Retailers who take Bitcoin say something different. For them, the currency is a viable, preferable alternative to credit cards that don’t carry the same risk of fraud and have lower transaction fees. Merchants say bitoin payments aren’t a huge part of their business, but the niche is growing steadily.
“It’s really been fantastic,” says Chris Nichols, CEO of GameTimeZone, an online seller of games and gaming consoles. “We’re a merchant that unfortunately has to worry about credit card fraud. When we see orders from companies like Poland and Eastern Europe and even Western Europe in high dollar amounts, we have to worry.” By contrast with Bitcoin “we know that it’s a safe transaction.”
GameTimeZone began taking bitcoin payments last October. Since then, such orders have encompassed as much as 20% of sales. That appears to be way above average. Online retailer Overstock says bitcoin transactions only account for about 0.25% of daily volume. The retailer posted $1 million in bitcoin-based sales within the first three months of offering the option and just recently hit $2 million in sales.
“It’s limited to a very small community of tech-savvy people,” says Vinny Lingham, CEO and cofounder of online gift card service Gyft, which First Data bought last week for an undisclosed sum. ”
It’s not growing as fast as people would like. It’s just not. It will go mainstream at some point in two- to five years
It’s not growing as fast as people would like. It’s just not. It will go mainstream at some point in two- to five years.”Working with BitPay, Gyft started accepting bitcoins for transactions in spring 2013, making it one of the first retailers to embrace the payment option. A flurry of others soon followed. Bitpay now claims it works with 40,000 businesses and nonprofits that take bitcoin while rival Coinbase claims that it works with 35,000. Adam White, Coinbase’s director of business development and strategy, says the number of merchants is growing about 10% per month.
As Nichols mentioned, credit card fraud is an impetus. When a transaction is found to be fraudulent, the retailer is forced to pay up. To add insult to injury there’s also usually a fine. “It’s 90% to 95% of the transaction cost and on top of that they’ll hit us with a fee, like $20 on top of a $10 sale,” Nichols says.
Another draw for Bitcoin is low transaction fees. While credit card companies can charge up to 3%, Coinbase doesn’t charge anything until there’s $1 million in sales. Then it takes a 1% cut.
Of course, no one believes Bitcoin is risk-free. Robert Siciliano, a McAfee online security expert, says despite the fees, bank-backed credit cards are still preferable. “Relying on an outside company has another set of issues. Remember Mt. Gox? They lost upwards of $450 million in Bitcoins in a hack,” he says. “Which is why it’s nice to have real banks, credit card companies and the FDIC. You know, real entities.”
Coinbase’s White says Bitcoin is the online equivalent of cash, with the same potential benefits and downsides. On the plus side, Bitcoin transactions are processed much quicker than credit card payments. As with cash, though, if you lose possession of bitcoins, there’s often no recourse. “I’m ultimately responsible,” he says. “It’s the same as if I had dollars and a wallet in my pocket.”
Another downside for retailers is that online, bitcoin transactions don’t leave much of a trail. While a credit card payment will yield information about the buyer, with bitcoin, there’s no data to be gleaned.
With mass adoption a few years away, for some retailers accepting bitcoin is a marketing play, meant to underscore a brand’s forward thinking. That was Jesse Jacobs’ reasoning. At the moment there are just a handful of retail establishments where you can walk in and actually buy something using bitcoins. One of the early adopters is Jacobs’ Samovar, a small chain of tea lounges in the San Francisco area. In June, Samovar began letting customers pay with bitcoin, which they do by letting Samovar’s Android tablet read the QR code off their phones.
Jacobs says to date about 100 customers have tried bitcoin payments.”We haven’t really stress tested it with thousands of people,” he says. Regardless, merely stating the ability to take Bitcoin can’t help but have a halo effect on Samovar’s brand. Says Jacobs: “This whole technology is just so groundbreaking.”
http://mashable.com/2014/08/06/bitcoin-retailers/ BY TODD WASSERMAN