satoshi reports that Australian residents have paid $150,000 toward BPAY-enabled utility bills, electricity bills, school fees and tax payments through their service. BPAY is an important bill-payment system in Australia and supports innovative ways to pay through digital banking, QR Codes and more.

Bitcoin bill payments is also happening in Canada, and elsewhere in the world too, Bitcoin is becoming a part of everyday life. Overstock plans to launch International Bitcoin Payments on September 1st. Yet, more bill payment and more retail payment may not necessarily translate to Happy Days. Retailers need fiat currency, and the more the mainstream services, the more the potential exposure to currency quirks.

As prices declined this week, and Bitcoin experienced one of the most volatile periods this year, reportedly going into a 38% free fall in some areas yesterday, I wonder whether the industry is already showing signs of age. Still in the first flush of growth, the industry must nevertheless go through all the growth phases of its predecessors, however different they may seem. But when teenage angst gives way to middle age worries, who will take care of Bitcoin?

Studying trends in Digital Money as we do, it seems as if each wave of new entrants and services seems indomitable at first, but may be brought down by some of the very factors that at first made it successful. Mobile money services can find it hard to support the very high volume low value transactions that are their reason for being. Money transfer operators feel the heavy burden of compliance due to the highly specialised nature of their business and their sprawling agent networks that made them successful for so long. And we all know what happens when banks become too big to fail: every one gets roped in to take care of them. But more importantly processes exist for detection and correction in these industries, and remedial action can proceed along well understood lines.

As the Cryptocurrency industry enters it’s sixth year, some of the processes have already been streamlined for efficiency. However this very maturity is exposing its Achilles heel of Volatility in new ways. The fact that it is possible to attack a pool more easily than the same number of independent miners, for instance, raises new possibilities for attacks as we saw recently. At the start of the month one hacker was revealed to have stolen $83,000 over four months by targeting a mining pool and using a vulnerability in the border gateway protocol.

A number of incidents, such as Mt. Gox have brought home the vulnerabilities of doing business involving Bitcoin. When traditional businesses fail, there are fall backs typically at the country or economic zone level. If the industry is to grow out of adolescence is it possible to put trusted guardians and a protection mechanism in place?

Cui Bono? Although it is clear that everyone stands to benefit from their being such a mechanism, it is not clear who stands to benefit from being such a mechanism.

Yet this will be vital for when cryptocentric systemically critical services such as Bitcoin need to be stabilised or bailed out. Otherwise the knock-on effect to other parts of the ecosystem will increasingly translate the shock onward, not just to Litecoin, Darkcoin and other cryptocurrencies as recently happened, but even to external entities that may seem totally disconnected at present.

A word about the format of The Digital Money Game

Posted on July 31, 2014 by Charmaine Oak

Thanks very much for your kind support and interest in The Digital Money Game. I am deeply touched.

A number of you have asked whether you could have a printed copy. I wanted to explain why we chose to publish an e-book, how to get it no matter where you are worldwide, and how to use it and get updates.

First of all I do strongly empathize with your sentiments. I myself love to have a physical book to hand. But…

I could hardly write a book that advocates the ‘7C’s of digital money and then ignore those when publishing the book. That would be inconsistent.
I want the book to be available at a price point that is accessible to everyone across the world as I want this to be a resource that people pick up when they are making life choices about their career.
I want to be able to update it frequently as this is such a fast changing space, and have the new version made available to existing customers. So don’t be surprised when you get an e-mail from Amazon notifying you that an update is available. It is FREE and all you will need to do is enable updates on your reader.
And most important of all, I had to get it out fast to every part of the world. That is where Amazon Kindle really comes into its own. You should be able to download it in minutes, no matter where you are.

You do not need to have a Kindle device. Just download the free Kindle reading app. The Kindle for PC supports you in reading the book on your computer.

Some of you felt that they were unable to buy on Amazon. I have received an assurance from the Amazon team that customers living in countries without a localized Amazon website can order it on www.amazon.com. No matter where you are it should be accessible to you.

When you get to Amazon, if it says “Pricing information not available” , please look to the right of the page. You should see a box similar to the one below. This will direct you to the appropriate website for you.

