Finding a payment solution, or even a currency, that works in identical fashion regardless of where it is used, is all but impossible these days. Nearly every country has its local fiat currency, and exchange bureaus make fortunes converting one currency to another. Bitcoin, on the other hand, is a global currency, even though most people wouldn’t call it a currency based on the standard definition.
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Traditional Financial System is a Bottleneck
Regardless of whether you are a consumer or a merchant, there is no denying that the current traditional financial ecosystem is a major bottleneck for e-commerce operations. The system that takes care of payment processing, clearing of funds, and settlements of account balances works at an obnoxiously slow pace.
In the past 50 years or so, there has been little to no innovation worth mentioning in the financial sector. Things have gotten progressively worse in the past two decades, though, ever since credit cards became a commonly used payment method for online shopping. As a merchant, waiting 30 days or more for funds to appear in a bank account.
Despite quite a fair amount of new technologies looking to facilitate payments on a global scale, most consumers are still stuck with an ecosystem that refuses to innovate. Both converting to other local currency, and the usage of credit cards in a foreign country, are quite the hassle. Not only are there large fees associated with either process, but the exchanges rates themselves are never in favor of the customer.
From an e-commerce point of view, the current financial services model is even more flawed. Every country has its own set of rules and regulations, affecting both in-store and online purchases. In the United States, for example, it is next to impossible to buy an item online without a credit card or bank account issued in the US.
Even “unified currency efforts,” such as the Euro in a large part of Europe, have proven to be a band-aid to a gunshot wound. Keeping national economies is a constant struggle for government officials, and the overarching European Commission can’t do anything but see how the world around them slowly but surely burns down.
Enter Virtual Currencies à la Bitcoin
Unlike traditional currencies, virtual currencies are not limited by countries borders, languages, beliefs, or central authorities. In fact, virtual currency is a prime example of how our financial system should have worked, but it is not too late to change it just yet. While Bitcoin and other digital currencies are criticized for not being backed by tangible goods, neither is fiat currency. To be more precise, any fiat currency bill is backed by a promise by the bank to pay out the value represented by that bill to the recipient.
One Bitcoin in Africa will be one Bitcoin in Europe, and one Bitcoin in Asia or the United States. There are no currency exchange rates necessary when dealing with Bitcoin payments, and virtual currencies can be converted to nearly every local fiat currency that comes to mind. Furthermore, the underlying blockchain technology is a prime example of frictionless transfers of monetary value all around the world, at a minimal cost.
In recent years, quite a few merchants have started accepting Bitcoin payments, both for e-commerce and in-store purchases. But it’s not only merchants who are embracing blockchain technology and Bitcoin payments, as several major banks are now starting to experiment with the technology at this time. Because Bitcoin presents such a global perspective for the entire financial ecosystem — and beyond — there is a growing interest in blockchain technology today.
Emerging markets will benefit the most from solutions such as Bitcoin, as the lack of financial services in those areas is worrying. Contrary to popular belief, these emerging markets often have access to fairly modern technology. Bitcoin will allow for the quick and easy exchange of money, goods, and services all around the world.
Until there is a regulatory framework put in place, virtual currency adoption will increase at a slower pace. But once the lines have been drawn, and Bitcoin can operate within certain borders in every country on the planet, things could change in the blink of an eye. There has never been a better time than now to get involved with Bitcoin and virtual currency; this is one revolution you don’t want to miss.
What are your thoughts on the role of Bitcoin and virtual currencies in e-commerce? Let us know in the comments below!
Source: UPS Longitudes
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