Crypto-currencies and the future of payments - Part I
Recently I have been trying to understand the ideas behind Bitcoin and other crypto-currencies and to think about what they might mean in the long-term for more traditional payments companies.
The Bitcoin protocol has some pretty neat ideas behind it and is generating a lot of interest and excitement. Something that makes it particularly cool is that, more than being purely transactional, it is a politically-independent alternative currency with no central controlling body.
However, payments is about so much more than just the transfer of money (or other forms of value) between people, so there is a lot more work that needs to be done before Bitcoin (or another crypto-currency) could seriously start to challenge existing mechanisms like payment cards.
Here is a draft version of a white paper I have been working on, analysing the payments value chain and how it might possibly be disrupted by a crypto-currency:Cryptocurrencies, Block chains & the Future of Payments?
I think a fair summary of my current thinking is that there is too much additional value provided by banks and card issuers, especially to consumers, that is not currently offered by Bitcoin.
In particular, until things like lending, consumer protection through mechanisms like chargebacks, and maybe even rewards are integrated into crypto-payment solutions, I really can't see them disrupting payments for normal, every-day transactions.
There are, potentially, some pretty interesting hybrid solutions which incorporate the best of both worlds, and I discuss some of these alternatives in the paper.
Of course it's more than likely that I'm wrong. My intention is to discuss some of my ideas as well as other, alternative viewpoints, in future posts.