{"id":247,"date":"2014-06-21T17:27:31","date_gmt":"2014-06-21T15:27:31","guid":{"rendered":"http:\/\/www.worldresonance.com\/?p=247"},"modified":"2015-03-06T11:57:36","modified_gmt":"2015-03-06T09:57:36","slug":"bitcoin-threatens-payments-sector","status":"publish","type":"post","link":"https:\/\/www.worldresonance.com\/bitcoin-threatens-payments-sector\/","title":{"rendered":"Bitcoin threatens payments sector"},"content":{"rendered":"
\"Digital
Digital currency is entering the mainstream<\/figcaption><\/figure>\n

Digital currency bitcoin has crept out of the shadows of Silicon Valley basements and into the national spotlight. Venture capitalists \u2014 and billionaires \u2014 have bet more than $100 million on the virtual currency, which can be used to pay for vegan cupcakes and $100,000 electric cars.<\/p>\n

The momentum of cost-efficient digital currencies threatens to disrupt the payments processing industry that has built billion-dollar companies fattened on processing lucrative credit card transactions and fees. For metro Atlanta, a national payments processing hub, that disruption could hit hard.<\/p>\n

More than 60 percent of companies in the payment processing industry call Georgia home, including Total System Services Inc.(TSYS), Global Payments Inc., First Data Corp. and Elavon Inc. About 70 percent of all U.S. payments processed annually run through the state.<\/p>\n

Bitcoin is a good alternative where credit cards don\u2019t work well, such as overseas e-commerce, or to pay for low-value items. Bitcoin is a faster and less expensive way to move money overseas than wire transfers.<\/p>\n

Bitcoin is not issued by a government or bank, but \u201cmined\u201d by high-powered computers that solve complex math problems. Of the up to 21 million bitcoins that can be potentially mined, more than 12 million are in circulation. Bitcoins are stored in \u201cdigital wallets\u201d and can be used to buy products and services from more than 20,000 merchants worldwide. Bitcoins are bought and sold on virtual exchanges such as Bitstamp or BTC China.<\/p>\n

If digital currencies catch on \u2014 and it\u2019s a big if \u2014 the payments industry will be forced to pivot and embrace the new technology. For now, most are taking a wait-and-see approach.<\/p>\n

\u201cWe have seen some interest from bitcoin people already, and I think there is going to be more,\u201d said H. West Richards, executive director of The American Transaction Processors Coalition. \u201cWisdom will be shared and relationships will be formed between the digital currency people and the payment processors.\u201d<\/p>\n

Some of those \u201cdigital currency people\u201d already call Atlanta home.<\/p>\n

The largest bitcoin payment processor, BitPay, develops software tools that allow online merchants to collect payments over the bitcoin peer-to-peer payment network.<\/p>\n

\u201cOur goal is to be the First Data of bitcoin,\u201d BitPay CEO Anthony Gallippi said.<\/p>\n

BitPay, which is backed by British business magnate Richard Branson and Hong Kong billionaire Li Ka-Shing, recently raised $30 million in a round led by Index Ventures, with participation by Founders Fund, Felicis Ventures, RRE Ventures LLC, AME Cloud Ventures and Atlanta\u2019s TTV Capital.<\/p>\n

Bitcoin, while the most popular digital currency, continues to be buffeted by price volatility and controversy. In February, Tokyo-based Mt. Gox, one of the largest bitcoin exchanges, said it had lost 744,000 bitcoins to hackers. Mt. Gox closed, wiping out $480 million worth of bitcoins held by its customers.<\/p>\n

Bitcoin has not gone unnoticed by Congress and the Federal Reserve.<\/p>\n

While digital currencies \u201cmay pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system,\u201d former Fed Chairman Ben Bernanke wrote in a letter to senators last year.<\/p>\n

Others are not so sure. Federal Reserve Bank of Atlanta President Dennis Lockhart referred to bitcoin as an \u201cinteresting little experiment.\u201d<\/p>\n

\u201cIn my mind it is very unlikely to become a substitute for the dollar,\u201d Lockhart said at Mercer University in February. \u201cIt could be a flash in the pan; it could be something that sticks forever.\u201d<\/p>\n

Venture capital is bullish on bitcoin. Nineteen bitcoin firms in North America have collectively raised nearly $100 million in venture capital, according to Boston-based Aite Group LLC. Pantera Capital Management L.P. has formed a $147 million investment fund for bitcoin, according to Bloomberg.<\/p>\n

