Full-fledged cryptocurrency payment applications look to challenge traditional systems Visa and MasterCard. Do they have nothing to fear?
The issue of transition to decentralised payment networks was raised again last week. On June 1, Visa, which usually processes more than 150 mln transactions daily, suddenly failed. Millions of people in the UK and Europe were unable to pay for goods or services, and Visa payments were also disrupted for US residents.
Several hours later, the problem was solved, but the mere fact of widespread failure indicated the need for decentralized and stable alternative systems, where such incidents are simply impossible.
Below we present an overview of several pioneers, which have chances for becoming similar to a ‘crypto’ Visa or MasterCard. They don’t just offer a comprehensive solution for storing, paying or managing cryptocurrency, but also provide full-fledged tools for businesses. Even more important – transaction fees are three times lower or even non-existent compared to Visa’s 3 percent.
CEO: Tony Gallippi
Founded by Tony Gallippi and Stephen Pair in May 2011, BitPay became the first operator to work with Bitcoin. The development of this project began due to the need to create a fast, safe, and cheap way of paying for goods and services. According to the creators of BitPay, the aim of the platform is to become crypto equivalent of Apple’s Apple Pay payment system, which is reflected in the similarity of their names.
In 2017, BitPay processed more than $1 bln in Bitcoin payments. The next step for the company was developing a BitPay Visa debit card, which allows payment through POS-terminals, as well as deposits and withdrawals at ATMs.
Bitcoin holders can buy a card for $9.95. Funds can be deposited into the account directly from the Bitcoin wallet or through an authorized provider. While BitPay takes a payment fee of up to 1.9 percent, processing speeds are a significant drawback.
In order to increase the application’s reach and popularity, BitPay announced support for Bitcoin Cash in addition to other currencies in December 2017. While it may seem that the service has increased reliability, various rumors still persist around the application.
For example, last summer the Bitcoin community accused BitPay of fraud. The fact is that BitPay misled users, saying that it is necessary to activate the BTC1 client while refusing from Bitcoin Core. The reaction of Bitcoin Core supporters, including Peter Todd, Tuur Demeestr, Francis Pulio, John Carvalho, Rodolfo Nowak and others was immediate. All of them were negative about BitPay's offer to use an alternative to Bitcoin Core. In particular, Peter Todd called the proposal fraudulent and encouraged other community members to participate in the proceedings. Programmer Eric Lombrozo appealed to his subscribers on Twitter to boycott any company supporting SegWit2x. On forums and in social networks around the web, an active discussion of the Bitpay offer continues.
Two weeks later, on December 24, BitPay confused users again when it announced it would raise its minimum transaction amount to $100 in a December statement. In just two days, the company changed the value back to $5, further surprising users.
CEO: Brian Armstrong
When it comes to reputation, it’s worth noting one big player which launched on Feb. 14. The Coinbase Commerce service comes from the Coinbase exchange, and allows merchants to accept payment in digital currencies with the funds directly credited to the wallet of the user, leaving them in full control over the account. Functionally, the Coinbase Commerce plug-in is very similar to the PayPal payment system, requiring a phone number and an email address only.
The product accepts payments in Bitcoin, Bitcoin Cash, Ethereum, and Litecoin, and can be integrated into a checkout process or used as a payment service on e-commerce platforms.
Coinbase has firmly established itself as a processing operator for businesses. For accepting payments in Bitcoin, merchants are not charged any commission, but for the conversion of funds the system retains a fee of 1 percent.
It seems like numerous guides and videos like "Nobody Likes Coinbase Fees" or "How to Avoid Coinbase Commission" are now in the past. But will the recent release will help Coinbase to “rehabilitate” itself for 4 percent fees charged for debit cards operations?
CEO: Steve Beauregard
Before being publicly launched in 2013, GoCoin was developed by a single person for private purposes. Now it has become quite a popular digital currencies platform and offers a payment gateway for online and retail merchants to accept BTC, LTC, DASH and BCH transactions. It was one of the first platforms to introduce lower merchant fees – only 1 percent , which drops to 0 percent after transactions have exceeded $2,500 monthly.
The platform can be installed as a plugin and allows customers to pay with the digital currency of their choice along with USD, EUR, and GBP. Several methods can be employed, from payment apps to hosted forms or buttons.
Since 2013 over 500 mln transactions have been processed by GoCoin. What makes this platform promising is a big client base of 15,000 merchants globally, among which there are companies such as General Electric, Cozy Games, BitFury, and Tesla Motors.
It’s also known that GoCoin is supported by a number of industry leaders like Owen Van Natta, former Chief Operating Officer of Facebook, and Brock Pierce, Blockchain Capital founder.
CEO: Alex Alexandrov
CoinPayments began as the first multicoin payment processor in the world in August 2013. The platform focuses on creating an easy way for integrating a checkout system for a staggering 535 cryptocurrencies, including widely used ones such as BTC, ETH, LTC, and smaller alternatives like PinkCoin and Triggers. The company also offers a number of shopping cart plugins, as well as custom payment solutions and merchant tools.
