The Companies Signing Up Big Merchants to Accept Bitcoin

The two most popular Bitcoin services providers, Coinbase and BitPay, are neck-and-neck in signing up merchants to accept digital currency.

"Some [of the momentum] has to do with merchants realizing that there are large untapped populations that are showing an interest in Bitcoin and taking these consumers seriously," says Gil Luria, an analyst with Los Angeles-based Wedbush Securities. "These are young enthusiastic tech-savvy consumers…that want to feel included and merchants can do that at a relatively low cost with a lot of benefits."

Coinbase is building more of an all-encompassing closed ecosystem, providing both merchant and consumer services and products, says Luria.

Coinbase launched its merchant tools in late 2012 and since then has accumulated more than 32,000 merchants, says Adam White, director of business development and sales at Coinbase.

Dish Network Corp. recently announced plans to accept Bitcoin through Coinbase. Dish is the biggest merchant so far to accept the decentralized digital currency.

Overstock.com, which began accepting Bitcoin in January through Coinbase, was the biggest merchant before Dish. The online retailer's CEO, Patrick Byrne, is outspoken about his views of Wall Street corruption and the zombie apocalypse, for which he sees Bitcoin as the solution.

While Byrne's decision to start accepting was more ideological, says Luria, Dish is focused on the business benefits.

Coinbase enables Bitcoin acceptance for the Chicago Sun-Times, Square Market and the payment technology provider Balanced. The setup with Balanced enables recurring debits, a new feature for Bitcoin, which uses a protocol designed for push transactions.

This recurring debit feature is likely one of the reasons Dish, with a subscription-based billing model, went with Coinbase, says Tyler Roye, co-founder and CEO of eGifter, a mobile gift card provider that accepts the digital currencies Bitcoin, Litecoin and Dogecoin.

EGifter began accepting Litecoin and Dogecoin two months ago. The first month, the company saw hundreds of transactions with the alternative cryptocurrencies, Roye says. The second month "we've broken over a thousand," he says.

Roye wouldn't disclose the company's Bitcoin sales volume, but says growth has been steady month over month, even when there's been a downturn in the currency's value.

Coinbase's consumer growth has been substantial as well. Its Bitcoin wallet has 1.3 million users (compared to just 115,000 a year ago) and is averaging about 20% month over month growth, says White.

"We'd like to consider ourselves the on-ramp into the Bitcoin ecosystem and see our platform as the easiest way for developers, consumers and merchants to use bitcoin," White says.

Recently, Coinbase launched Payment Pages, a service that allows consumers to pick a nickname instead of use the 15-digit alphanumeric public key typically used for directing bitcoin payments. The company also allows merchants to keep a percentage of their orders in bitcoin, instead of immediately converting the whole payment to a local currency.

BitPay has also seen steady growth, with "merchant adoption accelerating exponentially," says Stephanie Wargo, vice president of marketing at BitPay. In September 2012, BitPay had 1,000 merchants, and a year later 10,000 merchants had begun using its tools, she says.

More than 30,000 merchants use BitPay's platform today. "Our goal is to hit 100,000 by the end of this year," says Wargo.

And the merchant momentum has also brought about a significant growth in revenue for the Atlanta, Ga.-based company. "Last year BitPay processed $110 million in bitcoin transactions," Wargo says. "Today we are consistently processing an average of $1 million per day."  

BitPay differentiates itself through specialization. "We do not offer wallet services and we don't accept other cryptocurrencies," says Wargo.

This year, the company launched Bitcore, which allows developers to more easily build on top of the Bitcoin network, and Payment Protocol Support, which enables users to click on a link or scan a QR code to pay instead of copy and pasting a wallet address and amount.

"Right now we offer the most powerful API, seven ready-made libraries, plugins for 22 ecommerce solutions and instant integration with…ecommerce web services including Shopify, Word Press and 3dcart," says Wargo.

After securing $30 million in venture capital investment led by Index Ventures, BitPay plans to improve its user experience and automation, says Wargo.

While merchant adoption of Bitcoin increases, broader adoption of the digital currency is till one to three years away, according to a Wedbush Securities report by Luria and Aaron Turner, senior analyst for equity research at the firm.

As far as which merchants are next to adopt Bitcoin, online brands will obviously be more interested than brick and mortar retailers, Roye says. Also with Square and Stripe both integrating Bitcoin as a payment method, the momentum will come from the micromerchants as well.

The momentum in Bitcoin adoption may also drive interest from mainstream payment companies with deep pockets.

"It's possible [Coinbase or BitPay will] get acquired by traditional merchant acquirers who want to integrate Bitcoin acceptance," Luria says. "This is especially true of BitPay. Coinbase's ambitions are bigger."