We are not ruling out the possibility of offering printed copies. Once we have a few more books in the series out, if there is sufficient demand and we can find a way of making it affordable we shall certainly consider this.

Meanwhile thanks again, and please don’t hesitate to write to me or drop us an email at contact@shiftthought.com in case you have any questions. I hope you enjoy the book and greatly look forward to your feedback.

We will discuss your questions and feedback at The Digital Money Group on LinkedIn and you are all very welcome to join us there.

For background on this post please see Why I wrote The Digital Money Game.

Why I wrote The Digital Money Game

Posted on July 28, 2014 by Charmaine Oak

Thanks for the outpouring of support to me, on the publishing of my first book, The Digital Money Game, now available on Amazon sites around the world. After I last shared about it, A number of you asked me what made me want to write this book, so I’d like to say a bit about this today.

When I strayed into the world of payments, after being in Telecoms for many years, it opened my eyes to so many new possibilities. This was around 2005 and it seemed to be a no-brainer for a telecoms operator to build new revenue streams from payments.

This proved elusive though. Firstly it was a personal challenge to try to understand so many new areas all at once, and then be able to position the business case to top management in a way that communicated both opportunities and risks. All of us had spent our lives in Telecoms, IT and non-Payments functions, and we had to rapidly understand Payments, E-Money, Regulations, Prepaid, Cash Networks and all this across multiple geographies.

Regulations did not help. At the time I blamed myself, thinking there was something more I could do. Ten years later, having worked with a world leading bank and the largest money transfer operator in the world, I got to understand regulations so much better. Now I KNOW there was little else I could do: One depends on regulators, who themselves have such a difficult time coping with the large number of changes, with a heavy burden of responsibility on their shoulders.

The truth is, this is all new. We are all learning. But that doesn’t take away the stress of not knowing, as so many of you across the world would agree! I wish I had had someone to tell me what was happening, how it would affect me and what I needed to know to stay ahead. I wanted practical cases I could learn from, and reassurance that this was an exciting space to build a new career.

This is my chance to make that wish a reality for others, by sharing the lessons I learnt and offering some tips from over 10 years I have spent launching services of the different kinds discussed in this book. I hope it will help you in some small way, to reinforce decisions you have to make, to help you to put your case forward to management and most of all to feel good about yourself and what you are achieving in this highly competitive and changing space.

I would love to hear your feedback. Did this book help you? What further questions did it raise?

Click here to go to the Amazon site. To your right you will see a green panel suggesting the most convenient online store for you. Do let me know if you face any difficulty getting access.

The Digital Money Game– a multi-trillion dollar industry emerges

Posted on July 25, 2014 by Charmaine Oak

I have great pleasure in announcing the launch of my new book, The Digital Money Game. I describe the multi-trillion dollar emerging industry I term “Digital Money” from the perspective of very many different industries. It is not just meant for payment experts in large organisations, but for anyone who wants to understand how people pay, and how this is changing in each part of the world.

The penetration of mobile phones and smartphones is transforming the way in which consumers interact with brands and greatly facilitates a move towards non-cash payments around the world. To play the game properly though, one needs to understand the changes in a much wider set of fundamentals - identity, security, authentication, regulations, technologies and more, so as to create appropriate vision that goes across channels, services and market segments. That way you have a more effective roadmap with respect to new entrants, and a better chance that what you plan now will still be relevant when your projects go live. I share more about why I wrote The Digital Money Game here.

The book is based on Shift Thought research in markets around the world, and my interviews with experts from all the different industries that now participate in payments and financial services. I did my first set of interviews in July 2011. Four years later, the wisdom that they, and countless others shared with me has helped to shape this book. This is the first book in The Digital Money Series and we are currently working on others in the series.

Since then I have learnt so much from so many conversations that unfortunately it is impossible to thank each one of you by name – I hope you will recognize your contributions when you read the book!

The book is designed to help you to spot opportunities and gain confidence and insights to channel your work in a way that benefits you, and the markets you serve. It addresses multiple functional areas and levels: Chief Executives, Technologists, Business Development, Market Development and Product Development executives from Banking, Cards, Money Transfer, Telecoms, Payments, Technology, Retail, and Venture Financing Industries.

