Small companies could be helped to go global with bitcoin according to Klarna Exec


The possibility that the blockchain and bitcoin has the potential to fix a large number of the many problems that the world of payments current faces is something that Brian Billingsley, the CEO of Klarna North America strongly believes to be true.

Even with an ever growing number of startup companies offering online checkout services are starting to use bitcoin as an accepted method of payment Billingsley’s company which is based out of Sweden, covers 18 different markets and has more than 1200 employee is currently not ready to join them. The reasoning behind this is probably the same for many other companies and that is it is still unclear what value the digital technology holds for online commerce and payments technology.

At the Keynote 2015 conference earlier in the week Billingsley mentioned that as part of Klarna’s bitcoin strategy one of the main goals for his company was to get rid of one of the big problems that the bitcoin digital currency still hadn’t overcome and that was friction for consumers using bitcoin to make purchases.

As part of their efforts to introduce bitcoin trading in their business Billingsley mentioned that they were trying to ascertain when consumers would be allowed to trade with over 50,000 merchant partners using bitcoin through talks with Swedish regulators and were also actively tracking the development of any technology to be used for bitcoin.

One thing that Billingsley did stress even though his company was looking to move into the bitcoin arena was that Klarna’s merchant partners would be unlikely to see any rise in sales by taking up bitcoin as a method of payment even though the introduction would appeal to those with an interest in technology.

One of the big issues Billingsley had with the use of bitcoin in e-commerce was, given that there was already a certain amount of friction in the process of making on-line payment, how the barrier of having to first buy bitcoin before it could be used could be removed from the e-commerce process.

Even in those areas where it could prove useful he advised that this would prove to be a stumbling block that would weaken cases for the technology’s usability.

The concept for most consumers would be that no matter how simple the technology gets to buy bitcoin most would see little point in doing so and this is a problem that even the biggest companies trying to bring in bitcoin payments would face.

The best model currently available, according to Billingsley, would be for a large number of merchants group together to try and bring down transaction fees similar to the way that the Merchant Customer Exchange (MCX) have.

The greater reach of the smaller merchants globally is one of the possible areas that the blockchain and bitcoin could solve. With the hefty taxation from sales online these merchants could be put in a position where they would need to create a number of different corporate identities worldwide.

This would make one of the biggest problems for many merchants the ability to work out how to scale their business. The idea of using bitcoin for these businesses seems more compelling model compare to the current consumer model where it would be increasingly difficult to move them from their regular currency to bitcoin the less technically knowledgeable they became.

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In an effort to provide users with more options new dynamic transaction fees have recently been introduced by BitGo, which is a bitcoin wallet with multi-signature security. The reason behind these new dynamic fees is because of the increase in the volume of bitcoin traffic which has led it taking longer to process transactions. The pricing for the fees will be automatically adjusted based on processing periods that can be predicted and users will be able to choose which price to go for.

According to the BitGo website “Many transactions have taken longer than usual to confirm. As of (this) writing, the number of unconfirmed transactions is now well into the tens of thousands and continues to rise. To the user, this means that important operations such as exchange deposits are being delayed for hours, with no guarantee of confirmation time.”

One example of a surge in transaction fees that the BitGo website noted was an estimated fee of 0.00012502 BTC per kb or $0.03 USD on June 17th 2015 which had doubled in value by the 8th July 2015 to an estimated value of 0.00026823 BTC per kb or $0.07 USD.

The co-founder and chief technical officer of BitGo, Ben Davenport advised “As a response, BitGo has implemented dynamic fee rates on our wallet. The fees will be below standard during times of low bitcoin network congestion and proportionally higher during periods of high congestion. BitGo platform and wallet users will now enjoy the added benefit of having their bitcoin transactions processed in a more expedient and predictable manner. Our initial benchmarks estimate an average confirm time of about 2 blocks (20 minutes) with the enhanced fee estimations.”

When it comes to dealing with the current and potentially growing surge in bitcoin transaction activity there are three things that bitcoin wallets are doing at the moment said Davenport. The first is to just ignore it and hope things settle back to normal at some point. The second is to provide users with a greater degree of control over their fees, although this is just throwing the issue back at the user and the only way this method would work is if users actually knew what the fee should be and in most cases they don’t. The third way is the direction that BitGo has taken and that is to bring in dynamic fees that change based on the congestion conditions on the network. Davenport advised “We think it’s the best path forward – the software ultimately needs to make smart decisions, with some input from the user on the urgency of the transaction.”

He went on to say that a number of other popular markets are already using systems like dynamic pricing or surge pricing so it will be something that consumers on the whole will be used to.

As to whether people will accept a confirmation time of 20 minutes Davenport advised that in practise most people are waiting this long already, if not longer in some cases. He said that it would be likely that BitGo would add the ability for users to specify how urgently they want their transaction to go through as their main platform already has that capability.