Today, adventurous merchants are “intrigued” by bitcoin, the currency alternative. But could bitcoin eventually replace credit cards and PayPal?
SumAll, a provider of data tools primarily for marketers, is preparing for this possibility by rolling out bitcoin analytics. It has enabled the analytics for a few hundred of its approximately 200,000 customers, with a full roll-out expected by the end of April.
Not surprisingly, SumAll has found that bitcoin is the cheapest payment method for online merchants. Dane Atkinson, chief executive (CEO) of SumAll says, “It’s a simple, clean transaction…they are essentially paying nothing.”
He adds that even with the recent uncertainty in the bitcoin marketplace, due especially to the implosion of Mt. Gox – the bitcoin exchange that recently lost $400 million worth of bitcoins held by its customers – his company is still bullish because they know merchants suffer.
Atkinson estimates that around 100 of SumAll’s merchant customers are already accepting bitcoins, and that 5 to 10 percent of them will do so in the next few months. “If you transfer them immediately into cash, you lose a lot of the risk,” he says.
SumAll’s bitcoin analytics tool lets merchants plot the price of bitcoins in U.S. dollars against the total number of transactions in that currency.
“Seeing how many transactions are happening for a currency compared to how much the price is fluctuating tells you how stable the currency is,” Atkinson explains. “We can’t help predict a multi-country bankruptcy but we can help when you’re picking which currencies you want to transact in.”
He notes that, today, accepting bitcoins can give a merchant an edge, because there are so few that do, so holders of bitcoin have limited choice in where to spend the virtual currency.
For example, the day before Thanksgiving 2013, Shopify enabled all of the merchants on its e-commerce platform to accept bitcoins. Two days later, it posted an article called “75 Places to Spend Your Bitcoins.”
Shopify’s service lets customers from around the world check-out with a digital currency that works like cash; merchants that accept bitcoins via Shopify can choose to receive payments into a bitcoin wallet or in local currency deposited directly into a traditional bank account. Moreover, unlike credit cards or PayPal, once transactions are completed, they can’t be reversed by the buyer.
Jordan Schau, co-founder of Pure Fix Cycles, an online-only shop for fixed-gear bikes, began accepting bitcoins just before Black Friday 2013, mostly because he thought it was cool. The company uses BitPay, a bitcoin payment processor that converts them to cash for the merchant.
“It’s been very much a trickle of early adopters,” he says. Because Pure Fix processes orders with payment via bitcoin so infrequently, at this point the company immediately converts them to cash. “Over time, once it stabilizes, it might be in our interest to hold it for a little while. That is where we would probably use SumAll in being able to visualize where it’s going – is it worth it to hold it or should we sell it?” Schau adds.
While the e-commerce industry gets its ducks in a row, the U.S. government is grappling with the issues a virtual currency poses.
In March, the IRS issued guidance that virtual currencies should be treated as property for federal tax purposes, rather than as cash. But last week, Texas representative Steve Stockman introduced the Virtual Currency Tax Reform Act that would reverse that ruling and treat virtual currencies like cash.
While SumAll’s Atkinson acknowledges that, to date, there’s not enough bitcoin activity for the analytics tools to provide much insight, he thinks eventually his service will be able to help merchants understand whether they get a sales lift from accepting the virtual currency, as well as the proportion of actual sales transacted for the average merchant. And, given that bitcoins, as property, can appreciate or depreciate, SumAll will be able to tell a merchant whether it’s better to sell bitcoins it receives for cash or sit on them in hopes they’ll appreciate.
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