Payments companies make it easier for consumers, merchants to embrace cryptocurrencies
Don't call it a comeback. I've been here for years.
The opening lines to LL Cool J's classic song, "Mama Said Knock You Out," can easily apply to the current state of cryptocurrencies as a payments choice for commerce.
While most consumers today likely view bitcoin, bitcoin cash and alternatives such as Ethereum and Litecoin as assets, some payments companies in the past couple of months have announced plans for consumers to more easily use cryptocurrencies as payment, and merchants to accept them.
Such moves harken back to almost eight years ago and the original intent of bitcoin: a peer-to-peer electronic cash system.
One company has gone so far as to introduce its own twist on this trend with a poker chip-sized contactless device consumers can use to pay for goods and services in fiat currency after converting bitcoin to U.S. dollars.
And at least one of the executives behind the crypto, merchant acceptance surge is convinced bitcoin alternatives such as Litecoin can help change the payments industry for the better.
The questions that remain to be answered are whether everyday consumers are ready to embrace such a change, and if merchants are in a hurry to accept cryptocurrencies.
Fit Pay Inc., a wholly-owned subsidiary of NXT-ID Inc., believed something was missing from its platform, which adds contactless payment capabilities to wearables and IoT devices.
The company saw an opportunity with bitcoin and created a new payment device that enables those cryptocurrency holders to use the value of their bitcoin to make purchases at retail locations that accept contactless payments.
The device, which is a bit larger and thicker than a standard poker chip and called Flip, works in conjunction with a mobile app bitcoin holders use to convert their crypto into U.S. dollars that are then held in a card network-branded prepaid account.
It's that card network affiliation that enables Flip holders to use the device where contactless payments are accepted.
Michael Orlando, the COO of NXT-ID and president of Fit Pay, told Mobile Payments Today in a recent interview that initially the company took a wait-and-see approach with cryptocurrencies despite receiving interest from consumers about any kind of related product.
"We needed to figure out how we wanted to be able to deal with [cryptocurrencies] and what potential problems we could solve, or solutions we could deliver to the marketplace," he said. "So, Flip is really our way of entering that space. The evolution of that will become a more robust experience inside of our standard digital wallet and on top of other devices that our integrated into our platform."
Flip is an answer to what can be an issue for cryptocurrency holders: the ability to use the value of bitcoin and other coins to make purchases at brick-and-mortar retail locations. That was never widespread to begin with as such transactions were confined mostly to e-commerce.
But something like Flip removes the onus from merchants because they will be completely unaware the source of those transactions originated from a user's bitcoin holdings.
"The whole notion of Flip is really developed around the idea that people have bitcoin that's sitting in an account somewhere, and over a period of time, that asset has grown," Orlando said. "What we thought was interesting is the ability to take [bitcoin], convert it into [U.S. dollars] and make it easy for someone to spend it in their daily life using our Flip device."
Flip is not yet available, but Fit Pay is accepting preorders for the device at FliptoPay.com. The retail price for Flip is $29 with standard shipping included. There are account and exchange fees associated with maintaining a Flip digital wallet.
Orlando expects initial deliveries in the second quarter of 2018. Customers will only be charged when the product is shipped to them. Flip is currently only available in the U.S., but the company is considering expanding its availability to other regions worldwide.
While Fit Pay's approach is an indirect way for cryptocurrency holders to use their coins, Aliant Payment Systems has taken a more straightforward route.
The Florida-based merchant services provider recently announced it is offering its merchants the ability to accept Litecoin payments, as well as Ethereum, at the physical point-of-sale via Poynt's smart terminals.
Poynt, which former Google Wallet and PayPal executive Osama Bedier debuted at Money20/20 in 2014, has a marketplace where merchants can download Aliant's app to accept Litecoin and Ethereum payments via QR code.
Aliant then turns around and converts that cryptocurrency into fiat currency for the merchant, which doesn't need to hold any coins should they so choose.
Aliant partnered with Vancouver-based NetCents Technology Inc. to build out the processing platform and offer its crypto portfolio to Aliant's existing merchant base, as well as new clients.
Eric Brown, Aliant's CEO, told Mobile Payments Today that his decision to go this route with Ethereum and Litecoin arose from the need to give his clients alternative payment options.
"Originally, we were going to do a bitcoin option and offer it to our higher-risk clients: online travel clients, electronics, etc.," he said. "We thought this would be an attractive thing to have online, it would differentiate us from the competition.
"When we started running test [marketing] campaigns, we were surprised in the amount of retail clients that were interested. That immediately put us in development for coming out with retail-facing version with the Poynt smart terminal."
Brown's decision to focus on Ethereum and Litecoin, particularly the latter, plays into the cryptocurrency's current trends.
While bitcoin remains the preferred cryptocurrency for payments, a report from Bitcoinist shows that alt coins such as Litecoin and Dogecoin have picked up momentum in the past six months.
Litecoin in particular saw a surge at the end of 2017 as bitcoin transaction fees skyrocketed thanks to volatility. That helped lead to Stripe's decision to stop processing bitcoin transactions starting in April.
Brown did not reveal how many of his clients are accepting Ethereum and Litecoin at the physical POS, but believes the boarding process has gone well.
"I wouldn't say we've seen a lot of transactions yet, but it's been a lot of work in a short amount of time," he said.
How these initiatives from Fit Pay, Aliant and others play out long term could depend on consumers' appetite for cryptocurrencies.
While it is not as difficult today to buy bitcoin and Litecoin compared with a couple of years ago, there is still a portion of consumers that believe digital coins are a gimmick or scam.
But Brown is confident that perception is changing.
"It's funny how fast the word spreads when it comes to crypto," he said. "The Twitter community is big and welcoming. I don't think you have to be a tech guru to figure it out.
"I also think they're going to be some more professionals that come out and support it. There's more material out there for people to read and educate themselves. It's not quite as intimidating."
Of course, there is the other side of the equation with merchant acceptance.
"Retailers are taking a wait-and-see approach to crypto payment systems for the most part," Ricardo Belmar, senior director of worldwide enterprise product marketing at InfoVista, told Mobile Payments Today in an email. "While some leading-edge brands are taking a chance on accepting them, the main motivators are good publicity and testing the waters to gauge consumer reaction.
"We could see some retailers try to future-proof themselves by working with payment providers that support crypto payments but this will mostly be as an add-on to existing systems."
Which is what Aliant is doing at the moment. And Brown is convinced this can turn into something more.
"I've been doing this for 20 something years, and nothing has ever come close to what this represents," he said. "I truly feel that [cryptocurrency] is going to change the payments industry. It's an industry that is dated. It's one that's been doing the same thing for quite some time on the same platforms."
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.