What Can Bitcoin Learn from PayPal?
Retail businesses are keeping an eye on cryptocurrencies, but it will take a mass spread of crypto services and easy-to-use payment apps in order for crypto to be adopted and used as a mean of payment by your local grocery store, the same way he uses PayPal.
Way before Bitcoin and blockchain technology even existed as a concept, retailers had to get used to internet banking and later to PayPal and analogous payment applications that made life easier for both money spenders and merchants.
I remember mid-2000, when banks in Greece wouldn’t even acknowledge the existence of PayPal, not to mention integrate it in their own financial networks. Most of the time, you couldn’t even prove you have money stored on the internet, and even if you did, your bank wouldn’t accept it.
If banks can’t accept it, then retailers can’t accept it, as the later care about being able to withdraw funds earned by selling their respective products and/or services into local fiat currencies, all in an attempt to feel ‘secure’.
So, what actually made PayPal, AliPay, WeChat and similar payment apps popular and adopted by the mainstream markets, and could Bitcoin follow the same strategy to be the new norm of micropayments today?
For starters, PayPal became popular when banks started to integrate PayPal accounts and vise versa. People could easily fill their PayPal credits directly from their bank account and the bank account could accept PayPal funds as long as a KYC-like condition was met on the user side.
Since banks were ok with PayPal, retailers had no choice than to integrate PayPal themselves as it would bring in more customers who would rather pay electronically for their desired goods and services than walking down to the physical store.
From PayPal’s perspective, that was not just an issue of banks accepting the electronic payment giant’s services, but a clean-cut and easy to use user-interface, mobile app and various APIs made electronic payments the main means of fund exchange for global netizens. Of course, an equally well-crafted marketing strategy was not absent either.
Overall, it took almost a decade before PayPal became an accredited form of wealth system subject to taxation and adopted by banks, governments, and literally every retail shop that has some sort of internet presence.
In cryptocurrency scenarios, we see major coins such as Bitcoin (BTC) and Ethereum (ETH) being used pretty much like a faster, simpler, and more secure PayPal, yet we’re at the point where banks keep a skeptic approach, while governments cannot trust cryptos the same way they came to trust PayPal.
Bitcoin can be used among crypto-enthusiasts and people who understand its basic principles, but people like my mother are still confused about it, and not really sure on how and where they’d start if they decided that Bitcoin can replace their attachment to traditional internet banking or PayPal services.
Last month I decided to download Stellar’s latest mobile wallet. The download took less than a minute, my account was ready-to-go in the next minute, and in general, the app is very clean if not simpler than PayPal. The only problem was that when everything was set, the app said to me “Now you have to send some XLM to this wallet”.
So, for me, a self-proclaimed casual crypto-user, that would be relatively easy. I just had to call my broker Panos and ask him for some ETH in exchange for precious euros. In less than a moment, I could send that ETH to my Binance exchange wallet, and use it to buy XLM on the platform. Then I only had to send that XLM to my mobile wallet. Simple right? Well, try to explain that to your mother and see if she thinks the same.
Cryptocurrencies are definitely better in terms of security, transparency, accuracy, speed, and even fees in some cases when compared to PayPal or traditional e-banking systems, but there’s still much work to be done by companies like Coinbase if we want my mother to be able to pay for her groceries with Bitcoin.
I believe that crypto adoption won’t necessarily come with banks and governments being comfortable with it, but with use-cases that would make it a functioning part of the real-time economy, regardless of Bitcoin’s price, or BTC as an investment.
If my mother had an app that utilized blockchain technology to transfer funds from her account to the vendor’s account with just a swipe, she’d probably use it, considering the vendor is also part of the network.
One shouldn’t necessarily buy BTC himself or know what’s its price at that moment, as the app should be able to communicate with the user’s bank, withdraw the necessary funds required to pay for the groceries, translate the funds into crypto, send the crypto to the vendor, from where the vendor decides whether he wants to keep the payments in crypto or automatically translate them again into euros in his bank account as soon as his paid.
Such a system would not only help crypto adoption but it is the only way distributed ledger networks will be used on a regular basis, whether people invest in them financially or time-wise, or understand how crypto works or not.
Similar to PayPal, where you don’t care about PayPal’s stock price when you use it, we shouldn’t care about Bitcoin’s price or even Bitcoin itself when performing micropayments, as long as the background scenario utilizes some sort of a distributed ledger for the benefits such an architecture offers, and not for the price of the respective token used in the transaction.