With the recent interest in crypto-currencies, Bitcoin has had plenty of press over the last 12 months. While it’s clear that the nature of payments is changing, the unanswered question is whether we’ll start to see consumer demand pushing businesses to adopt these new technologies and whether they represent a lasting, mainstream change to the payments landscape, writes Chris Wade
It’s not hard to see why businesses may embrace the move away from physical money. There’s an inherent cost to cash, which anyone with experience working for a high-street retailer will understand: cash has to be counted, cashed up, reconciled with till totals, stored securely on the premises and eventually banked. This adds a significant labour costs for the retailer and there are wider economic costs such as the price of production and the cost of forgery. Using an electronic payment mechanism allows all this to be circumvented.
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There’s also certainly a value in providing people with alternative way to pay and we’ve seen huge changes in what consumers are using to pay merchants. In a recent survey we found that 46 per cent of consumers stated that they were more likely to shop if a store offered them new and innovative payment methods.
However, when we look specifically at Bitcoin, it seems that this may just be a step too far for anyone but serious technology enthusiasts. Recent data has reported that 79% of consumers would avoid Bitcoin. So whilst it marks something of a revolution in terms of alternative payments and crypto-currencies, it’s missing a key driver to make it a success-consumer demand.
For consumers, the question still remains; what is the benefit of loading a mobile wallet with Bitcoin when they can just as easily load it with conventional currency? This is familiar, easy and convenient for most people and Bitcoin doesn’t have any immediate advantages over this.
There is also the challenge of fluctuating valuation for both consumers and merchants to think about. The physical currency value of Bitcoin has pretty wild and unpredictable swings; it would be a tough job for the average SME to make sure that they stayed on top of this, in addition to the other day-to-day challenges they face
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By GlobalDataAnd hot off the press there is then the news that one of the largest Bitcoin exchanges, Mt Gox, has closed down due to technical issues. This will just add to the confusion over the sustainability and security of the currency in consumers’ eyes.
There’s no doubt that the payments landscape is changing but where does this leave UK businesses? We have a long record of being enthusiastic adopters of new technology, but I think that broad adoption of Bitcoin is some way off. It has to overcome the chicken and egg problem of consumers asked "where can I spend my Bitcoin?" and merchants asking "Who has any Bitcoin to spend here?" but I think anyone that completely dismisses it will probably regret that in future.
Chris Wade, Head of Strategy and Product at SagePay
