While last week’s Keynote 2015 conference saw the introduction of new voices to the conversation surrounding bitcoin and blockchain technology, none may have been heard louder and with more skepticism than CardLinx CEO Silvio Tavares.
Tavares used his forum at the conference to discuss his organization’s focus on developing standards for promoting card-linking, a process by which the consumer data managed by payment companies is shared with merchants to target discounts and rewards. Founded in 2013, CardLinx boasts founding members including Bank of America, Facebook and Microsoft.
Given that the attendee base was composed of many from the bitcoin and blockchain industry, it may not be surprising that attendees greeted Tavares’ positive appraisal of the credit card industry with skepticism. At the event, Tavares sought to attack the idea that credit cards aren’t affordable and don’t offer privacy, and further, that the payments industry isn’t innovative.
In interview, Tavares expanded on this view further, asserting that contrary to their perception in bitcoin and blockchain circles, payments companies are innovating at a faster rate than ever, creating a higher hurdle for new technologies.
Tavares told CoinDesk:
“If you think about payments and digital advertising, there’s enormous innovation transforming how people find and pay for services and the business model for how traditional payments work. … There’s a huge amount of innovation in the space and that’s both a challenge and opportunity for bitcoin.”
A former senior vice president at Visa and First Data, Tavares added that in this current environment dominated by payments innovation, being safer and cheaper hasn’t been enough to propel the technology to the mainstream.
That’s not to say that Tavares doesn’t believe there will be applications for bitcoin in payments, it’s just that he believes the technology is still searching for a niche.
“I don’t see bitcoin as replacing card payments anytime soon. I don’t see bitcoin replacing card-linked capabilities anytime soon,” he said. “But, I think that technologies like bitcoin and credit cards can co-exist and complement one another.”
The comments follow increasing debate about the strength of bitcoin’s value proposition to merchants following reports of declining adoption and a broader shift in interest toward the technology’s applications as a distributed database.
Awareness a non-issue
One indication that the technology is still not ready for mass market as a payment method, Tavares said, is that adoption has been disproportionately low when compared to public interest.
“You can hardly look at The Wall Street Journal, Businessweek or Harvard Business Review without reading an article about bitcoin. Bitcoin is everywhere, but yet we haven’t seen consumer adoption,” Tavares said.
Tavares indicated that, part of the issue, is that consumers perceive bitcoin as more difficult to use than other forms of payment. The assertion is backed by recent studies, like one in April that found bitcoin was perceived to be the “most inconvenient” payment method.
He went on to call ease of use and small merchant acceptance the biggest issues with bitcoin and its applications for payments, even though he acknowledged how integration has been added by companies such as PayPal, Shopify and Stripe.
“At the end of the day, merchants want to accept as many payment methods as possible, but if it’s hard for them to implement, it becomes a challenge,” he said.
Trust and control
Tavares also framed bitcoin as a potential complement to payments industry practices like card linking, suggesting that, while this process relies on information sharing, the pseudonymity bitcoin offers isn’t a roadblock to such use cases.
Rather, Tavares asserted that consumers want to control how they pay, so long as they’re also able to share relevant information with select parties as well.
“Consumers want to be able to control how they pay, but they also want to share this information with people who deliver value. I think consumers are not so focused on maintaining anonymity, they want to have anonymity with the right people,” he continued. “Consumers like privacy, but they don’t want to live in cloaked world where no one knows who they are.”
Tavares suggested that card linking has struck this balance by enabling consumers to elect who they share data with in exchange for a quantifiable reward. However, he said he doesn’t foresee a blockchain removing the role of trusted intermediaries, even in the exchange of data for rewards.
Time and education, he said, will need to play a role as other industries are just realizing one of the core innovations of the blockchain is its ability to reduce or eliminate trusted counterparties in the transaction process.
“When you look at the blockchain as a counterparty, you’re putting your faith in the wisdom of the crowd and that’s not a very well established model yet,” he said. “People place their trust in institutions and companies and they’re used to that because they see how that works.”
Innovating at scale
That said, he believes incumbent payments providers currently have two huge advantages in that they have capital and established user bases on which to test new ideas. Many of the challenges bitcoin and blockchain companies are working on, he said, are being attacked by firms with bigger budgets and more resources.
For example, when asked about the ongoing effort by Gyft to tokenize gift cards on a blockchain, he noted that there are other companies such as Raise seeking similar solutions for the same challenge – illiquidity in the gift card market.
“It would be a mistake to think that the large companies are not already focused on those inefficiencies and investing heavily to solve them,” he said. “I do think there are going to be some opportunity for bitcoin as well, the key question is where is that going to be and where is it well suited to address challenges.”
More broadly, he noted that he believes bitcoin has already “captivated” the payments space, but that channeling this interest into business opportunities remains a roadblock.
“There are a lot of great killer apps that are growing quite rapidly in the payments space,” he continued. “Given that we have 24 hours in a day, and you can only place your bets in a certain number of spaces, you want to base them in ones with acceptance.”
Overall, Tavares said the goal of his speech at the Keynote event was not to antagonize, but rather to help a new generation of technology entrepreneurs learn how their space is being viewed by incumbents.
“I wanted to share how much innovation there is in the traditional payments space, because I think that gives a perspective to bitcoin’s value-add capabilities,” he said.
Going forward, Tavares expressed an interest in having more bitcoin and blockchain companies join the CardLinx Association, given its broad interest in digital commerce.
Tavares believes that both technologies can thrive alongside each other given that, at the end of the day, both consumers and merchants are incentivized to use and accept as many payment methods as possible.
“It’s not just cards. This is really about digital commerce and how you can more effectively match merchants with consumers. That’s why I’m very, very confident bitcoin can co-exist.”
Image via Keynote 2015