The digital money approach described in this book can help you create products and services that are secure, convenient and empowering to a whole range of consumers and merchants, across a variety of channels. The goal is to create a shift in thinking – from merely addressing the new opportunity provided by mobile phones, to launching holistic services that build solid brands.

My book is available on Amazon stores around the world, priced in local currency and immediately accessible as an Amazon Kindle download that works across Kindle for PC and a host of commonly used devices. In case it says “Pricing information not available” just look to the right of the screen to select the Amazon site in your country.

In the first 2 days that the book has been available I am delighted to say that it has already been bought from many countries around the world. Thank you so very much for your support and kind words.

Have you bought my book? I would love to have your feedback and can direct you to further resources that may be of interest. Do drop me a line at contact@shiftthought.com.

Digital Money in Retail –3 years on, where are the digital wallets now?–Blog 1

Posted on June 6, 2014 by Charmaine Oak

In mid 2011 we saw the launch/announcements regarding digital wallets from Google, Visa, MasterCard, American Express and many more. Would this mean the end of PayPal’s 10 year domination of this space? 3 years down the line let’s take a look at how these digital wallets fared.

In Mid-2011, led by Google Wallet, digital wallets became the new kid on the block. Shift Thought defines these as customer accounts that can hold stored value and allow users to make electronic commerce transactions.

It was recently reported that Google has no intention of giving up on its slow-growing wallet service or mobile payments, and amusingly it was reported “We have been doing this for a while ..And we’ll continue to keep doing this for a long while.”. By “this” I am sure they do not mean growing the wallet slowly. This piqued my curiosity. Where are the digital wallets now? What are the gains and losses?

In March 2014 Eat24, a restaurant delivery app which integrated with Google end November 2013, reported customers spend an average of 11% more when paying with Google Wallet. Subway was one of the first to accept the Google Wallet, offering the option in 5 markets since 2011. Jack in the Box also started testing Google Wallet in 35 of its restaurants in the Los Angeles and San Francisco markets in November 2011.

Now Google is reportedly changing the way they support contactless payments on the newest versions of Androids. This seems a good time to share our research on how each of the different digital wallets announced in mid-2011 have fared since then.

I’d like to share a bit about the landscape at the time when they launched, as a backdrop for discussing how this has changed, and the main initiatives we see today. In 2011, I created the figure below to explain in one page what the Digital Money ecosystem looked like then.

There were 7 billion consumers making payments in the world at the time, which included payments between each other (P2P), to and from governments (P2G/G2P) and corporates (P2B/B2P). The figure shows the main industries and players that supported such payments.

In that year banks and money transfer operators were joined by new entrants to create a vastly different competitive market for payments. Alipay and Paypal led the world at the time, but expectations were high for the new Google wallet which offered a business model based on ‘Google Offers’, a targeted sales mechanism that sent promotions to smartphones. This was a scheme by which consumers and merchants benefited, but it raised concerns about personal data.

In the next blog posts I will look in more detail at each of the industries in this figure to see how they have moved on since 2011.

Cryptocurrency – Building a new business model based on safety rather than secrecy

Posted on June 1, 2014 by Charmaine Oak

As global financial centres such as Switzerland grapple with the need to reinvent their business model, Shift Thought recommends a way forward that will enhance rather than challenge reputational branding.

A Big Thank You from the team at Shift Thought

A big thank-you for the huge interest and support for our webinar Digital Money: a new business model for Switzerland. We also take this opportunity to thank the UK Trade & Investment for this opportunity, and in particular Anna Faber, Commercial Officer - Technology & Innovation, who was a source of inspiration and support, and without whom this would not have been possible.

The recording is now available at this link

On the webinar we reveal our thoughts on an architecture that could form the basis of a new business model to innovate in the context of cryptocurrencies. Some of the questions we addressed within this recording are:

Do we see similar challenges in implementing Bitcoin, as encountered for the Euro?
Which type of digital money has the greatest potential for the future?
Do you think digital money should be regulated? Is this possible? How?
What do you view as the biggest problems with Bitcoin: technical such as the ability to scale, regulatory such as government reactions or business model fit?
Would you agree that ultimately only one cryptocurrency will exist?
Are some banks more ahead of the game than others when it comes to digital money?
Do you see a service like PayPal as being threatened by Bitcoin or enhanced by it?
What would be the first step for a "traditional" Swiss private bank to take an interest in Bitcoin & cryptocurrencies?
Are some banks ahead of the game more than others when it comes to digital money ?