Whatever the long-term prospects of bitcoin, digital currencies are having an impact on payment processors today. Bitcoin has added to the sense of urgency, and is causing financial institutions to feel a little less complacent about the current model, said Kevin Hagler, commissioner of the Georgia Department of Banking and Finance.<\/p>\n

Bitcoin will add competitive pressure to improve the traditional payment processing systems, Hagler said.<\/p>\n

\u201cIn fairness to the legacy systems, I think they were already working toward faster processing times, but digital currency may quicken their pace a bit,\u201d he said.<\/p>\n

An Atlanta venture capitalist who invests in fintech and payments companies concurs. The established payment processors are taking a wait-and-see approach to digital currencies, said Gardiner Garrard, managing partner at TTV Capital. The venture firm recently raised a $40 million Fund III from investors including TSYS and Global Payments.<\/p>\n

Once bitcoins get market traction and user adoption, Garrard expects traditional payment processors to dive in.<\/p>\n

\u201cI think they will wait until there\u2019s real validity and traction,\u201d he said. \u201cThey\u2019d rather pay up a little bit later [to get into the game)]than to take the risk now.\u201d<\/p>\n

Garrard doesn\u2019t see digital currencies eliminating the credit card processing business. When credit cards emerged, they didn\u2019t kill off checks, he said.<\/p>\n

\u201cWhat we\u2019ve learned in the payments business is that more is better and it\u2019s not necessarily a zero-sum game,\u201d Garrard said.<\/p>\n

Garrard views the payment processors as potential acquirers and partners, rather than competitors. By investing in venture funds, the payments behemoths are dipping their toes in the digital currency space and other technologies. Next, payment processors could partner with bitcoin-focused companies offering to resell services to their customers.<\/p>\n

\u201cIf the digital currency gets mainstream adoption and regulations get buttoned up, then I think they\u2019ll start taking steps to enter the market,\u201d Garrard said.<\/p>\n

One payment processing industry insider sees the bitcoin ecosystem as an evolution.<\/p>\n

\u201cI see the evolution being driven by the merchants, by the consumers, I see it being driven some by existing innovation happening in Silicon Valley, and I see it being driven by some innovation that is going to start taking place here in Atlanta,\u201d the source said, requesting anonymity. \u201cAdd all of those things up, and the bitcoin investors may be pleased to know that the aspects of what they have invested in are indeed, at some point in the future, going to be used by the processors.\u201d<\/p>\n

BitPay\u2019s Gallippi realizes the 800-pound payments industry gorillas are eyeing his turf. \u201cThey are starting to come to the conclusion that bitcoin is an efficient way to conduct a payment,\u201d Gallippi said. \u201cThe longer they wait to support bitcoin, the more traction that\u2019s going to give us … to take advantage of the interest there is in the market.\u201d<\/p>\n

If Gallippi is concerned about deeper-pocketed competition, he\u2019s not showing it.<\/p>\n

\u201cBitPay\u2019s advantage is that it has a three-year head start,\u201d he said. \u201cIf others were to start building a platform now for bitcoins, they would go through the growing pains and scalability issues that we had, and we solved, a long time ago,\u201d Gallippi said.<\/p>\n

BitPay can compete on price and features, Gallippi said.<\/p>\n

\u201cBeing a startup with a better technical solution and [leaner] operations, I think we can compete very well,\u201d he said.<\/p>\n

Gallippi sees the legacy players as potential partners, or even acquirers, when they decide to get into the game.<\/p>\n

\u201cIt\u2019s a possibility that someone like a First Data, or even Visa or American Express, could buy a bitcoin startup,\u201d he said.<\/p>\n

By Phil W. Hudson
\nSource: Upstart Bizjournals<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Digital currency bitcoin has crept out of the shadows of Silicon Valley basements and into the national spotlight. Venture capitalists \u2014 and billionaires \u2014 have bet more than $100 million on the virtual currency, which can be used to pay for vegan cupcakes and $100,000 electric cars. The momentum of cost-efficient digital currencies threatens to […]<\/p>\n","protected":false},"author":1,"featured_media":249,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":{"0":"post-247","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy"},"yoast_head":"\nBitcoin threatens payments sector - WORLD RESONANCE<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.worldresonance.com\/bitcoin-threatens-payments-sector\/\" \/>\n<meta property=\"og:locale\" content=\"it_IT\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bitcoin threatens payments sector - WORLD RESONANCE\" \/>\n<meta property=\"og:description\" content=\"Digital currency bitcoin has crept out of the shadows of Silicon Valley basements and into the national spotlight. 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