Though undeniably popular with its ardent supporters, bitcoin is arguably still searching for a practical application that makes it indispensable to mainstream users.
That doesn’t mean there aren’t real use cases for bitcoin that could bring the kind of payments revolution many in the industry are hoping to achieve, though.
Being both digital and decentralized, bitcoin is already a globalized electronic currency that operates across international borders. These traits are a key reason why many believe the first true killer application for bitcoin will be travel, and mainstream businesses like CheapAir and Expedia seem to agree.
All over the globe countries use different currencies, with banks and currency exchangers taking profits from each transaction. While small, these add up to real costs for everyday travellers and the travel industry itself – costs that bitcoin could help alleviate.
Alan Safahi, CEO of payments company ZipZap, allows his company’s consumers to convert cash into bitcoin.
A seasoned traveler, Safahi told CoinDesk he believes in the potential bitcoin has for globetrotters:
“You can plan your travel all around bitcoin. It’s a really good use case for travel.”
Market in need of solutions
Of course, while bitcoin may have real benefits, it’s important to try to quantify just how big of an impact it could have on the travel industry, and how specifically the technology might be able to lead to improvements.
Research firm IBISWorld has found the global tourism market brings in more than $1tn in revenue for over 1.6 million travel-related businesses.
Further, travel is also a growing global industry that has not neared its peak.
Still, currency is a constant issue for those who travel internationally, and thus travel companies that provide solutions could win customer loyalty by improving the experience for users.
“I travel all over the world, and every time I go somewhere the first thing I do is go to an ATM and get some cash. And one out of 10 maybe works,” said Safahi.
The byzantine banking network around the world is another part of the problem. With so many payment processors and networks, it’s almost impossible for ATM networks to cater to every single consumer card, and as a consequence, just as difficult for travel businesses to serve these customers at a low cost.
Bitcoin ATMs provide essential infrastructure
Bitcoin ATMs may be able to alleviate this issue by allowing travelers to go across borders with just one currency – bitcoin – before withdrawing local fiat at a low cost wherever they need it.
Safahi sees the potential for bitcoin ATMs in international locations, such as airports, train stations and other hotspots for travelers.
He said that if bitcoin ATMs were ubiquitous, this would be the likely scenario for a traveler:
“Go to a bitcoin ATM, scan [a] phone. Then have a map on their phone that shows every business that accepts bitcoin.”
Though it is becoming more convenient, it’s not exactly simple to live off of just bitcoin, which is what makes traveling with only the digital currency problematic.
Roger Ver, a digital currency evangelist well-known for living on bitcoin, told CoinDesk:
“With more and more bitcoin ATMs popping up around the world, I think it is just a matter of time until we see companies like Travelex or other money changing business adding bitcoin to the list of currencies they exchange.”
Alternative to unstable fiat currencies
Another problem for the travel industry is the diversity of currencies used around the globe. Wikipedia lists roughly 180 circulating currencies in 193 of the countries recognized by the United Nations.
Here, bitcoin could offer stability where local currencies fall short.
ZipZap’s Safahi told CoinDesk there are a number of countries that are far behind in regard to digital commerce and payments, and bitcoin may have an opportunity to become widely used in those markets.
For example, Safahi says in places like Iran, people still book travel through a travel agency, paying cash.
Another example is Argentina, where the Argentine peso has been so problematic that a growing number of citizens believe bitcoin might be a better alternative.
That’s why Sebastian Serrano of BitPagos, which allows hotels and restaurants to convert local fiat payments into bitcoin, is already doing business in Latin American countries like Argentina.
“In countries with high capital controls like Argentina or Venezuela, the exchange rate difference would be substantial and once you convert to the local currency is not possible to convert it back to the foreign currency,” Serrano said.
Ver pointed out how much easier traveling with bitcoin will be going forward, given the progress being made so far:
“We’ve already seen Square announce [planned] bitcoin integration. Soon, I think we will see major POS companies integrate bitcoin into their systems. Once that happens, I suspect most people would prefer to use bitcoin.”
“Bitcoin will become the world’s currency,” Ver added.
Disrupting currency spreads
There is also the matter of bitcoin’s ability to compete against existing solutions. Today, it’s common for people from the developed world to use credit cards while traveling.
While this sometimes helps a traveler avoid issues with handling local currency, it allows banks to profit from currency spreads that they dictate. These differences are spelled out in credit card agreements, and can include a ‘foreign transaction fee’ that is levied on transactions.
“With the banks playing a foreign exchange spread on either end of the transaction, if one can even use their card, they are paying a significant premium,” said Scott Robinson, who, as the lead for Plug and Play Technology Center‘s bitcoin startup program, travels to many conferences searching for new ventures to invest in.
In fact, those living and traveling just on bitcoin might be able to get a discount for paying in bitcoin depending on location. There are some global consumers, for instance, who may want bitcoin, but are struggling to gain access to it right now.
Robinson told CoinDesk:
“Bitcoin might present an environment where there is incentive to trade it for the consumer ‘exchanger’, especially in areas with low access to digital currency, which makes it much more attractive for travelers.”
The killer app question
Many claim Silk Road was the first killer app for bitcoin, and there are many who believe bitcoin gained popularity because of the illicit marketplace.
Even so, it is arguable that global travel could become the first legitimate application for bitcoin’s payment protocol. Early adopters like Roger Ver are spending bitcoin around the world, and at the same time promoting merchant acceptance.
“The technology is there, what is missing is the merchant adoption. [But] it’s always better to pay in bitcoin than have to convert your cash on each country you visit,” said BitPagos’ Serrano.
Ver dismisses merchant adoption as a problem facing bitcoin travelers. He said he has great bitcoin-accepting merchants already at his disposal, and that’s enough for him:
“Thanks to CheapAir, Expedia, LocalBitcoins, and ANXBTC’s bitcoin based credit card, it is completely possible to travel on bitcoins.”
Travel image via Shutterstock