Our next blog offers further answers to some of the questions covered on the webinar. We also received a number of follow-up questions and these will be answered in depth by Dr. Neeraj Oak. We invite you to participate with us as we explore the development of this critically important topic. It would be great to make this a dialogue in which people from around the world can join.

We have therefore created the Digital Money group on LinkedIn

Please join this group today, to add your unique perspective to the body of knowledge being created. This group brings together news and views on how digital money is changing the way people pay around the world.

RBS – the role for digital banking in establishing the most trusted bank in UK

Posted on May 13, 2014 by Charmaine Oak

As Ross McEwan (Chief Executive of RBS since October 2013) sets out to cut 1 billion pounds of cost this year, this post sheds light on how digital channels are likely to support this plan. The plan involves removal of duplication and complexity by rationalising functions currently duplicated across divisions.

With the backdrop of these plans, and the context of the UK launch of Paym last week, Charmaine Oak (CO) caught up with Terry Cordeiro (TC), Head of Mobile, RBS, to understand how his vision plays out in terms of mobile banking and payments. He shares with us his expert insights into the UK payments market, and how he hopes to create a seamless consumer interface that hides implementation details and simply solves the consumer needs.

But first there is the imperative to sort out the systems behind recent high-profile outages. RBS reportedly plans to reduce technology platforms by over 50%, slashing the number of core banking systems from 50 to 10 and the number of payment systems from 80 to 10.

CO: Terry, what services do RBS/NatWest customers currently enjoy with respect to mobile banking and payments services?

TC: Our mobile app supports a range of everyday banking needs including statement history for the last 90 days across all accounts, payments and transfer services. Our award-winning NatWest and RBS GetCash service has evolved from an emergency cash service to much more casual, every-day use, “money for treats without your wallet”.

SMS services have been around for a while, and can sometimes be taken for granted, yet we find increasing numbers of our customers signing up for these. From their use as alerts and notifications regarding payments, they have evolved into ways in which we can help our customers save money, by reminding them about upcoming thresholds beyond which they may incur penalty charges.

CO: How about contactless payments? Do you plan a follow-up on your TouchPay trial of 2012-2013 that allowed consumers to pay for £20 or less from their current accounts?

TC: The TouchPay trial proved to be a useful learning exercise for us. Customers told us they want more than just going from paying with plastic to paying with mobile. We’re currently in the process of designing that “something extra” experience which will incentivise customers to overcome the inertia of changing their habit of paying with a card. This could include location awareness, loyalty points and incentives that come from the new data points such services can provide.

CO: What about domestic transfers? Why is RBS not in the first tranche of banks supporting Paym?

TC: We’ve supported payment to mobile phone number for the last 12 months, via our Pay your contacts service and it has been incredibly successful. This is a P2P service that runs on our internal systems for on-us payments, and leverages Visa Europe Personal Payment services for payments to anyone holding a valid UK to Visa card and UK mobile number. We expect to first manage some of the rationalisation projects, recently announced by Ross McEwan, before we implement Paym later this year.

CO: Talking about rationalisation, it seems UK customers are now spoilt for choice with respect to mobile payment services. Your own bank services have now been joined by those from the schemes, and now interoperable services such as Paym and Zapp, not to mention operator based services from Weve and individual mobile operators. Don’t you think there is a danger of confusing the consumer into an “analysis paralysis” almost?

TC: That is exactly where we come in. Our goal is to simplify the experience for the consumer – just give them increasingly easier ways to pay. As the alternatives become available they just provide more options for the 2.5 million to 3 million UK consumers who currently use our mobile banking services. It’s great that these new services are helping to increase the awareness of new ways to pay.

CO: Terry, thanks so much for sharing your vision and these insights with us. I wish you the very best in taking your strategy forward, and hope to learn more about it as it evolves further.

