4 Comments

Summary:

Bitcoin suffers two big problems when it comes to consumer adoption: retailers are unfamiliar with it, and shoppers have no incentive to spend it. A rewards program by gift card site Gyft shows how this could change.

Bitcoin
photo: Guardian/Guy Grandjean, James Ball

Bitcoin is getting more buzz than ever thanks to an apparent thumbs-up in Washington this week, which triggered a new bout of speculative mania that saw the virtual currency brush $900. Now, if only someone could find a use for the stuff.

Recall that a big problem for Bitcoin is that it’s great in theory but, in practice, it’s not good for much besides speculating. A handful of places in New York and San Francisco accept it, but most retailers haven’t even heard of Bitcoin and, besides, it’s still much easier to pay by swiping a card.

One way this could change is by incentive programs like the one offered by online gift card service Gyft. The site, which offers users an online way to combine retail gift cards from places like the Gap and Target, is offering a 3% discount whenever someone uses its service to make a purchase with Bitcoin.

The Gyft program is significant because it gives consumers a reason to use Bitcoin instead of a credit card. While merchants have an obvious incentive to avoid credit cards — since they can save the 3 percent charged by Visa or MasterCard and avoid chargebacks — the reverse has been true for consumers, since most cards offer 1 percent cash back or other rewards.

In a phone interview, CEO Vinny Lingham said Gyft users are spending over six figures worth of Bitcoin every week on everything from big retailers to Whoppers at Burger King. He added that from the retailers’ perspective, a store doesn’t even have to know that a user is paying with Bitcoin; the cashier simply sees a bar code on the shopper’s cell phone, and the appropriate amount is deducted from the consumers’ gift card.

In the bigger picture, Gyft’s Bitcoin transactions are just a tiny drip in an ocean of retail transactions, but they do represent a consumer incentive and a friction-free retail experience — two things that have so been far missing from the Bitcoin shopping experience.

Meanwhile, San Francisco-based Coinbase has removed another barrier for newcomers. In the past, those who signed up for Coinbase’s currency exchange service had to wait several days for a bank transfer to fund their Bitcoin wallet; now, the company will front newbies one Bitcoin if they provide a credit card number.

Overall, I still think that volatile Bitcoin (now back down to $600) is not yet cut out as a consumer payment platform, and that its best use will be as a remittance mechanism. But the rapid innovation adoption (10,000 merchants are now accepting it through Bitpay) means it could be embraced by consumers sooner than later.

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  1. Ahmed Sharieff Friday, November 22, 2013

    If I had no incentive to spend it, why do I spend it all the time? For instance, I bought a CD on Amazon the other day with bitcoin using Snapcard. I then simply bought the bitcoins back using Coinbase a few minutes later. There goes your disincentive – it’s poppycock sir. Poppycock and BALDERDASH!

  2. With the nonexistent and inscrutable info on using the software, no. The average consumer cannot begin to comprehend even the basic setup, let alone how and where to use the currency if they get that far.

    Someone will have to write new software that has an interface that’s well-designed as well as a comprehensive and thoughtful getting-started overview.

    Perhaps one of the 3rd party apps is already fantastic at this, but bear in mind that the official page warns users to be careful of 3rd party apps, thus steering them toward the official apps and we’re back where we started with the nonexistent and inscrutable documentation and user interface. But all this has happened before, and will happen again.

    1. coinbase online wallet on android looks like it was designed by Ivy himself.
      Sadly Apple kicked the Coinbase app from the App store for the fear that Bitcoin is a threat to their mobile payment plans.

      1. Jeff John Roberts MrD Sunday, November 24, 2013

        MrD, thanks for the comment.. I’ve been wondering what the story is with the iOS app. I asked the company about this last week, and they suggested it was some sort of glitch or misunderstanding

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