Bitcoin, mobile payments share some consumer adoption problems
From left to right, Bob Wilkins (founder and CEO of Ziftr), Byrne Reese (vice president of product for Bitreserve), Dawn Newton (COO of Netki) and Steve Beauregard (co-founder and CEO of GoCoin) participate in a panel at the Virtual Currency Summit.
This all sounded very familiar.
Last week, Networld Media Group hosted its first Virtual Currency Today Summit in Boston. Bitcoin enthusiasts filled a room at the Back Bay Hilton with a lot of gusto for the virtual currency's future, specifically the potential for the blockchain technology.
But some of the assembled speakers worried that different industry players were not doing enough to foster consumer adoption.
"We need to help solve for the user-adoption problem," Steve Beauregard, CEO of virtual currency processor GoCoin, said during his keynote presentation. "It's difficult [for consumers] to get coins, [figure out] which wallet to use [and there's] still friction around the actual transaction itself."
Beauregard described consumer-adoption obstacles that are not unique to bitcoin. Some of the challenges he discussed could easily be applied to mobile payments, which is why the Virtual Currency Today Summit gave me a sense of déjà vu.
"In the the overall [bitcoin] ecosystem, there is a lot jockeying around, but there are silos of innovation," Beauregard said. "But that's not necessarily good for the consumer. There's so much noise, they are not sure where to go."
Again, doesn't that sound similar to what we discuss when it comes to mobile payments?
I don't believe it's necessary for me to rehash some of the consumer issues with mobile payments. But as the summit progressed throughout the day, some of the speakers made indirect comparisons to mobile payments for us.
"Asking someone to change the currency they transact in everyday is a big thing to ask," Byrne Reese, vice president of product for Bitreserve, said during a panel discussion about what's needed for virtual currencies to become mainstream. "It's a revolutionary type of technology."
But it's a technology consumers are not all that familiar with outside of mainstream media coverage related to bitcoin exchanges run amuck and the Silk Road trial.
One of the biggest questions the bitcoin industry still needs to answer is "What problem does the virtual currency solve?" That's a question we hear time and time again with mobile payments.
At the moment, the best answer to that question might be to coax consumers into using bitcoin with discounts and incentives.
Merchants who accept bitcoin for payment do not have to pay the typical 3 percent transaction fee that comes with credit card payments. The idea there is that those merchants can pass along the savings to consumers.
Overstock.com, which was the first major online retailer to accept bitcoin, thanks to its Libertarian-minded CEO Patrick Byrne, in the past has offered consumers discounts and rewards for paying with Bitcoin.
Judd Bagley, the director of communications at Overstock.com, spoke about the company's experiences with bitcoin acceptance during a panel discussion. While Overstock today does not see the high bitcoin volume it experienced when it first started accepting the virtual currency, he said there are other ways to measure ongoing success.
"One way we consider it an ongoing success is that the bitcoin shopper is loyal and zealous," Bagley said. "It costs next to nothing to acquire these customers."
Outside of pushing such discounts, merchants who already accept bitcoin would be better served if they were to invest in marketing the virtual currency to their customers.
"The [marketing] models I look to are something like Safeway, where employees talk you into [joining] a loyalty program," Reese said. "Even if every merchant accepted bitcoin, it wouldn't change everything. You have to be involved in the process of educating them in the value of holding bitcoin."
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.