Swiss Financial Services– preparing for the biggest transformation in 80 years

Posted on May 11, 2014 by Charmaine Oak

Shift Thought studies lead us to believe the Swiss Financial Services industry is on the cusp of the biggest transformation it has seen in 80 years. In this blog we share a bit about what leads us to this conclusion and our upcoming Free Webinar that we hope you will attend.

Over the years Switzerland has carved out a space for itself as a renowned country that exemplifies a unique system of Direct Democracy, precision and innovation.

A part of Europe, yet apart, it is currently seeking to define it’s relationship as a major trading partner of the EU. This is now defined through a framework that consists of over 120 agreements. However, a Swiss vote calling for curbs on immigration led to EU restrictions and questions regarding a range of agreements based on Swiss commitment to free movement of people.

Recently found to be the most expensive country in the world, the high cost of living is often associated with the large number of super-rich foreigners who have made Switzerland their home. New rules for the super-rich must walk a tight-line between attracting foreigners and satisfying growing concerns from the locals.

To add to this, in recent times there has been intense pressure on Switzerland from the USA and India, to release information on their citizens who may seek to avoid paying tax back at home, and worse still, conceal assets that represent “black money”.

Finance Minister P Chidambaram this month warned that India would take a position at the upcoming Global Forum, to call for more effective exchange of information. Earlier the US has brought action on some of the largest Swiss banks, relating to allegations regarding tax evasion activities by US citizens.

All this calls into question the well-established Swiss financial services model that has developed and evolved over the years, since the introduction of the legendary numbered bank account in 1934.

However, whilst pressure mounts on Switzerland, there is a simultaneous ground-swell of new payments products and services (NPPS) that we at Shift Thought continually study, as they evolve in each part of the world. I am just back from our market studies in India and Singapore. In the production of our reports on Singapore and Switzerland I have been continually struck by the parallels between the two countries. Emerging countries around the world present an opportunity and a threat for the Swiss Financial Services model.

And then there is Bitcoin. In thinking about Bitcoin, I am reminded of the song How do you solve a problem like Maria? from the evergreen movie The Sound of Music, where the von Trapp family hikes over the Alps into Switzerland and to freedom. Unfortunately the Bitcoin conundrum is not as easy for Switzerland to resolve.

All Digital Money is not Bitcoin, and Bitcoin is more than Digital Money

As innovative start-ups such as Monetas choose to make Switzerland their home, our upcoming Webinar touches on what the development of crypto currencies means for the country. We place this in the context of a wider set of new payments products and services and the opportunities and risks when providers create strategies around these.

I’d like to invite you to join us for a free webinar I will be conducting for UK Trade and Investment (UKTI) on Tuesday the 27th of May 2014, from 2:00 pm to 3:00 pm BST.

Register here : Digital Money: a new business model for Switzerland

I shall share some of our findings from our recent report on “Digital Money in Switzerland 2014” and our “Guide to Bitcoin and crypto-currencies 2014” . Read more at our previous post.

Digital Money: A new business model for Switzerland

Posted on February 5, 2014 by Charmaine Oak

Mon, Mar 24, 2014 2:00 PM - 3:00 PM GMT

Shift Thought is working with the UKTI (United Kingdom Trade & Investment) to present some country-level options for balancing risk and innovation, while creating sustainable consumer services for the future.

In this webinar, Charmaine Oak, the Digital Money Practice Lead at the UK-based management consultancy, Shift Thought, will discuss some of the recent innovations in payments and remittances services. She will provide insights from recent Shift Thought research on Switzerland, UK, Singapore and other markets around the world.

This will focus on opportunities for UK-based companies to prepare for requirements common to countries such as UK and Switzerland that are seeking to innovate for the future.

Shift Thought tracks innovations across a wide range of services they term as Digital Money. Shift Thought believes that balancing innovation within an overall framework of regulation is of paramount importance. This helps to create sustainable long term growth, both of individual organisations as well as for a country as a whole.

Mistakenly some people tend to confuse this with Bitcoin, which is only one form, of one of the many dimensions across which innovation is possible. Bitcoin is a decentralised crypto-currency that represents one kind of disruption. It is positioned as a potential way to do low cost transfers, but governments and central banks have expressed concerns regarding potential risks to consumers, as well as on fundamentals surrounding the operations.

