Computerworld

Australian startups eye Bitcoin opportunities

“Electronic payments should facilitate commerce, not stifle it with margin-eroding fees,” says Tomcar CEO.
  • Adam Bender (Techworld Australia)
  • 06 November, 2013 09:52
Some startups see Bitcoin as a potential new revenue stream. Credit: [[xref:http://www.flickr.com/photos/105644709@N08/|Antana|Antana Flickr page]] via Flickr

Some startups see Bitcoin as a potential new revenue stream. Credit: [[xref:http://www.flickr.com/photos/105644709@N08/|Antana|Antana Flickr page]] via Flickr

Accepting Bitcoin for payment may be an effective way to drum up more business with fewer fees and greater privacy for customers, according to startup companies.

Tomcar Australia, which manufactures all-terrain vehicles in Melbourne, announced today that it will accept payments in Bitcoin. The company previously used Bitcoins to pay one of its suppliers, according to the startup’s CEO David Brim.

“We thought, if we’re using Bitcoin, why not accept it?”

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Tomcar has a small staff of less than 10 people, and sells vehicles directly through its website rather than through dealerships. “We have taken a tech startup approach to our business,” Brim told Techworld Australia.

It was only natural, then, that the company became interested in Bitcoin. Tomcar first dealt in the currency to pay a supplier overseas, and a major benefit was that the company did not have to pay large fees on the international transactions, said Brim.

Fees ranged from 6 to 12 per cent with fiat currency, but with Bitcoin it’s 1 per cent, he said. “That’s a big savings on a $300,000 to $400,000 payment [to the supplier].”

“Electronic payments should facilitate commerce, not stifle it with margin-eroding fees.”

The pseudoanonymity of Bitcoin was a major reason VPN provider VPNSecure chose to accept Bitcoin, said the company’s director Shayne McCulloch.

“It comes hand in hand with the type of business that we have. We’re providing a privacy service for our customers and Bitcoin ... provides privacy with regards to paying,” he said.

He said Bitcoin is more private than PayPal, which has “got all of your details.”

McCulloch added that Bitcoin seemed like a good match for the technically minded people that use VPN services. “They’re the type of people that would also use Bitcoin,” he said.

Jamie McIntyre, CEO of the 21st Century Education and Media group, said the company sees accepting Bitcoin as a way to generate new sales.

“It is a relatively safe currency, except for its volatility in price,” he said.

“Nevertheless, it has a huge upside and if only a percentage of sales are done via Bitcoin, businesses have very little to lose but a lot more to gain by tapping in to new customers.”

The other companies using Bitcoin also said they believed accepting the digital currency would boost business.

“Because it is such a different way to pay online, it just opens up avenues for additional customers that you would not normally get,” said McCulloch.

Right now, Bitcoin sales only represent a low percentage of payments on VPNSecure compared with other methods, he said.

“We expect Bitcoin sales to rise significantly over the coming 12 months as merchants, the Bitcoin community and [VPNSecure’s payment provider] CoinJar help establish the currency further into the mainstream markets.”

Brim said, “Smart marketers have always understood the power of payment methods.”

“If you think back to the emergence of credit cards, it was an advantage to accept them in the early days—not everyone did. Bitcoin is just like that. The fast adopters get the fast traction initially.”

Next page: A risky currency?

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A risky currency?

Bitcoin has not been without debate and controversy.

“We believe Bitcoin has huge potential as a payments protocol and have seen a few examples of Bitcoin fostering innovation in the financial services sector,” said Rui Rodrigues, investment manager of Tank Stream Ventures, a Sydney-based seed fund for early-stage startups.

“However, there is still considerable risk in these investments given the uncertainties around the regulatory environment.

“As countries legislate to protect consumers from illegal uses of the virtual currency — as they always did for traditional currencies — Bitcoin's potential could be limited.”

While acknowledging the debate, the startups who had adopted the currency said they are not concerned.

“The uninformed believe that Bitcoin is a risky form of currency, but I see it as the opposite,” said Brim.

“If you look at the recent management of fiat currency, it’s more risky. The supply is not fixed and it can be impacted significantly by government decision making.”

McIntyre agreed. “People say it relies on trust and if trust evaporates then the Bitcoin could disappear as well,” he said.

“However all currencies rely on trust, even the US Dollar and the fear of the US dollar collapsing, is driving Bitcoin's popularity,” said McIntyre.

VPNSecure’s McCulloch stressed that it’s not just hackers using digital currency, said McCulloch. “Everyday Joes are using Bitcoin.”

All three businesses said they believe Bitcoin has potential to grow into a major form of currency.

“Bitcoins have gone beyond being a fad to becoming a potential future currency,” said McIntyre.

“Just the way some people buy gold to hedge against fiat paper money, after the Cyprus banking crisis, Bitcoin has started to take off as people are losing trust in the current debt-based fractional reserve banking system and the Feds’ constant printing of paper money.”

Brim said today’s status quo for currency is not permanent.

“Currency has always been in a state of flux. There’s always a variety of currencies being used concurrently in any economy. Some of these currencies stay longer than others, some evaporate and new ones arrive.”

“While shark teeth and trading shells have long gone, precious metals still have significance relevance. I think that crypto-currency is just the new era of currency.”

McCulloch said he hopes Bitcoin will grow as a currency.

“It all depends on merchants like myself giving people the option,” he said. “While we are a small fish in the sea, accepting Bitcoin as a merchant is helping that currency grow.”

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