To anyone who has made ecommerce websites such as Amazon, Ebay, Netflix a daily or even weekly destinations for their online shopping and entertainment needs – the process of paying for what lays in the shopping cart is probably the most abstracted aspect of the entire user experience.
Barring any unusual activity surrounding your login ID or credit card fraud, once you input a payment method into an ecommerce site, the user is to encourage continued behavior around purchasing more items.
While this is by design and likely helpful to the business’s bottom line, rather than the consumers, there is significant room for growth in changing payment behaviors and means on ecommerce websites. A payment technology like Bitcoin or other blockchain tech could make this an even better process for both the customer and the business.
The biggest news in the digital currency world as of late is that Bitcoin has split. No, it’s not the same type of split seen with large publicly traded companies like Apple or Amazon. Rather through a miner proposed change to the maximum size of data per block on the blockchain and a disagreement within the community about how or if this should be accepted, the changes were accepted by some miners and rejected by others, causing a split in the blockchain which created two separate digital currencies. Now there is Bitcoin Core (BTC) and Bitcoin Cash (BCH).
In terms of scaling to meet main-stream adoption. many in the industry felt Bitcoin was being held back by fundamental ideals and wasn’t growing technologically to meet the commercial demands of mainstream adoption.
Visa alone is able to handle thousands of transactions per section worldwide, processing over 5 billion transactional messages per day and over $9 Trillion USD in volume per year. That’s a high technical goal for just about any newcomer to want to tackle. But Visa has been around for 59 years and has been able to leverage a capitalize on consistent financial success and technological advances.
Importance of Secure Payments
Credit card domination isn’t stopping Bitcoin and other virtual currencies from trying either. With current roadmaps for both BTC and BCH, transaction capacity could soon reach those of major credit card networks. Digital currency Ripple (XRP) has also recently announced that it is capable of reaching Visa-level transaction throughput. Additionally, with constantly increasing network strength through the Proof-of-Work mining, the security around the blockchain aspect of financial transactions being un-hackable makes for a more viable option.
Anti Money Laundering and Know Your Customer (AML/KYC) regulations are stiff and expansive across the globe. While there are different details regarding how much information must be acquired by compliance departments within financial institutions, it’s largely recognized that the finance industry is the most regulated in the world. So, by creating an on-boarding pretty much across the board for banking, lending, money transfer and payment services, a paper trail of who uses these services is created and maintained in case future needs arise.
Cryptopay, a Bitcoin exchange and payment processor claims to take stringent compliance and AML/KYC steps towards its business to help mitigate risk for those who use its service. On the consumer side of Cryptopay they vet their Bitcoin debit card holders identities to the full extent of legal requirements. The ICO that Cryptopay is currently running is monitored and self-regulated with AML/KYC procedures to ensure that the SEC and other international regulating bodies are satisfied with how funds are being raised and managed from end-to-end.
While Cryptopay seems to emphasize security, the company also views itself as a radical in terms of the existing order of global monetary policies.
“Bitcoin may seem a like terrorist by itself for the most of non tech-savvy people. It has broken in into the world economy unexpected, it’s somewhat difficult to understand, it revolutionized the way humanity treated money in general, traditional banks are its enemies. All in all this is more like a famous revolutionary leader biography, rather than a currency description.”
Nikolai Kuznetsov, a fintech writer at Forbes, says that blockchain “has introduced new payment methods, smart contracts, and even new ways to verify digital identity.”
In the same piece Kuznetsov argues that the popularity of cryptocurrencies is on the rise among ecommerce merchants.
“As for ecommerce, accepting cryptocurrencies such as Bitcoin is relatively simpler. Bitcoin wallet services such as BitPay allow users to accept bitcoin through buttons and, for more advanced users, APIs. For instance, bitcoin services now provide merchant services to enable ecommerce companies to accept bitcoin. Through such a service, merchants would also be able to exchange it for fiat currency and vice versa giving them flexibility in which currency to use.”
According to Sergey Nazarov, the CEO of SmartContract, blockchain will lower chances of fraud.
“Consumers will benefit from this with lower levels of fraud, greater security, greater transaction speed, and therefore a large reduction in costs within the developed markets, as well as the ability to leapfrog into various capital markets capabilities in emerging markets.”
Retailer Acceptance is Slow
The online retailer Overstock.com made waves back in 2013 when CEO Patrick M. Byrne announced plans to accept Bitcoin. Since then Overstock has been the ecommerce leader in terms of accepting Bitcoin for payments as well as using other underlying aspects of the blockchain technology in other parts of its business.
Still, much of the hesitancy surrounding the process of accepting Bitcoin payments securely is to do with issues such as price volatility and security.
Bitcoin payment processing services help ecommerce websites to avoid chargebacks due to Bitcoin’s inherent immutability. These services also can convert the received Bitcoin into local currencies rather than having retailers worry about selling the Bitcoin themselves. All of these processes are handled using a high degree of security including encryption and air-gapped cold storage so that a website business owner doesn’t need to worry about being hacked and having a large reserve of Bitcoins stolen.
What is clear is that even as Bitcoin and other digital currencies are fast approaching the technical capacity to at least handle the numbers of transactions that large e-commerce websites see on a day-to-day basis, the outstanding questions surrounding regulation and security must continue to be more clearly defined by those within these industries so that best practices can be established, tested and then followed by later adopters.
Read more about blockchain at TechCo