This webinar touches on the much broader possibilities for innovation in payments and remittances. It aims to enhance the level of co-operation between UK Financial Service and Payments providers and the Swiss ecosystem.

It will do this by offering insights into the changes affecting the Swiss market and the ways in which countries such as Switzerland are approaching a range of innovative financial services.

The presenter will cover areas such as:

Creating a sustainable context that balances innovation and risk, to create services that build reputation
How could Switzerland use its unquestionable strengths to create such innovations that consumers really want?
What opportunities might British businesses draw from the transformation in the financial services approach in Switzerland?

This webinar will be of interest to audience in the Swiss financial services sector as well as to UK businesses who wish to cater to the needs of the Swiss financial sector.

However, the innovation and risk balancing theme addressed is likely to be of broader interest to regulators and payment professionals across the world, and in particular in countries such as Switzerland that are also in the process of creating enabling environments for financial services of the future.

Further details and registration is available at Digital Money: a new business model for Switzerland.

Background reading: See our previous blogs, What is digital money? and Bitcoin - Fan it or Ban it? , and also browse for more about the different virtual currencies and get an understanding of other such initiatives at Bicoin Search Results.

Bitcoin – Fan it or Ban it?

Posted on December 13, 2013 by Charmaine Oak

As debates on the regulation of Bitcoin and cyber currencies continue to build up, Karena de Souza, Shift Thought distributor in Canada recently chatted with people involved in the rapidly growing Canadian Bitcoin ecosystem. She shares her thoughts here and we raise key questions to reflect on.

Background

News on Bitcoin alternates from viral growth to free fall. Fuelled by a meteoric rise in value based on announcements and events over November 2013, phrases such as ‘cyber currency’, ‘digital money’ and ‘virtual currency’ have entered the common vernacular. Press releases, announcements and senate hearings have all worked to keep it front and present in the public eye. The word ‘bitcoin’ made its official entry into the Oxford Dictionary in August 2013.

Bitcoin is now getting the visibility it has been struggling for since its inception, as Forbes reported 2013 to be the Year of the Bitcoin. The European Banking Authority has now warned consumers of the risks, as China’s PBOC barred financial institutions from handling Bitcoin transactions last week.

It is important to clarify that at Shift Thought we look at Bitcoin as just one example of a class of virtual currencies, not to be confused with our description of Digital Money, the term we use for describing innovations that move people away from paying with cash.

What is Bitcoin?

After the recent interest, most major financial news agencies have published an explanation of Bitcoin – how it is created and how it works. The Bitcoin community maintains a comprehensive FAQ. I recommend the Huffington Post: A three part series by Alexandra Berke as an easy introductory read. A Fistful of Bitcoins is a more in-depth discussion of algorithms and the concept of anonymity.

Value versus Volatility

Key announcements, particularly from China and the USA, have kept the focus on Bitcoin and other virtual currencies, causing a rise and fall in the value and sudden surges in demand. After trading within the $10-$200 USD bracket for most of 2013, the value of a Bitcoin jumped 400% within the month of November.

The graphs, sourced from OANDA Historical Exchange Rates show more volatility in the price of BTC based on daily announcements, primarily out of China, not so far a total reversal in value.

As more consumers get comfortable with the concept of a virtual currency, especially in markets as large as the USA and China, the opportunity for a digital currency with low transaction costs to succeed gets larger. As discussed in the Shift Thought webinar on Digital Money in China 2013, the online purchasing population of that country is bigger than the entire population of the 5^th most populous country in the world. Announcements out of China therefore have the ability to create huge swings in a cyber-currency still in its infancy.

Bitcoin operates as a cyber currency that provides users in many countries with a way to transfer value internationally at a nominal rate, without a bank account. The effect on remittance streams could be significant, causing leading global payment providers to consider whether and when to support it. However the potential effect on consumers could be catastrophic. Also of great concern to the regulatory community is the cash-like anonymity this method offers, and the potential for exploitation by money launderers and criminal elements.

To hoard or to trade?

Creating the expectation that there will only ever be 21 million Bitcoins helped its value to rise dramatically and also fuelled an instinct to hoard. Yet hoarding goes against the effectiveness of a means of payment.

