As the mobile payment industry heats up to become a $720 billion-a-year industry within the next three years (according to Gartner) and big name companies vie for consumer and channel partner mindshare (read: wallet share), another contender is gaining traction that has the potential to cause the biggest disruption in the market: Bitcoin.
According to a recent article by JMRConnect Principal Mostafa Razzak, Bitcoin, which is a digital currency valued at $10 billion, is very important to those who want to eliminate many of the middlemen involved in mobile payment processing. The rise in Bitcoin’s popularity reveals several parallels to the popularity of Napster in the late 1990’s and early 2000’s. In the article, Razzak talks about how Napster presented a solution to the digital music stores of the day, which were mired in proprietary formats, digital rights management challenges, and limited selections. Along came Napster and fixed all of that with one little problem — a lot of the music being “shared” on the peer-to-peer platform was copyrighted and therefore being downloaded illegally. Bitcoin, similarly, uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of Bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.
Besides eliminating all the bureaucracy and limitations surrounding traditional mobile payment services, Bitcoin’s unregulated digital transaction model makes it easier for drug dealers and cyber criminals to conduct business anonymously.
Those tempted to see Bitcoin as only being useful for such nefarious means, however, should consider the contribution that Napster eventually made to the digital music world. Today’s iTunes, Rhapsody, and other digital music stores owe a debt of gratitude to Napster for paving the way for low priced music that could be purchased by the song rather than by the album, and can be downloaded in a format compatible with nearly any MP3 player. Razzak concludes: “Bitcoin is going to play a key role in moving [the mobile payment industry] in the right direction — but the journey is going to be messy and real progress won’t happen until we see a convergence between Bitcoin and the traditional financial ecosystem.”