Coinbase Answers Circle With MasterCard Replacement Aspirations

Posted in: Archive
May 19, 2014 11:00 AM UTC

Coinbase aims to supplant payment processors like MasterCard and Visa, CEO Brian Armstrong told the Wall Street Journal.
As Armstrong hints at in the interview, altering current payment processing methods would be a huge boon to bank consumers around the world. Armstrong claims that credit card processing fees amount to $500 billion. Bitcoin will slim that number down to $50 billion. I wasn’t able to verify that number with Google, but the point is that many experts estimate that Bitcoin could cut transaction costs and other fees to about 10% of whatever it currently is. MasterCard and Visa cannot compete with the cheap, instant transactions that Bitcoin offer.

[dropcap size=small]B[/dropcap]ut let’s see. When did Coinbase mention these lofty goals? Immediately after Circle kick started its beta “consumer finance company.” While replacing the likes of MasterCard certainly is not a short-term response to Circle, it seems like a calm response to all the Circle hype. Coinbase is one of the largest Bitcoin services out there. It offers a wallet service and a variety of tools for Bitcoin merchants.  And it still has cool future plans.
Circle aims to bring Bitcoin banking to a wider audience, facilitating its transition from early adopter to early majority. Right now, Circle services are free. And, right now, the company is actually giving a drop of Bitcoin away with fresh sign-ups.
Circle offers a wallet from which users can make withdrawals and deposits. Users can also connect your bank account, debit card or credit card after ID verification. Transactions are instant, secure–even insured. Bitcoin’s multi-signature capabilities are built in. It’s easy to use for users with no understanding of the whole cryptography dealio. In fact, Circle seems eager to downplay Bitcoin. Users have little indication they are using the digital currency.
So Circle is posturing as the global Bitcoin bank. Five minutes later Coinbase says, “Well, we’re going to be better than MasterCard.” It is great stuff for curious consumers. They offer easy, user-friendly services. They have grand ambitions of thrusting Bitcoin into the mainstream.
Since Circle came out of the shadows last week, the two services have been duking it out. Coinbase offered $10 to students (for a limited time at select schools) who sign up for a wallet with their university (.edu) address, possibly in hopes of attracting young, open-minded college students to the world of Bitcoin. Well, especially to their services. Circle unveiled a plan to offer $10 to all members who sign up for their beta services (which is, so far, invitation-only).
Both ventures have attracted some venture capital in the past. Coinbase garnered $25 million from Andreessen Horowitz at the end of the year. Circle raised a similar amount–$26 million–in two rounds of funding.
In the wake of Mt. Gox and other uninviting screw ups, major Bitcoin players are developing legitimacy. These blossoming startups are addressing several cringe-worthy elements of the super nascent Bitcoin sphere—more secure processing, user-friendly services.
But its worth mentioning, payment processors like MasterCard is not going to lay down without a fight. Coinbase and Circle are trying to outdo each other, but MasterCard has hired five lobbyists to home in on Bitcoin. Some suspect this move is part of an attempt to legislatively squeeze Bitcoin and its disruptive impact on financial services.  But perhaps this is MasterCard’s way of adapting to the new digital payment system. In other words, maybe MasterCard will become the new MasterCard before Coinbase does.
Featured image by Shutterstock.

Last modified: June 14, 2020 9:29 AM UTC

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Alyssa Hertig @AlyssaHertig

Alyssa earn a B.A. in history from the University of Minnesota. She's written for Motherboard, Reason, and PolicyMic. Get in touch on Twitter: @AlyssaHertig