While the popularity of both innovations has grown quickly (even though Coin is not yet available), they still face key uphill battles because of their unconventional path to success by not partnering with a trusted financial service provider first.
I’ve worked with hundreds of companies in the financial space – and I’ve seen what common denominators need to be addressed for a service or product to be successful. Let’s take a look at three key obstacles to success that will affect Bitcoin and Coin’s quest for consumer adoption – and which technology currently has the advantage in each category.
1. SecurityIf you’re not confident that a product or service that is handling your money is totally secure and legitimate, then you’re unlikely to use it. When we’re talking money, consumers want an endorsement from someone they trust before they use a new service.
Square Wallet’s partnership with Visa gave it a huge advantage over competitors in the mobile payments space due to public validation from such a well-known financial services brand.
Looking at Coin:
Upon launching, Coin hit its campaign goal in 40 minutes, trending on Twitter and receiving 200,000 mentions on Facebook. The viral sensation has seemingly tapped into deep market demand, even though it is in a prototype stage and is not publicly available.
Coin’s adoption could easily spike as friends see friends using the product as long as it delivers on the experience that matches its vision.
However, a major concern remains: will credit card companies want to validate Coin by allowing the company to mimic their cards, without any of the branding that is so important to them? This is an important question mark in the future of Coin.
If Coin can secure one partnership with one of the big three credit card companies, like Square did, it would start the snowball effect of shoring up consumer confidence.
Looking at Bitcoin:
Many trusted technology leaders have already publicly backed Bitcoin and an increasing number of retailers are accepting the new currency.
Marc Andreessen, a venture capital titan, has poured $50 million into Bitcoin-focused startups alone, while The Social+Capital Partnership founder, Chamath Palihapitiya, who owns $5 million in Bitcoins, is also bullish on the service.
Congress seems interested in legitimizing the positive uses of cryptocurrencies. New companies like Coinbase are launching, highlighting the opportunity and interest for simple and useful services built on top of the Bitcoin protocol.
Although these companies and solutions are quite legitimate, the upstart nature of Bitcoin means that it is still in a big grey area, which in turn naturally makes consumers wary of Bitcoin’s security. U.S. banks have so far tacitly allowed converting dollars into Bitcoin – but they could easily cut off this access.
Meanwhile there have been a string of hackings and thefts in which thousands of dollars worth of Bitcoin are stolen, with little legal recourse, which will cause serious security concerns for consumers.
Additionally, the price of Bitcoin is highly volatile and much of the enthusiasm comes from its sky-high price, ranging anywhere between $500 and $1200 per Bitcoin in the last two months. If this wave of favoritism crashes, Bitcoin’s value may also see a subsequent crash.
After the People’s Bank of China banned financial institutions from trading in Bitcoin, the cryptocurrency’s value dropped by 50 percent. Other countries such as India were not far behind. While the value bounced back, the volatility of the currency is problematic for average investors.
Who’s got the advantage? Coin
Coin is more likely to drive consumer confidence in the near term. Bitcoin is both a completely new concept, and can have a much larger impact on our financial system, however it is still poorly understood and not well regulated.
The U.S. government will likely wait and watch for some time before making any big regulatory moves around Bitcoin. In addition, Coin isn’t threatening credit card usage and, in fact, it may be promoting usage by simplifying the use of multiple credit cards.
2. Overcoming preconditioned consumer behaviors
In truth, mass-market adoption of new payments technologies and systems can take decades.
By Joe Polverari
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