Payment Expert Says Bitcoin Has More Potential as a New Payment System than a Currency

By Inside Bitcoins Nov 1, 2014 4:59 PM EDT

bitcoin payments

NEW YORK (InsideBitcoins) — J. Walter Thompson — or JWT as its now known — is one of the most storied marketing firms in America. With over 200 offices in more than 90 countries, the firm guides world-class brands such as Ford, Johnson & Johnson, Kellogg’s, Rolex and scores of others. It has created some of the most memorable campaigns in advertising history.

Recently, the firm published a new research report, “The Future of Payments and Currency.” As a part of the study, JWT interviewed Bill Maurer, professor of anthropology and law at UC Irvine — and dean of social sciences. As a “cultural anthropologist,” Maurer has a unique perspective on bitcoin’s role in the future of payments. In a post on the JWT Intelligence blog, Maurer shared some of those thoughts, a portion of which are excerpted here.

Less potential as a currency

Bill-Maurer-435“What’s interesting about things like bitcoin is less the potential it has as a currency and more the potential it has as a new payment system — as an alternative payment rail, so to speak, that operates using different protocols, that has different kinds of security built into it, that has some of the advantages and disadvantages of cash in that it’s a push payment: Once I send it, I can’t call it back,” Maurer said.

“The things I’ve been watching that look pretty interesting — and I don’t know if they’re going to go anywhere, but the technique is interesting — is the use of bitcoin as a way to do trans-boundary remittances. There’s a couple of services that operate in Kenya that let you send money from like England to Nairobi through a bitcoin interchange. The funds can then be deposited directly into your mobile money account, your M-Pesa account. They’re avoiding all the problems that come from using the traditional international wire services. You’re still going to have issues around settlement time and around processing fees, but we’ll have to wait and see what happens with that.”

It’s not about a cool, anarchist, decentralized currency

And what about the industry push to gain mass retailer and consumer adoption?

“When I look at something like Coinbase, the pitch to a merchant about why I should be using bitcoin as a payment system at the point of sale or online, it’s not about, ‘This is cool, anarchist, decentralized currency that will revolutionize society forever.’ In the community of people using bitcoin, this is quite controversial still, but it seems the currency side of the argument may be receding and the payment side is coming to the floor.”

As to merchant acceptance , Maurer advises a third-party solution that collects the bitcoin and exchanges it for fiat currency. “From the point of view of a brand, saying you accept bitcoin instantly gets you a media hit, instantly gives you a bit of a sheen of being tech-savvy, cutting-edge and maybe just a little dangerous but in a hip way. But I don’t think you want to be doing it yourself; you want to be using a third-party service.”

A lot cooler to be a miner than a transaction processor

The payments and currency expert does have a couple of concerns regarding the cryptocurrency: mining limitations and regulation.

“To me, a key thing to watch specifically with bitcoin is, as the maximum cap of bitcoin ever to be mined gets closer and closer to being reached — that 21 million bitcoin cap — and mining activity slows, there is likely to be a transition from the people who consider themselves miners and are rewarded for that activity. It’s a lot cooler to be a miner than it is to be a transaction processor. Over time we’ll see some folks in the system drop away, and other folks adopting a more standard payments-industry model.”

If we’re going to do this, we have to enter the world

And the bitcoin industry will have to face the realities of regulation sooner or later.

“I think it’s going to encourage more people who have experience with the payments industry. The FinCEN ruling … [it] may have thrown some cold water on some of the exuberance, but then it also made people realize, ‘If we’re going to do this, we have to enter the world.’ And then some people started to say, ‘If we think of ourselves not as an alternative to the U.S. dollar but as an alternative to the Visa network, there’s probably some money to be made.’ That’s one of the things that’s been happening recently.”

He adds, “There’s a degree of uncertainty because of regulatory uncertainty, but I don’t think at the end it’s going to be a thing that squashes it all. There is probably enough momentum behind some of these new entrants modeling themselves on payments businesses that those are going to gain some traction.”

More than just transit value

Some of the aspects of the digital currency that Maurer and his team of researchers are particularly interested in are the innovations being deployed on top of the bitcoin protocol — the blockchain.

“Something like Ethereum, Ripple — which is still in payments, but there are other possibilities there — or Monegraph, which is creating provenance for digital works of art. These are playing around with other uses for blockchain databases, where you want to use the blockchain instead of a trusted third party and eliminate that third party. Stepping outside the domain of money and payment for a minute, I think we’re going to see more experiments with what else you can do with the blockchain besides transit value.”

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