Feb 11 2014, 10:30am CST | by Forbes
Even as its price slid to its lowest levels in two years yesterday, Bitcoins, the digital currency which has soaked up several headlines in recent times, took another step towards mainstream use today.
Revel Systems, a San Francisco-based maker of iPad-based POS systems, today announced integration of Bitcoins into its systems. Five Markets, a grocery store located on 24th Street in San Francisco, became the first establishment in the country to accept Bitcoins using the company’s POS systems. This means that Evelyn Fong, co-owner of the store, can charge customers in Bitcoins using Revel’s cash registers and an app made by Coinbase, an online Bitcoin wallet.
Chris Ciabarra, chief technical officer at Revel Systems, says the process is fairly simple. Once Fong enters the Bitcoin option on her POS system, customers simply scan a QR code displayed on the payment screen. An email confirmation of the transaction is subsequently emailed to both customer and grocery store owner. The entire transaction takes less than a minute and transfers Bitcoins from the customers’ wallet to Fongs’ online Bitcoin wallet at Coinbase.
The integration took approximately a month to develop. According to Ciabarra, approximately thirty customers and a number of online Bitcoin exchanges requested the integration. Although there are other methods to integrate Bitcoins with online wallets (such as emailing invoices), Ciabarra says QR codes are the fastest and simplest payment method using current technology. “They reduce the number of steps involved in the transaction and the processing time is much less as compared to other methods,” he says. The transaction time is especially important in Bitcoin transactions as it determines processing fee for use. Ciabarra says transactions worth less than a million dollars are free using Bitcoins. This contrasts with other payment forms, such as credit cards, where each transaction incurs a specific usage fee that is a percentage of the total transaction cost.
Bitcoins’ security features, which make fraud difficult within its ecosystem, should further encourage adoption of the currency to buy groceries, says Ciabarra. This is further complemented by the convenience of using ubiquitous smartphones to make payments. According to Fong, over ninety percent of her customers are smartphone owners. The addition of Bitcoin integration will make it even more easy for them to make payments using their smartphones, she says.
To be sure, Five Markets is a nondescript grocery store with a limited number of aisles and high customer churn. While the Bitcoin use cases for large establishments, such as Target and Walmart, to meet customer demand are clear, small businesses are charting untested territory here. This is because Bitcoin is still a relatively untested currency. Although it has zoomed to stratospheric valuations in the last two years, the digital currency’s current valuation has come at the cost of volatility.
As I mentioned at the start of this piece, the currency slid to its lowest price in two years yesterday due to detection of fraud at Tokyo-based Mt. Gox, the world’s largest Bitcoin exchange. Speculators, such as the Winklevoss twins, have jumped into the Bitcoin fray and are driving up demand for the currency by sucking out large portions of its existing market. The average volume of transactions, a key factor affecting the currency’s prices because of limited Bitcoin supply, is already rising. However, most of those transactions are limited to speculative activities such as buying and selling of the digital currency.
Revels’ foray into the space is among the few concrete examples of Bitcoin use as a real currency. Ciabarra expects the transaction volume to increase further due to today’s announcement. He says the “cool factor” of using brand new technology to buy groceries will further drive customer use of the digital currency.
That “cool factor,” however, comes with riders. For example, simplicity of the transaction’s workflow conceals its complexities. Because Bitcoins are not backed by a central authority, online retail establishments that accept Bitcoins convert them into dollars to maximize profits and reduce risk. In the case of Five Markets, the Revel POS system is configured to immediately convert accepted Bitcoins into dollars using Coinbase. But, grocery store owners can speculate using the currency by setting specific time periods to convert the currency into dollars. In this case, the system works in a manner similar to a day trading system with inbuilt circuit breakers. “It all depends on the grocery store owners’ appetite for risk and reward,” says Ciabarra.
Source: Forbes Apple
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