The future of payment
Cryptocurrency is for many a new and exciting frontier in the space of both technology and finance.
Existing on the back of blockchain technology, it is being looked at as a potential currency for the future. There is a pretty big issue, though: barely anyone accepts cryptocurrency as payment today. An issue compounded by the fact that most people have a less-than-stellar understanding of what cryptocurrency is, or how it works.
What is cryptocurrency?
Cryptocurrency is a decentralised, digital-only currency unveiled in 2009 by Satoshi Nakamoto, the creator of Bitcoin. The concept was born with the beginning of the blockchain, and in order to truly understand one, you must understand both. The blockchain is a way of storing information across multiple computers, rather than one server. This means that if one computer goes down, the chain
remains unbroken and the information isn’t erased.
Whenever a piece of information on the chain is changed, all blocks are updated, ensuring only the most up-to-date version of the chain is housed online and every user has the same information.
Cryptocurrencies use blockchain technology, but the blocks are assigned value. In the case of Bitcoin, that approximate value has previously reached as high as US$25,000. If a user owns a unit of cryptocurrency, their ownership of that unit is publicly housed on the blockchain, ensuring everyone on the chain knows who owns what at all times.
This sounds dangerous, an easy way for financial information to be found and currency to be stolen, but there are securities in place.
Each user has a private key, a 51-character-long alphanumeric string, which they can use to access their cryptocurrency, and transactions, both in and out, can only take place with the use of that key.
That sounds technical, but the important thing is that the value of cryptocurrency both held and transacted by Australians is nearing $4 billion a year. Despite this, holders of cryptocurrency are not being served in the Australian market. There are early adopters, but most major retailers are so far skittish.
Deloitte partner and payments advisory practice lead Richard Miller believes there are two pain points for retailers when it comes to accepting cryptocurrency.
The first is how to accept cryptocurrencies in a secure way. The second is how to actually use the funds they receive and ensure the value doesn’t change dramatically before they do.
“There are challenges both from a record-keeping standpoint, as well as from the perspective of processing these funds. And then the key point is that the value of cryptocurrency can fluctuate quite quickly.” he says. Who accepts cryptocurrency?
The payment space is a two-sided market. Miller refers to it as a “team sport”. One team is the consumer, who holds a form of currency they wish to spend. The other team, the retailer, provides a way for the consumer to spend said currency.
“If you have a payment, but nobody accepts it that’s where cryptocurrency is now. You might hold a Bitcoin, or any of the alternatives out there, but unless a merchant accepts it, it’s not going to be useful for payment,” Miller says.
“The end problem is that it’s very difficult for a consumer to present their cryptocurrency at the merchant without the merchant having, somehow, potentially established their own connection to the [cryptocurrency] network and then put in place a terminal
at some point at the retail point-of-sale to accept a digital wallet.”
These point-of-sale terminals are not difficult to obtain. It can be as easy as attaching a QR code to the side of a register for customers to scan in their payment app of choice.
WeChat, a messaging and payment system popular in China, uses this QR-based payment method, and Commonwealth Bank has a
service called Camera Pay that functions similarly.
However, an issue arises in that each cryptocurrency has its own value and blockchain, and for each cryptocurrency to be accepted, the
retailer would have to become a part of that ecosystem. With over 1500 different cryptocurrencies on the market, the choice becomes staggering. The alternative is for a middleman to emerge to handle the transactions from both sides, issuing a digital wallet for
customers to use, and facilitating retailers in accepting payments from the digital wallet.
William Wong, Liven CEO and co-founder, hopes to fill this space. Liven is a digital wallet and rewards program, allowing customers to use the app to purchase their food and beverages at partnered restaurants and earn rewards by doing so.
Wong says that Liven will soon be taking the plunge into offering these rewards as its own cryptocurrency LivenCoin.
“It’s a natural progression for our company to enhance what we are doing,” says Wong. “What we’ve found is there are a lot of security
issues when you’re creating your own digital currency [referring to the company’s previous reward scheme, Liven Cash].
“It became clear to us, as we were [looking] into fixing these problems, the solution is already there in terms of cryptocurrency, which is much more secure and it can be used as a reward as well as the form of payment.
“When you go into a restaurant for example, the bill comes to $27. [You could] pay $20 from your credit card and $7 worth of [LivenCoin].”
Though the Liven team started their venture focused on the hospitality industry, they have aspirations to enter new markets, allowing a greater number of customers to use their app and new merchants to receive crypto-payments.
“We had always planned to expand to other verticals beyond hospitality, because we’ve got the infrastructure, we’ve got the system, all we need to do is enter a different space,” says Wong.
“Using a single currency makes it a lot easier for us to enter that different space.”