Digital Currency: Coming to a Store Near You
Bitcoin, Ripple, Litecoin, Quark are the names of just a few crypto-currencies.
And if you're not thinking about them and how digital payments might affect your business in the not too distant future, maybe it's time to start.
The Royal Canadian Mint this week displayed its crypto-currency called Mint Chip at the annual National Retail Federation's Expo in New York. The Mint plans a limited test of the currency later this month.
Developed by the mint in 2012, Mint Chip is about as different philosophically from Bitcoin and other digital currencies as you can get. Backed by a government and tied to the national currency, it's also gaining acceptance from some pretty big mainstream companies, which RCM hopes can distribute it. The mint has also played host to smaller companies who've developed consumer-facing applications for Mint Chip.
"We're doing outreach with merchants and financial institutions in Canada now," says Marc Brule, principle director of emerging payment systems for the Royal Canadian Mint. "Mint Chip is more effective than what's there now."
Typically the most common form of electronic transaction happens via credit cards. This process includes multiple parties such as an issuing bank, a merchant bank, a payment processing entity, as well as the consumer and merchant involved in the sale.
Mint Chip, which eliminates those middlemen, is meant as a digital cash equivalent, where value can be transferred directly from person to person without needing to identify either party. Unlike cash, however, it can be used online, and to transfer value from person to person via mobile devices, or to pay at stores with bricks and mortar locations. RCM hopes Mint Chip will replace many of the mint's physical coins, which cost money to handle and move, Brule says.
RCM will first test Mint Chip using its 200 employees as guinea pigs, and the closed environment of its cafeteria as the playpen later in January. The pilot will let them purchase food, replenish their accounts, and pay each other in Mint Chips simply by tapping phones together, or by tapping a payment terminal in the checkout line.
Ingenico, one of the largest point-of-sale terminal manufacturers in the world, wants in on the game too. The Paris-based company has designed the software on the new terminals, which will accept Mint Chip payments.
"This is Ingenico's first foray into digital currency and we are the only point of sale technology looking at it at this time," says Suzan Denoncourt, vice president of market development for Ingenico.
Ingenico also seems to grasp what other digital currency aficionados also understand--cash still makes up the bulk of all financial transactions, and there's a gold rush on for companies that can successfully and securely replace it in a world that's increasingly mobile and electronic.
Small businesses will no doubt be intrigued by both Mint Chip and Bitcoin, as well as other digital currencies.
Because it's backed by and tied to the Canadian dollar, Mint Chip has none of the "going rogue" excitement of Bitcoin, which functions more like a commodity and whose value is determined by what people are willing to pay for it. Currently one Bitcoin is worth about $800, but its value spiked to a dizzying $1,200 this summer.
Mint Chip has about eight patents associated with it, and the payment architecture can be used by other governments that want to replicate the system, Brule says. But merchants are already using Bitcoin, which requires no special terminals, just an application and a Web browser.
"The processing time is about 30 seconds and there's no sales tax," says Dan Lee, the general manager of Green Avenue Market, one of five family-run businesses in Brooklyn, N.Y., which have accepted Bitcoin for close to a year. "People want to use it."