Bitcoin merchant services help the Bitcoin community a lot. The payment processors transfer USD to BTC, or BTC to USD, and some earn a commission, but the important part is that they are creating the infrastructure needed to grow the Bitcoin ecosystem.
How do they do this? Well, many retailers and stores have started accepting bitcoins for payment, but many are not prepared to take the risk of volatility that Bitcoin itself brings. Instead, they use payment processors to have their Bitcoin-based purchases converted into USD, or another fiat currency. While this puts downward pressure on Bitcoin’s price, because the BTC accepted must be sold, it also gives legitimacy to Bitcoin as a whole, and exposes more people to the currency.
BitPay and Coinbase Are Taking Bitcoin Mainstream
The leaders in the Bitcoin merchant services sector are, undoubtedly, BitPay:
Both of the companies have secured massive investments, with Coinbase landing a total of $106 million thus far, and BitPay securing $32 million through it’s investment rounds. Recently, BitPay partnered with Ayden , a global payment processing services with high profile clients such as Facebook, Spotify, Uber etc., and Coinbase has launched an exchange to run alongside their payment processing services. Whats more is that Ayden has processed $25 billion worth of transactions last year and the company is worth a massive $1.5 billion which shows that it is reputed and commendable.
Both BitPay and Coinbase have managed to build this a huge client base via charging 0% fees to merchants. Coinbase limits this to the first $1 million in purchases, then charges a 1% fee after that, and BitPay offers 0% fees “forever” while offering paid, premium services beyond standard payment processing.
New Bitcoin Payment Processors and Related Companies
While Coinbase and BitPay have lead the way, many other companies are being created, or are starting to come together after years of development, to compete with the two in some ways.
ChainPay: Europe-Focused Bitcoin Payment Processor
A new payment processor, ChainPay, has been launched by a firm named AltXE, but with the goal of targeting Europen customers. What makes them different from the rest of the payment processors, according to the co-founder James Carter is that whenever a merchant signs up with them, they will constantly be engaged with the merchant and try to help them. Rather than relying on outside investors, ChainPay is completely bootstrapped and funded by Carter.
Coinkite: A “Bitcoin Platform with Multi-Signature, Bank-Grade Security, Hardcore Privacy, and an Advanced Developer API”
Coinkite was compared to BitPay in a previous article: “What is the Best Bitcoin Payment Processor?” While the company certainly does not have the funding of BitPay, nor is it an established name, it has created an impressive platform. It’s API is robust, it provides a point-of-sale terminal, provides support for Litecoin, and seems to be focused on ease-of-use. Coinkite could become a serious competitor if they keep moving forward at their current pace.
Snapcard: “The easiest way to accept digital currencies.”
Snapcard claims to be the easiest way to accept digital currencies, and supports more than just Bitcoin and Litecoin, as they also include Dogecoin and Ripple on their list. Like Coinkite, Snapcard seems to be going the ease-of-use route, and provides an easily accessible API, a built in refunding feature, and claims to support over 20 local currencies.
CoinX and Trucoin: Licensed, Regulated, and Focused Bitcoin Services
CoinX and Trucoin are different companies, with different focuses, who seem to be partnering together to tackle specific aspects of Bitcoin payment processing, purchasing, etc. CoinX has obtained money transmitter licenses (MTLs) in more states than any other Bitcoin-related company, and provides a payment processing system similar to the ones mentioned above, as well as a Bitcoin exchange. However, the company has not advertised themselves in a significant way, and seems to be working toward full licensing, as well as partnering with other companies to provide additional services.
Trucoin is one of these companies, as it is using the MTLs that CoinX has acquired to allow individuals to purchase bitcoins instantly with a credit or debit card, and setting up Bitcoin ATMs. Coinbase, and other companies, have provided this ability in the past, but with tight limits on the amount of BTC that can be purchased per week. Trucoin has opted to focus on perfecting their system, in a way that reduces the risk of chargebacks and fraud, so that users can purchase up to $1000 in BTC each day, and receive the coins instantly.
BitPay, CoinX, and Trucoin?
Considering the fact that BitPay has stuck to mostly providing payment processing, premium services, and open source technologies to advance digital currency, without moving into direct Bitcoin purchases or creating an exchange, along with CoinX’s focus on creating a truly compliant Bitcoin-based money service business, and Trucoin’s development of their instant BTC purchasing system and ATMs, each of the 3 seem to be taking on different aspects of the same problem.
Adding on to that, with Trucoin’s partnership with CoinX, as well as their previous partnership with BitPay to provide ATMs at the Bitcoin Bowl, and the close geographic proximity of the 3 companies, there may be a closer relationship in the future.
All Inclusive Bitcoin Money Service Businesses or Specialized, Individual Companies? Or Neither?
With Coinbase moving in all directions, and attempting to provide: payment processing, an exchange, an online wallet, instant BTC purchases, and more, as well as the Winklevoss twins’ “Gemini” on the way, which seems like it will be an exchange first, then move into other aspects of the industry, smaller companies have their work cut out for them.
However, the smaller, specialized companies, like most of those listed above, have the advantage of being able to focus on, and perfect, their product. With partnerships and cooperation, that kind of focus could be a huge advantage.
Then again, these may all be rendered obsolete by decentralized projects. Bitsquare is creating a decentralized exchange; Openbazaar has developed a decentralized eCommerce platform; CounterParty, Ethereum, Blockstream, and other companies are developing, or have developed, decentralized systems to create complex contracts and programs; and many other initiatives are underway, but have yet to be revealed.
As most people involved with Bitcoin know, decentralized systems tend to be more efficient than a centralized system can possibly be. With the right combination of developments, the big names in digital currency today may not be necessary, or may need to completely change their direction, in the future.