Bitcoin's broadest impact might happen outside payments, but some retailers are already finding value in accepting Bitcoin for goods and services. A panel of businesses that are taking Bitcoin payments discussed their experiences with the virtual currency at a Money2020 panel this month.
Surprisingly, security was one of the biggest benefits of Bitcoin for two of the businesses represented on the panel: Amagi Metals, a trading site for precious metals, and Newegg, an online computer and electronics retailer.
Typically, fraudsters want to use stolen credit card credentials to buy goods that can be a store of value (like gold, silver, or high-end electronics). Stephen Macaskill, Amagi's CEO, said his company is a constant target for fraudsters. "We always have people trying to make orders with fraudulent credit cards. We have to have a whole department to make sure that all of our credit card transactions are legitimate, so it is expensive for us. We catch people on a weekly basis."
Amagi was hit with chargebacks from fraudulent card transactions in 2012, and it started accepting Bitcoins that year. Thanks to the Bitcoin Blockchain, it doesn't have to worry about any chargebacks with its Bitcoin transactions. The Blockchain, a public ledger of all Bitcoin transactions, makes it impossible to counterfeit Bitcoins. Each transaction recorded in the Blockchain is verified by a third party.
[For more on the Bitcoin Blockchain, check out: Banks, Bitcoin & the Blockchain]
"I don't see a way to end credit card fraud… and we have the highest rate of credit card fraud in precious metals," Macaskill told the audience. "With Bitcoin, we don't ever have to worry about chargebacks."
Security might not be the first benefit that comes to mind when people think about Bitcoin, after incidents like Mt. Gox this year. But the Blockchain technology gives the virtual currency security as a payment mechanism, even if some of the Bitcoin exchanges have proven far less secure.
Ted Rogers, chief strategy officer of Xapo, told Bank Systems & Technology that Bitcoin advocates need to provide a great deal of education about the security benefits of the Blockchain for payments.
"There's a security aspect that's partly educational. Our challenge is explaining why this technology is so secure," he said. "It is easier to steal the Mona Lisa than to steal a Bitocin in a cold wallet."
Soren Mills, Newegg's chief marketing officer, said at the Money2020 panel that the online computer and electronics retailer also found Bitcoin useful for dealing with fraudulent card transactions. But the greatest benefit for Newegg has been in attracting new customers.
"What's been surprising to us is the amount of new customers we have" using Bitcoins, he said. "Our customers expect us to offer products that are at the forefront of technology. This was a way to show our community that we are on the leading edge. And the customers who are transacting in Bitcoin, they are transacting in larger amounts and more frequently. They are looking for outlets to spend their Bitcoins."
And Mills expects Bitcoin to help with Newegg's recent expansion. "We started shipping internationally about six months ago. We think Bitcoin offers us the ability to bring a convenient payment method for that international expansion… Bitcoin offers an opportunity for a standard transaction method throughout the world."
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio