Through a partnership with U.K. payment network Payzone, San Francisco-based bitcoin payment processor ZipZap will enable bitcoin purchasing at 20,000 retail locations throughout the U.K. The partnership is part of an international effort to "democratize" access to digital currency.
"Our goal is to help customers be able to buy digital currencies easily and securely in their own neighborhood, and to just make it convenient for them and local," says Alan Safahi, ZipZap CEO.
Payzone is a cash processing network in the U.K. that has cash processing terminals, similar to credit card terminals in convenience stores and grocery stores throughout the country. Consumers use the terminals to pay cash for utility bills and other bills or even to pay cash for online purchases. The ZipZap partnership is Payzone's first foray into digital currency, but through it, consumers will be able to buy and receive bitcoins at locations likely to be within a few kilometers of where they work or live.
For ZipZap, the relationship is one of the steps in trying move bitcoin from a currency used mainly for investment toward fulfilling its intended use in purchasing transactions.
"The customers who are buying it right now are mostly buying for investment purposes, hoping its value will go up and trading bitcoin. It's mainly speculative," Safahi said.
ZipZap serves as the back-end payment processor for many bitcoin exchanges. The company has been working to form partnerships in countries around the world where conditions are favorable for bitcoin usage.
In the case of the Payzone partnership, a consumer in the U.K. would have to register with ZipZap, which would validate the user's identity. When registered customer buys bitcoin at a Payzone terminal, ZipZap will automatically authenticate the user, transact with the exchange offering the best rates at that time and process the payment, which will then be delivered directly to the customer.
"I think for a currency to be valuable it has to be cash-in, cash out, with options for easily putting money in and taking money out. We are doing both of those things right now," Safahi said.
Ironically, although based in San Francisco, ZipZap has not established as significant a merchant network in the U.S. as it has in other countries. While negotiations with potential networks in its home country are in the works, Safahi says further regulatory clarity would help make U.S. merchants more comfortable with digital currency. In the meantime, he practices what he calls "regulatory arbitrage," establishing networks in countries that are most hospitable to bitcoin.
"The next thing that has to happen are really good use-cases for digital currencies to get people involved, and that's what we will be focusing on for the rest of the year," he says.
Initially he sees digital currencies potentially providing cost advantages for the remittance services like those provided by Western Union and Moneygram and similar financial networks. Depending on the provider, some users pay interest rates as high as 25 percent for these types of services, Safahi says. In addition, there is potential to facilitate currency conversion for international travelers, which can also be costly and fraught with fees, he said.
"For too long customers have had to bend to requirements of financial institutions," Safahi says. "We are coming from a different approach. We are coming in with solutions that people want and figuring out how we can do it."
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