Amid the continuing volatility and controversy that surrounds the virtual currency bitcoin, mobile payment innovator Square Inc. added bitcoin payment functionality for merchants on its online platform, Square Market. San Francisco-based Square partnered with bitcoin processor Coinbase to offer the service.
According to a March 31, 2014, post on Square's corporate blog, the service is available on Square's online checkout page. "When a buyer opts to 'Pay with Bitcoin,' we first generate a new bitcoin address and attach it to the order," said Square Market lead Ajit Varma. "We will continually monitor this address throughout the checkout process so we know when it has received payment."
Bitcoin users can then open bitcoin wallets on their mobile devices and scan quick response codes on the checkout page to complete payments, Varma added. Alternatively, users with bitcoin accounts stored on hosted servers follow separate instructions to facilitate transactions.
Coinbase settles bitcoin transactions in dollars, which streamlines processes for merchants and safeguards transactions from bitcoin's wild exchange rate fluctuations. "Keeping it simple for the seller, the seller receives the amount of the purchased goods or services in USD and in the amount of USD advertised to the sellers' customer at the time of transaction, so the seller takes no risk on bitcoin value fluctuations," wrote Varma.
Bitcoin payment functionality via Square is not currently operable for brick-and-mortar retail settings. A Square spokesman confirmed it is charging 2.75 percent for bitcoin payments, which is the same percentage it charges for standard card payments.
Because Square is a trendsetter in the payments industry, its bitcoin implementation is a significant development. But Nathalie Reinelt, Analyst at Aite Group LLC, believes only time will tell what impact the move will have on Square and payments in general. For the time being, it will be "a great learning experience for Square to see how bitcoin will affect their environment," she said.
Restricting bitcoin payments to the online environment allows Square to evaluate how much it affects transaction flows and whether Square merchants realize increased sales, Reinelt added. She noted that online discount retailer Overstock.com added bitcoin functionality in January 2014, which resulted in an uptick in sales. But such a result may not translate for Square merchants because, unlike a big online merchant like Overstock, merchants using Square for payment acceptance are primarily small and micro-businesses, Reinelt said.
One factor in favor of increased business for merchants able to facilitate bitcoin transactions is that bitcoin users are invested in seeing bitcoin succeed as an alternative currency. Once merchants add bitcoin payments, "bitcoin enthusiasts want to go and transact with them because they want to see the payment feature take off," Reinelt said.
While Square is apparently taking a cautious approach to bitcoin acceptance, new online payment venture PayStand jumped in wholeheartedly. Jeremy Almond, founder and Chief Executive Officer of the Bay Area startup, said that, to the best of his knowledge, PayStand is the first application to be launched with bitcoin payments already built in. "If a merchant wants to put bitcoin alongside credit card on their website, we are the fastest, easiest way to do that," he said. PayStand launched out of beta testing on April 2, 2014.
Almond makes a distinction between bitcoin, the alternative currency, and the bitcoin network, which is the infrastructure for accepting alternative virtual currencies, not just bitcoin. "Bitcoin the technology really is a technological breakthrough," he said. "It gives us for the first time a distributed peer-to-peer network that allows us to move money in a really simple way without central control and authority but still is a trusted mechanism."
Therefore, PayStand is not betting specifically on the viability and longevity of bitcoin in particular, but on the bitcoin network itself. "The underlying concept of a peer-to-peer, cash-like network that's free and open source and doesn't have transaction fees … that concept's here to stay and it is very revolutionary," Almond said. "We're betting big on that concept. And whatever currency mechanism we end up using doesn't matter very much to us."
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.Prev Next