San Francisco-based Bitcoin payment processor Bitnet has announced a strategic partnership with major payment processor Cardinal Commerce, a firm which presently handles payment processing for a number of major firms including one of the world’s largest PC manufacturers, Lenovo. So as not to confuse the reader, this does not automatically mean that such companies will begin accepting Bitcoin, but it does mean that they will have the option without any headache.
CCN was able to get Bitnet CEO John McDonnell on the phone for about an hour on Friday for an exclusive interview, and he had some very interesting things to say. He has worked in the industry a long time, and digital payments are nothing new. He began his career as a securities attorney in the early 1990s and moved on to working within the payments industry. His last company, CyberSource, was acquired by Visa in 2010 for roughly $2 billion.
“Cardinal is looked to by a lot of retailers for their expertise in integrating alternative payments. They’ve done a lot of work with PayPal, for instance and some other, you know, mobile payments. So I think that they’re kind of uniquely positioned as a strategic partner for a processor like Bitnet because merchants are looking to them, again, for their expertise in integrating these new, non-card payment types,” he says.
Aside from Bitcoin, non-card payment types can include e-check processing, bank drafts, Paypal, and other forms of payment for those that don’t necessarily want to use their credit card in a transaction. Internationally there are many competitors to Paypal, such as Skrill. McDonnell also spent a year working at Paymo, the provider of a suite of tools for freelancers in time billing and invoicing. This did not come up in the interview, but it speaks to his level of experience in the field of online payments outside of CyberSource.
I think that the reason that Bitnet may be more likely to perform a lot of these platform integrations, versus one of the other service providers, could be due in large part to the way we’ve designed our platform. This is something that’s based on our experience at Visa and CyberSource, the Visa subsidiary where most of us came from. We understood the value of the strategy to engage the channel partners.
One of the other reasons McDonnell believes that his company’s platform is ideal for merchants is that reporting is streamlined.
In order to on-board merchants, so-called KYC/AML, there are certain functions that we have designed and hardwired into our platform that can be accessed by a discrete API so that, without any sort of onerous burden on behalf of the merchant, we can comply with the regulatory environment in the relevant jurisdiction […] and that capability, that function, is something that we knew early on would be subject to different applications, and different requirements depending on the country where the merchant is domiciled. […] The issue is that the laws are local, the laws change from country to country. So we’ve designed the platform to be flexible enough so we can capture the information that we need, both to satisfy the regulators and just as importantly, the local banking systems.
Cardinal Commerce’s focus has been on e-commerce, but they also work with brick and mortar stores. Recent commercial innovations like the Starbucks payment application and Apply Pay have made consumers more comfortable with the idea of using their phones to make payments, McDonnell believes. Whether you see these things as competitors to Bitcoin or not, the idea is that breaking down this barrier of adoption is good for all parties.
There are already some examples of app-based payment systems working very well. Starbucks is a pretty widely used app. […] Consumers are getting pretty used to using their smart phone to pay for stuff. I think it’s kind of a natural progression. […] I know a lot of people in the Bitcoin industry have different views of Apple Pay, but frankly, my initial reaction was that any payment type that gets the consumer comfortable with taking their cell phone out of their pocket and interacting with a payment terminal can only be a good thing for Bitcoin.
CCN asked McDonnell about the EU’s recent decision to cap credit card fees. He said that fees are not the only incentive for merchants to use Bitcoin, because a lot of other risks would be left out of that assessment. For instance, charge-backs and fraudulent purchases will not be affected by the lowering of card fees, even if they were down to zero percent. Also, consumer privacy is still a big issue. The fact is that consumers have to fork over a great deal of information every time they use their credit card.
There are other considerations for accepting Bitcoin. From a consumer perspective, there’s the privacy consideration, that you’re not over-sharing details like your billing address and a whole lot of other information that can be used and repackaged and resold and whatever. From an online perspective, there’s still the advantage, and this is a big one to merchants, that, whatever the interchange is with cards, the operating rules of the card networks still place the burden of loss on the merchants. So that if that card is stolen, the merchants eat the fraud. And that’s something that we’ve found is as important when comparing accepting Bitcoin to accepting cards.
Images from Shutterstock and Bitnet.
Last modified (UTC): March 28, 2015 17:56