The level of service and the number of options are impressive for both buyers and sellers. The developers did not limit themselves only to payment instruments, and built the platform into a lot of online stores. Crypto lovers have a choice of 16 categories of goods, including games for XBOX, clothes, beds for cats and even cannabis seeds. While making purchases is easy enough, it is not entirely clear how legal they are.
Another peculiar feature available for users is the PaybyName service, which may simplify the life of any cryptocurrency trader or investor. By creating an account, you get a single address that can be used to send or receive any supported coins.
Merchants are given one of the most favourable conditions in the market – simplified registration, customer support and fixed commissions of 0.5 percent.
CEO: Vitaliy Andrusevich
An “all-in-one” gateway to blockchain services, Coinsbank was founded in 2016 under a name of BIT-X. Initially, the BIT-X project had been conceived as a cryptocurrency prepaid cards service. After rebranding on August 15, 2016, Coinsbank become a full-fledged payment platform, and since then has been maintaining high standards in everything that is connected with exchanging or processing of cryptocurrencies. In spite of a relatively small choice of supported cryptocurrencies, the platform’s steady daily trading volume allows Coinsbank to hold a position in the top 10 cryptocurrency exchanges.
“Think of this as being akin to a bank’s deposit box, with special access via two keys: one retained by the customer and the other by the bank. Here it's worth explaining that in terms of the security aspects offered by CoinsBank, that without a user key “no external party” to the wallet is able compromise its security.
If, for example, someone hacked CoinsBank’s system – as was the case that befell Hong Kong bitcoin exchange Bitfinex back in August with the theft of over $60 mln Bitcoin - the former wallet cannot be bypassed/compromised as there is “no possibility” to initiate transactions or make movements from them without the user’s signature.”
Coinsbank revealed to Cointelegraph the information about the issue of cryptocurrency debit cards to be announced on the Blockchain cruise in September:
“Payment cards will be issued by the world's largest card provider and will be available for ordering users soon. The cards will work with cryptocurrencies available on the service – LTC, BTC, ETH, XRP.”
Let’s see whether the commissions will be as low as the current fixed merchant service fee of 0.5 percent.
CEO: Hisyam Nasir
Other projects do not focus on exclusivity of services and rather aim for technological perfection. One of them is the GoByte Network, which is developing its own payment service and offers 0 percent fees for processing services inside the platform and non-cash payments.
The GoByte Pay module interacts directly with the blockchain, creating and executing transactions which are later confirmed by masternodes and miners for technically challenged merchants and consumers on desktop, web, and mobile. Being fast, secure and easy to use, GoByte Pay allows user to have multiple wallets in one account. While only the GBX coin is currently available for payments, developers promise to add new coins after the Pay module’s release in June.
The module is designed to solve the problem of a lack of adoption in retail stores by creating an API to help existing terminals easily connect to POS terminals. Along with InstandSend and free transactions, GoByte is planning to issue their own cryptocurrency debit cards, ATMs and POS terminals.
Visa and the conflicts of interests
A giant like Visa is a regular participant in conflicts with the aforementioned projects. In January 2018, Visa left users in Europe without debit cards. The order was sent to the payment platform WaveCrest, whose customers include several projects working with Bitcoin, including BitPay, TenX, Bitwala and Wirex. As a result many of them had to stop servicing non-US customers.
The BitPay Card is no longer available from our European card issuer Wave Crest Holdings, Ltd. Learn more and see what's next for the international BitPay Card: https://t.co/lI9wFpyPWx NOTE: BitPay Card users in the United States are unaffected by this change. pic.twitter.com/uns1GVcgWJ— BitPay (@BitPay) January 5, 2018
This year, a scandal erupted between Coinbase and Visa, based on erroneous withdrawals of users accounts.
1/ We have determined that the erroneous credit and debit charges are the result of Visa reversing and recharging transactions. This was not done by Coinbase. We are working with Visa to ensure all affected customers are reimbursed.— Coinbase (@coinbase) February 16, 2018
Developers of cryptocurrencies continue to pursue the goal of monetization with the help of processing systems. To date, fees for depositing funds through credit cards are 3 percent. It seems that many projects creators these days try to put their startups in mobile applications, bypassing the issue of plastic cards, since now the use of NFC on smartphones allows customers to instantly pay for the purchases made by placing their phone next to the seller's gadget. It could be much easier and more convenient to scan a QR code for mobile Bitcoin payments. Possibly in the near future, users will be able to completely opt out of QR in favor of NFC.
In summary, there are no grounds at the moment for thinking that someone would compose a strong competition for the Visa system. For a large number of people, functional convenience, reliability, and ease of use outweigh commission costs which are almost 3 times smaller.
It’s possible that one of the above solutions will earn a significant share of the cryptocurrency transactions, proving its security and developing positive relations with the necessary regulatory bodies. Meanwhile, against a background of ambiguous regulation in different jurisdictions, the future development of such projects remain difficult to predict.