Despite the cautious stamp of approval bitcoin has received from emerging payments giants like PayPal, Square and Stripe, many in the traditional payments industry are struggling to understand bitcoin and the strength of its technology.
However, perhaps more crucially, former VeriFone CFO, current Tanjarine president and new BitFury board member Bob Dykes believes that the payments industry is struggling to separate bitcoin from the scores of new payments technologies that have emerged in the last decade.
Dykes chooses to view bitcoin and its road to mainstream adoption through this lens, noting that the payments industry has seen the rise and fall of a number of technologies – including QR codes and near-field communication (NFC) – that have promised to bring disruption and change overnight, only to be met with a long road to adoption or a cold shoulder by the industry.
As a result, Dykes told CoinDesk, the traditional payments industry is struggling to see how bitcoin will be able to gain wider adoption:
"If you go back three-to-four years, there were lots of companies cropping up with what people in the payments industry were thinking were a bunch of crazy ideas and they got big for a while, but I think you're going to see them fade, because they weren't a very good idea in the first place. When it comes to bitcoin, I think it's a bit different. It has legs because it's a fundamentally more efficient way of having a transaction."
Dykes indicated that his ability to recognize this potential lead him to join the team at bitcoin mining services giant BitFury, which raised $20m in May from VC firms like Crypto Currency Partners and angel investor Bill Tai. BitFury manufactures mining hardware and computer chips, and recently completed a 20MW data center in the European country of Georgia.
Citing the company's impressive data centre presence and ability to provide low-cost transaction processing through its mining infrastructure, Dykes added:
"If you're going to ride a horse in the bitcoin space, BitFury is the best horse to ride."
Profit potential for payments space
Notably, Dykes suggested that one reason the traditional payments industry has been slow to react to bitcoin is that its businesses see bitcoin as a threat to their cost and profit structures.
“This is a place where you can make a lot of money already.”
His former employer VeriFone, for example, earned $436.1m in net revenue during Q1 2014 through products such as multimedia point-of-sale devices, mobile wallets and payment processing, all offerings that bitcoin aims to improve or replace.
However, Dykes said that over time, the opinion of his former industry will change because bitcoin will offer new ways for these companies to cut costs and generate revenue through their existing services.
Core to this belief is Dykes' assertion that the bitcoin industry is already generating significant revenue, a factor that provides a crucial advantage over past payments technologies:
"It's not like an industry that's going to require massive funding, this is a place where you can make a lot of money already."
Dykes said that this could prove to be an advantage to bitcoin that helps propel adoption faster than other types of payment technologies.
Despite his bullish beliefs about bitcoin's long-term prospects, Dykes suggested that the payment industry isn't likely to embrace bitcoin anytime soon, simply due to its historical resistance to technology.
Dykes told CoinDesk:
"The payment industry is an enormous industry and it moves slowly – look at EMV and chip cards in the US for example. Nothing is going to move very fast even though we have a lot of new entrants, but it's got to move at a steady rate and in places where bitcoin has a fundamental advantage."
Dykes mentioned cross-border and e-commerce payments as two areas where bitcoin could gain a strong foothold. Elsewhere, he sees the technology becoming more widely used in the background, with established payments giants using bitcoin behind existing services.
"You're going to have bitcoin sitting behind a card with a logo on that card, and then [that brand] making a bitcoin wallet and bringing attention to it, so it will create some efficiency in the industry but it's not going to be a major change," he explained.
Bitcoin is at critical mass
Unlike many of his peers, Dykes said that he believes bitcoin has already reached a "critical mass" in the market, though he suggested that his definition may be different from other observers.
For example, he mentioned bitcoin processors and bitcoin debit card providers that are building on bitcoin's core infrastructure as evidence of this assertion, saying:
"It has reached a point where regular people can use bitcoin at every merchant that takes a major credit card. Infrastructure pieces are in place, and now it's just a matter of growing these activities."
Still, he cautioned that bitcoin enthusiasts should temper their expectations even in light of his high praise for the industry.
Taking a long-term outlook, Dykes concluded:
"The payments space is truly enormous and even with really high growth, it's still going to be a very small portion of the payments space. There's no expectation that the whole industry is going to be overturned in the next few years."