The radical new technology underpinning digital currencies enables fast, cheap, peer-to-peer payments and offers users a financial freedom impossible just a few years ago.
As a result, traditional financial institutions have been somewhat shaken up, even admitting that they may have to adapt to survive.
However, one area of finance has been more receptive to the benefits of bitcoin and other cryptocurrencies: payments.
As a number of bitcoin payments companies sprung up to serve the growing user base of this new technology, mainstream commercial payments providers like Mollie, Stripe, Shopify and Digital River have added bitcoin to their list of options, alongside credit cards, PayPal and so on.
Sign of the times
Next month’s Bitcoin Finance (Bitfin) conference in Dublin, Ireland – which aims to bring together the “brightest minds in payments, finance, business, banking and bitcoin” – is a sign of this sea change that is becoming apparent in the world of money.
Unusually for a bitcoin conference, the speakers and attendees are not all from bitcoin-based companies – or at least not yet. One such speaker is Colm Lyon, CEO of Realex Payments.
Headquartered in Dublin, Realex Payments is one of Europe’s largest and fastest-growing online payment gateways, processing payments valued in excess of €28bn ($37.9bn) per annum on behalf of around 13,000 retailers throughout Europe.
CoinDesk spoke to Lyon to find out why the head of a fiat currency-based payments company is talking at, and even sponsoring, what is ostensibly a bitcoin conference.
For many decades, explained Lyon, the payments industry has been dominated by legacy, legacy rules, systems, businesses and people. In the meantime, technology has advanced at rapid pace and created a payments/technology gap. He added:
“Bitcoin is far more than a currency, it is a catalyst to change in the payments industry – that’s why we are sponsoring and speaking at this important event.”
While, on the surface, the payments landscape may seem very competitive, in reality, Lyon believes, there is still a long way to go.
“Many of the innovations of today are new applications sitting on top of existing structures such as the card schemes,” he said. “Competition is the key to innovating, it is the single most important factor in making efficiencies and getting organisations to move.”
“This is why we like bitcoins. Accepting the fact that there is still some time and development required to create the triggers that will encourage wholesale adoption, there is enough there today to encourage everyone in payments to redefine their strategies.”
Looking at bitcoin
If bitcoin and its digital cousins are so admired by Realex as a driving force of change, does the company plan to add cryptocurrencies to its business payments options, or its personal wallet service Realex Fire soon?
“Both Realex Payments as a gateway for online commerce and Realex Fire as a payment account are highly compatible with bitcoin – we are considering all angles here!”
The regulation issue
Many people involved with bitcoin see regulation by financial authorities as unnecessary and, indeed, detrimental to its decentralised and trust-less nature.
Regulation would, they fear, place burdens on bitcoin businesses, such as licence fees and compliance hurdles, which would raise the bar to entry and end up effectively centralising aspects of the industry in the hands of governments.
Michael Jackson, Skype’s former COO, agrees that bitcoin businesses should avoid being regulated as much as possible.
He recently told CoinDesk: “Companies need to just carry on doing what they are doing – if they can make a case for themselves that they don’t need regulation, they shouldn’t even go near it.”
Such libertarian ideals are not universal, however. Many businesses in the bitcoin sphere now acknowledge the need for certain controls and standards, especially in the wake of Mt. Gox’s demise and the resulting loss of public trust in the bitcoin system.
Lyon, too, sees the need for rules in certain areas of the industry. In fact, he believes they can be beneficial.
Part of Realex Payments’ business is currently regulated, and the company supports the regulation of entities that engage in core payment services, whether these use fiat or not.
He said: “The conduct regulation is good for the users of payment services – both personal and business alike. Regulation is essential for the future development and adoption of bitcoin.”
How to grow the industry
In Ireland, Lyon said, there are no e-money licenced institutions and only a handful of payment institutions, so more are needed. Furthermore, he advocates the creation of a new regulatory body to oversee and develop this market:
“We need more competition in the payment market and we believe that it is time to create a new industry wide payments regulator. A new body that can consider innovation, competition and the overall development and strategy of the payments market.”
Such a body could, he said, fall under the veto of the central bank, but having a separate board and executive team on a new payments regulator would be “a significant step on the journey to ensure Ireland remains at the forefront of payments innovation”.
Lyon explained that the United Kingdom has taken great leaps forward in payments regulation by engaging with all players in the industry.
“That will lead to innovation and competition in the market.”
What the future holds
Looking ahead, Lyon sees a bright future for the payments industry, and considers the arrival of the new block chain-based digital currencies a boon, not a burden.
“Payment processing is set to become more accessible, more integrated, safer and less expensive,” he said, adding:
“Bitcoin has a big role to play here, not just in itself as a new way to transfer value, but also as a catalyst that has sparked the debate about the need for real and deep innovation in payments.”
It isn’t just bitcoin businesses that are excited about the future, it seems.
Payments concept image via Shutterstock