VirtEx, The Canadian Virtual Exchange has been building a bitcoin ecosystem by working with merchants and customers.

At the Small Business Forum in Toronto on October 23, 2013 (1BTC=$183.69 CAD) CEO Joseph David encouraged small businesses to consider becoming a part of the Bitcoin network. They are attempting to take Bitcoin beyond cyber commerce, to make it viable tender at an expanding number of brick and mortar sites. They use the appeal of low transaction fees, quick access to money and the cash-like anonymous relationship to the transaction. VirtEx claims to have a rigorous identification process in place before it will establish an account. It supports a range of Bitcoin related activity and has expanded its portfolio of products most recently by launching a Schedule 1 bank-based debit card. This allows Canadians to use the Interac network to spend Bitcoin or withdraw the Canadian Dollar equivalent in cash, within the guidelines established. VirtEx stated aim is to provide the Canadian Bitcoin community with a secure place to trade in Bitcoin.

The increase in awareness amongst the general population, coupled with the growing value of BTC (the Bitcoin currency) has certainly got more merchants considering acceptance of Bitcoin as tender. But could the recent volatility scare smaller merchants who are dependent on a predictable cash flow? Will we start seeing protective hedging in the form of options and futures? Virtex Business Development Manager Reed Holmes hoped that by encouraging a robust and ever-increasing circle of suppliers that are willing to accept Bitcoin internationally, merchants will keep their transactions in BTC, opting to convert to fiat currencies only when necessary. While it is good to see BTC appreciate in value, there is hope that instead of hoarding, sufficient amounts of BTC will stay in regular circulation and like gold, be ‘on display’.

Bitcoin in Canada

Canada is a perfect incubator for ideas and innovation – the smaller, concentrated population with a high degree of technical and financial knowledge, is coupled with a conservative yet open-minded, internationally respected regulatory environment. The significant proportion of immigrants helps the osmosis of good ideas back to their countries of origin. This has created conditions for large numbers of Canadians to embrace Bitcoin. The world’s first bitcoin ATM was launched in Vancouver, with more planned. According to Isabell Boese, Executive Assistant at Bitcoiniacs, the second Robocoin ATM is to be installed in Calgary by year-end, and the first of two earmarked for Toronto will be in place by end of January 2014.

That should be well in time for the first bitcoin Expo to be hosted in Toronto April 11-13, 2014. At that event, Canada will look to establish itself as an innovator and leader in this space. It aims to attract merchants, start-ups, VCs and investors who are interested in fostering the ‘growth and development of Bitcoin communities worldwide with a focus on collaborative and decentralized models’. It features an international panel of speakers as per the post from Anthony Di Iorio, Executive Director of the organizer, Bitcoin Alliance of Canada.

There have been frequent announcements of Bitcoin related start-ups and ventures. At the Mobile Money Conference 2013 in November, Venture Capital Panelist Alex Baker forecast that the coming months and years would see Bitcoin play a more prominent and disruptive role in retail payment.

The Risks and Rewards

Bitcoin.org lays out the many risks with using this new payment method. Competitive cyber currency offerings, denouncement by sovereign countries and central banks and the fraud and embezzlements uncovered all conspire to affect the day-to-day value of BTC. Yet the international Bitcoin community and its supporters grow, as a new wave of digital payments joins the traditional cash, gold and credit remittance and payment streams.

For some hoping for a Bitcoin in their stockings, it seems they may have to be happy with a few Satoshi! I am taking the long view – I think virtual currency will be to payments what the smart phone was to the telephone and camera … it’s going to make new things possible!

Over to you …

What is the innovative and disruptive element of Bitcoin that is likely to change payments?
What effect do you see Bitcoin having on international remittances?
Will Bitcoin still be the hot topic at the end of 2014?
What does it take for a new payments method to go mainstream?
Will Bitcoin have an impact on your business or way of doing business?

Karena de Souza is a forward thinking and entrepreneurial professional with a special interest in payment streams for small business. Karena’s focus on mobile finance blends the challenges and opportunites she faced as a small business owner in Canada with her experience using technology to facilitate financial services while at Morgan Stanley in New York. She graduated from the University of Westminster with a BSc (Hons) Mathematics and Computing.

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