For digital-marketing agency Cooperatize.com, taking bitcoin for payment was easy enough, all co-founder Roger Wu had to do was obtain a digital wallet. To promote the move in 2014, he even penned a blog post for Forbes explaining the decision.
The number of transactions the New York-based firm has made since? Zero.
“The biggest thing is are people willing to pay in bitcoin?” Wu said. “The reality is that most of our customers are other businesses and other businesses don’t use bitcoin.”
Even as the euphoria over bitcoin reached a fever pitch last week as the price surged to almost US$3,000, slow transaction times and inertia are helping to prevent it from achieving widespread usage. Adoption has slowed, according to Morgan Stanley, after a slew of companies from Microsoft Corp to Expedia Inc initially trumpeted its use, and hurdles remain when it comes to longer-term viability.
“We see few reasons for consumers to use bitcoin over a credit/debit card given that paying online with bitcoin represents a marginally more inconvenient way to pay,” Morgan Stanley analysts wrote in a 33-page report released on June 13. Processing costs for bitcoin and other digital currencies are likely to grow, they said.
Time Inc and Dell Inc said they’ve stopped accepting the cryptocurrency, with the computer maker citing low usage. When website content management system Wordpress stopped taking bitcoin in 2015, founder Matt Mullenweg said usage was “vanishingly small,” adding that it was initially incorporated for philosophical reasons, not commercial ones.
Still, there’s plenty of evidence the price surge has helped boost bitcoin’s use – albeit from a low base.
Payment processor BitPay said its now handling about US$2mil in transactions a day, up almost threefold from April 2016. Coinbase’s volume has doubled since the start of the year. Overstock.com Inc, an online discounter, said it’s been handling around 100,000 bitcoin transactions per week, up from about 30,000 when it first added the payment method in 2014.
Yet somewhat paradoxically, there’s the question of whether its status as a red-hot asset is compatible with being a stable method of payment.
There’s the issue of volatility. This year has seen bitcoin surge and plunge by as much as 19% over the course of a day. As transactions rise, processing them is also becoming slower and more expensive because of a cap on the data the bitcoin blockchain can process – an issue whose resolution has spurred bitter infighting within the development community.
And probably most importantly, bitcoin isn’t recognised as legal tender. The US Internal Revenue Service has ruled that bitcoins are property, while regulators treat it as a commodity.
Most big businesses take bitcoin through payment processors such as BitPay and Coinbase. When a consumer makes a purchase via those platforms, he or she will pay at a conversion rate based on the latest bitcoin price.
The processors then convert the bitcoin immediately and pass the fiat currency to the seller, essentially removing all exposure to bitcoin’s volatility.
For merchants, Coinbase charges nothing for the first US$1mil and 1 percent of transaction values afterward. That compares with Visa Inc’s roughly 2% interchange rate and almost 3% charged by PayPal Holdings Inc.
The process is more complicated for shoppers. Unless your digital wallet is already on the platform that’s processing the payment, transferring bitcoins incurs a transaction fee, which can vary depending on its size, how quickly you want it processed and network conditions.
The median transaction fee was US$2.10 on June 15, compared with an all-time high of nearly US$3 reached earlier this month, according to BitInfoCharts.
Sonny Singh, BitPay’s chief commercial officer, said bitcoin is more useful in emerging economies where trust in local currencies is weaker and credit cards are less cWhile greater usage remains in question, there are often some unexpected benefits for merchants who’ve embraced bitcoin.
Since the Roast of Sherwood added a Coinbase wallet six weeks ago, it has averaged five bitcoin or ether transactions each week, according to Lee Galloway, who runs the sandwich stall with his father in a bustling street market along London’s Whitecross Street.
“For a few small payments we’ve taken, it’s a large amount of publicity,” the 32-year-old said.
“If we’re taking large amounts of cryptocurrency payments, I’ll probably have to re-address and re-look at the entire issue, but I can’t imagine that happening any time soon.” – Bloomberg
