Amazon-owned Whole Foods, Nordstrom, and Crate and Barrel, now accept Bitcoin and three other types of digital currency.
By James DiGeorgia
Since cryptocurrency arrived a decade ago, it has battled to be accepted by mainstream commerce, but this could change with a new initiative announced on Monday. Big name retailers, including Amazon-owned Whole Foods, Nordstrom, and Crate and Barrel, now accept Bitcoin and three other types of digital currency.
This initiative came about with a partnership between Gemini, the digital currency company owned by Winklevoss, and Flexa, a payments startup. It works by using digital scanners many big retailers already use to accept phone-based payments from digital wallets, including Apple Pay and their apps.
Flexa has persuaded the retailers, including Baskin Robbins, Gamestop and Regal Cinemas, to reconfigure the scanners to also accept payments from the Spedn cryptocurrency app. The customer needs to hold up their app, and payment is made. Cashiers will generally not be aware that customers are paying with crypto, and the merchant will receive real-time payments in either dollars or crypto.
Although the Winklevoss twins have good credibility in the Bitcoin universe, merchants have largely avoided crypto as it is volatile and popular with cybercriminals.
The app does, however, seem to work as intended. We tested it by downloading Spedn’s test version and transferring Bitcoin worth $10 to it. We visited Baskin Robbins in the area and purchased a small coffee by using the app. This worked. We then went to a Starbucks (although it is a partner in the project, this is unofficial) and bought a banana. This also worked. For each transaction, the amount of Bitcoin in our wallet was adjusted by the app.
As this is the first low-friction, widespread, opportunity for customers to shop using cryptocurrency, it is potentially a huge deal. The Spedn app allows users to spend four types of digital coin: Ethereum, Bitcoin Cash, and Bitcoin, while the fourth is a stable coin known as Gemini Dollar. This coin is pegged at $1 backed by State Street, a banking giant.
It’s Different This Time
Since the start of cryptocurrencies, merchants have attempted to accept Bitcoin, but most efforts were eventually abandoned, mainly due to cryptocurrency networks’ slow processing times. Using crypto for ordinary payments has also proven to be impractical for consumers, due to the volatility of crypto - a wallet with Bitcoin valued at $100 may only be worth $80 in a few days or even hours.
Merchants may, however, be more comfortable offering crypto payment this time as the scanners provide an easy way to accept them, while Flexa’s real-time network will clear transactions very fast. Gemini handles the backend operations, and merchants will typically receive the cash equivalent of the crypto amount paid by the consumer.
The CEO of Flexa, Tyler Spalding, noted the attraction for merchants is an opportunity to decrease commission fees typically paid to other payment networks. Spalding added that payments with crypto also enables stores to experiment with customer rewards based on blockchain.
Although Fortune tried to speak to 6 of the retailers using the Flexa service, none were prepared to comment at this stage. An anonymous person familiar with the project remarked that this silence is due to the crypto payments still being experimental. Retailers are, therefore, not willing to discuss them until they have a better understanding of consumer demand and technology.
From the consumer’s perspective, Flexa provides an easy way to spend crypto at everyday stores. This does not mean that more than only a few will use the opportunity, especially while other payment methods work without a problem.
The volatility issue does however, remain a concern. The value of Bitcoin in our app jumped by about 5% in one day. While this is great for investment purposes, it is not practical for day-to-day payments.
The Winklevoss twins believe the volatility problem can be resolved if the Gemini Dollar is used, as its value is pegged to very close to $1. When interviewed by Fortune, they envisaged the stability of the Gemini Dollar, together with Flexa’s ease-of-use would eventually lead to widespread use, especially by individuals who appreciate the blockchain technology behind crypto.
Spalding also told Fortune they would provide developer kits to organizations wanting to integrate the scanner payment technology with their own apps.
At the moment, it is too soon to predict if big name merchants who signed on this week (Office Depot and Petco, Lowe’s) will still be using this system in a year.