If Bitcoin transactions were less cumbersome, the digital currency could potentially become the premier international currency of the world. But as it stands, using cash or credit for everyday purchases is much more practical. Xapo, the Bitcoin wallet and storage service, seeks to reshape this paradigm using a debit card that taps directly into a user’s Bitcoin storage and is accepted anywhere in the world where MasterCard is.
The Xapo debit card works similarly to a bank issued debit card, performing transactions in real time; when a user purchases a product or service, the value is debited from his or her Bitcoin storage, and is automatically converted into the local currency thanks to a partnership with a few undisclosed banks — meaning users can purchase goods from any online or brick-and-mortar establishment that accepts MasterCard.
Unlike the previous attempts at creating a unified Bitcoin payment card, Xapo’s debit card is not a prepaid card. Users do not have to first convert their local currency into Bitcoin before they can actually pay for products or services. If successful, the Xapo card will become the first payment service to lay the foundation for Bitcoin acceptance into the mainstream money market.
The service launches with both the physical debit cards themselves, as well as an online rendition. Users can sign up for a physical card on Xapo’s website for $15, but will have to wait approximately two months before receiving their card. However, the online debit account is free and Xapo will not charge any transaction fees for usage.
How does it works?
Picture the following scenario: Chad walks into a coffee shop and decides to swipes his Xapo to purchase a cup of coffee. The second his card swipe is registered, the partner bank (still undisclosed) checks to see if he has the adequate funds in his account. If true, then the transaction proceeds and funds will be automatically debited from his account. What’s uncertain as of yet is whether Chad will have to pay the partner bank a certain fee for piggy-backing off its service.
Will the idea catch on?
Purchasing products and services with Bitcoins has been available for quite a while, but the service is not integrated into the main stream money market, limiting the number of vendors who accept Bitcoin transactions to trendy startups and obscure online markets.
Xapo's CEO, Wences Casares, believes the initial user base will consist of people who invested in Bitcoins when they were inexpensive, and after receiving a hefty return on their investment, want to spend their profits. Moreover, the Xapo card is an excellent credit card alternative in countries where credit cards are difficult to obtain.
Bitcoin benefits
1. Payment freedom: Money can be instantly sent anywhere in the world at any time. Transactions are not disrupted by bank holidays or politics. Users will have to independently report earnings and transactions to their country’s corresponding tax agency.
2. Very low fees: According to bitcoin.org, Bitcoin payment transactions incur either no fee or extremely small fees limited to priority processing or the cost of converting the crypto-currency into a fiat currency.
3. Anonymity and lesser merchant risk : Transactions do not contain customers’ personal information, thus, protecting merchants from losses caused by fraudulent chargebacks while simultaneously allowing market penetration into areas where credit cards are not available.
4. Security : Bitcoin users have complete control over their transactions, preventing unwanted charges from merchants.
Bitcoin disadvantages
1. Low acceptance: Bitcoin payment acceptance has not yet proliferated; Xapo hopes to change this.
2. Volatility : Bitcoin is the first startup currency in the modern world, so forecasting its future is difficult. Furthermore, the total value of Bitcoin in circulation coupled with the low number of businesses using Bitcoin implies that small events can have a drastic impact on the total value.
3. Security : Because Bitcoin caches are stored in strings of code, hackers can empty out your entire savings into a prepaid card if the code is compromised. The anonymous nature of the currency makes it almost impossible to trace thefts.
Via Xapo and Bitcoin.org
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