Amid the current global economic turmoil the largely misunderstood and somewhat maligned cryptocurrency, Bitcoin, has come into the spotlight as a realistic foil for existing payment methods. While the Bitcoin debate rages, fuelled by the emergence of the mistifying Blockchain, the trend is clear: more and more people are using it. This is evident in the 236,175 transactions per day seen in January.
Cryptocurrency experts with their feet firmly planted in emerging and developed markets believe that the Bitcoin adoption curve is about to head northwards. Their assertion is that more merchants will start accepting it, especially when the benefits of fast transactions and low fees enter the equation. “As more people use and accept Bitcoin, it creates positive feedback loops for usage and trust, which helps grow the industry. At some point we believe it will hit a critical mass that will cause growth to become exponential,” says Werner van Rooyen, head of business development and growth at BitX.
BitX is a Singapore-based global Bitcoin platform, with offices in Cape Town, that was founded in 2013.
Van Rooyen says markets on either end of the wealth spectrum are starting to grasp the potential of cryptocurrencies. “Since Bitcoin is currently seen as a bit of a luxury, we see the majority of trading and investment currently happening in richer countries, notably the United States. Those markets already have excellent, established financial services – which Bitcoin certainly can complement – but we expect the biggest benefits will accrue to users in emerging markets, where Bitcoin can solve real pain points.”
The practical applications for the cryptocurrency have advanced considerably in the last five years. This can be seen in the way e-commerce has magnetised toward the security of Bitcoin. For example, a merchant in Johannesburg who is selling to customers in Botswana (or Barbados, for that matter) wouldn’t have all the issues associated with fraud and time-delays in getting paid for their goods and services.
Despite the expansion in trade that we’ve seen over the years, most payments are still predominantly restricted by a certain geography or currency and it’s difficult for medium-sized merchants to receive payments from international buyers. Bitcoin is changing this.
Local barriers to entry
Charles Elliman, head of business development at PayU EMEA does not believe that the barriers to adoption are unique to South Africa. “As with any new technology, but especially for matters related to finance, it takes time for people to develop trust. In this case, trust in the cryptocurrency, and in companies that provide Bitcoin services.”
Another issue is that it takes some work to trade in Bitcoins. Werner van Rooyen explains, “There is also a fair amount of effort involved in obtaining Bitcoins; in the same way you just can’t walk up to any shop in South Africa and buy US dollars, for example. There are some hurdles before someone can purchase their Bitcoins.”
Van Rooyen says online payment providers can play an important part in lowering the hurdles to transacting in Bitcoins. “Bitcoin is a natural progression of payments, especially online payments, due to its digital nature. Payment processors like PayU can help provide more avenues for merchants to allow their customers to pay with Bitcoins (helping them reduce fraud risk, lower fees (and therefore generating more profits) and gain access to new markets and customers), but for those merchants to still get paid in their local currency i.e. hedging out the volatility risk of Bitcoins. In short, companies like PayU, partnering with companies like BitX, can help bring merchants to the new digital age.”
South African adoption of Bitcoin
PayU’s Elliman says, “For South Africa to become a catalyst for adoption in the region, South African e-ommerce adoption needs to start uptrending closer to that of Asia and for companies like BitX and PayU to help educate people and make the overall customer experience better, all within the right regulatory frameworks.”
Van Rooyen says BitX is up for the challenge and is putting a lot of effort into having the cryptocurrency become a more regular means of payment. “We are working hard every day on our relationship with consumers, businesses, banks and regulators all across the globe and working at finding ways of lowering the barriers of adoption.”