Crypto-currencies have the potential to transform fundamental aspects of industry and society and make a considerable difference to the activities of government bodies and policymaking. What do you need to know now sitting at the crossroads of technology, economics, social sciences and business where cryptography has managed to disrupt our established practices and notions of trust, identity and value?
ITWeb: Can you tell us a little bit about Bitcoin for those who aren't aware of it?
Croft: Bitcoin is the first successful implementation of a distributed crypto-currency. Bitcoins are sent easily through the Internet/mobile Web, without needing to trust any third party. There are a variety of ways to acquire bitcoins, most commonly to purchase BTC through an online exchange or to mine it via specialised hardware equipment.
ITWeb: How will Bitcoin and crypto-currencies disrupt the payments ecosystem and who will win and lose?
Croft: Bitcoin and crypto-currencies are part of a technology "megatrend" that could change the fundamental mechanics of transactions, according to a new report from Goldman Sachs' equity research analysts. Bitcoin, along with improved payment security, big data analytics and faster payment networks are the components of a technology trend that will disrupt the payments ecosystem.
The disruption of the $1.2 trillion global payments industry will also be driven by converging trends in regulation, global demographics and the rise of markets outside the United States. Innovations in network technology and cryptography could change the speed and mechanics of moving money. Bitcoin's major impact will be enabling the transfer of assets without a central clearing authority.
The large public companies that will benefit will be merchants, who will reap savings on payment costs. Firms who might lose out are traditional money-transfer firms like Western Union, MoneyGram and Xoom.
ITWeb: Who are the leading firms in the Bitcoin space currently?
Croft: The leading firms would be Coinbase, BitPay and Ripple Labs. Bitcoin's impact will be felt in the field of consumer-to-consumer payments. This market includes all payments made between consumers, with examples of leading vendors being mobile wallets like Venmo and Square Cash.
ITWeb: Who are the disruptive entrants within the crypto-currencies space?
Croft: Disruptive entrants to the consumer payments space are limited to earning revenue from international money transfers, a market that's worth $580bn. These entrants include Bitcoin exchanges and the peer-to-peer platform for foreign currency exchange TransferWise, Coinbase, itBit, Circle, Trucoin and CoinCorner.
Bitcoin could also play a significant role in global remittances for customers who want to use cash to begin the transfer process. Bitspark as an example of a firm that lets customers remit funds by depositing cash, bypassing the need for a bank account. Bitspark then performs the transfer by exchanging it into Bitcoin.
New players could take 20% of the current $30 billion consumer-to-consumer market from incumbents over the next 10 years. Newcomers will also drive fees down from a current average of 6% of the principal to 2.5%. Distributed networks are, in principle, more secure and reliable due to their open-source nature, and there is no single point of failure.
The Ripple network is highlighted as a Bitcoin alternative that could gain acceptance among small banks. The report points to Ripple's partnerships with banks like Fidor, CBW Bank and Cross River Bank as evidence that the network allows these institutions to perform international money transfers without depending on large banking partners.
ITWeb: How long do you think it will take for the markets to adopt this?
Croft: Merchant adoption of Bitcoin is set to rise in coming years. It is estimated that 23% of merchants plan to accept bitcoin within the next 24 months. It is estimated that more than 100 000 merchants currently take Bitcoin payments globally and this number continues to grow each quarter. Overstock, Amazon, CVS, Subway, Victoria Secret, Virgin Galactic, Paypal (for their merchants, not eBay), Tesla, Tiger Direct, Expedia, Bing, Sears, Apple, Dish Network, Alibaba and many more already accept Bitcoin with more companies adding or looking to add Bitcoin as a payment method for their products and services. The opportunity for Bitcoin-linked companies is tiny compared to the potential gains available in other sectors identified in the report. While $6 billion could accrue to firms like Bitcoin exchanges operating in the consumer-to-consumer payments space, some $17 billion is up for grabs in the business-to-business payments sector. In the field of payments between businesses and consumers, $84 billion could be taken by newcomers.
Share