Brokers and Bitcoin: A New Future for Payments in Financial Services
by Leslie Brown, CLFP Monitor 101 2021
Bitcoin has become more than just a buzzword in the financial services world and brokers and other independent companies need to earnestly explore the idea of accepting this newer form of currency.
Leslie Brown, CLFP, Owner, Mak Global Corporation
Every time I hear a discussion with the word “innovative” in it, my ears shut down and my legs run in the opposite direction. Innovation is quite the buzz word, but I don’t want to hear about ideas that never come to life. I’m tired of the clickbait. Let’s hear about the actual direction of our markets and what we can expect in the next 10, 20 or 30 years.
The same grunts and groans occur every time I hear the word “Bitcoin,” but I can’t ignore it anymore. It’s left the trendy monologue of innovative gurus and has planted itself firmly in finance. As a broker, I’m left to consider accepting payments in bitcoins while trying to determine if it is a weed worth pulling and tossing aside or a valuable commodity worth cultivating?
Cryptocurrency Goes Mainstream
This isn’t new to us. Monitor has been reporting on bitcoin and blockchain technology since 2017. The capabilities of each have expanded. Today, many recognize Bitcoin as a tangible form of currency, even banks. Without arguing why banks are or are not in favor of cryptocurrency, it remains a fact that customers are demanding cryptocurrency services and banks are being forced to heed the call. As banks watch customers send money to alternative cash apps like Coinbase, they have gotten creative and flexible. Supply and demand are forcing a change in the marketplace rather than letting it stagnate.
JPMorgan Chase is at the forefront of the push. It introduced its own form of cryptocurrency more than a year ago. Ally is another. Reputed as the most Bitcoin-friendly bank, the online platform has become more popular with the social distancing movement. And, recently, Fiserv and NYDIG announced their partnership goal of making Bitcoin available to banks and credit unions everywhere. The dynamic duo claim that hundreds of small banks have already signed on to start the process. If banks are climbing on board, is it realistic to, at the very least, consider Bitcoin an option for alternative financiers? Maybe.
How difficult is it to accept, convert and report Bitcoin transactions? It’s easier than you think. According to NYDIG, its plans for this sector include offering checking accounts for Bitcoin that provide end-user-to-end-user encrypted payments. This will include reporting ledgers, and debit cards that offer rewards paid in Bitcoin will, of course, include a statement report. In the interim, there are Bitcoin payment processors like Bitpay and Coinbase. There are also online wallets that allow easy transfer from wallet to wallet with reporting capabilities. Processors, bank accounts and wallets come with ledgers and receipts so that reporting Bitcoin to overbearing regulators is workable.
Who Accepts Bitcoin?
How popular is Bitcoin, really? If one divides their customer base up by geographic location, industry and age group, one might find that it is more popular in certain demographics than others. The 60 years and older demographic may never adopt Bitcoin, but younger generations may increase their purchase and use of cryptocurrency as they learn the basics of finance and money management. However, individuals in the 25 to 55 age group are unique. Once they jump the first hurdle of learning about Bitcoin, the more they will use it, with the lack of familiarity being the biggest obstacle for most.
Curiosity sent me on an adventure looking for places that would allow me to spend Bitcoin. During my search, I found that some of the places that accepted bitcoins as payment included Amazon through Purse.io, Newegg, BMW, Microsoft, AT&T, Overstock, Subway, the Dallas Mavericks, Etsy, Dish Network, Intuit, Bees Brothers, Tortuga, and the list goes on. These companies have done their research. They’ve color coded fancy graphs, wrote a bunch of dissertations about the pros and cons of Bitcoin, had meetings about it and, after long deliberation, decided they’re in.
So, to answer my question from earlier, Bitcoin is fairly popular. When you use it, you’ll still be able to report every red penny to the governmental overlords, plus it’s easy to accept and exchange and banks are only going to make it easier to use. That all sounds good, but what if Bitcoin loses all its value?
Weighing the Risk
Numerous reports and opinions on the value of Bitcoin are available with a simple internet search. While jumbling through this mess of information, I’ve asked myself two questions: As a small business owner, do I want to diversify my investments? To what extent is the risk and reward I’m carrying with each investment? Those are personal questions and involve an intimate understanding of a business owner’s goals. As a small broker, my company has streams of ancillary revenue that are perfect for investment allocation specific to Bitcoin.
Documentation fees are an outstanding example of how a small broker company could implement Bitcoin. Usually, documentation fees come from the customer and are small enough to invest without causing a cash crunch. Brokers want to make smart decisions that increase their ability to gain profit while minimizing the tax and cash flow burdens such profits might bring. That’s a conversation each company should have with its accountant.
Should broker companies consider options for accepting Bitcoin payments? It’s true that Bitcoin is under constant assault by regulating authorities that want to clamp down on or annihilate the decentralized money system, so is there a risk? Yes. Perhaps it’s too soon to slap that Bitcoin logo up on your website, but we’re only considering the option here; we’re not committed yet, are we? With the ease of use, gain in popularity and ability to maintain records, it seems worth the time to consider. Not to mention, Bitcoin will gain in value, whereas the dollar doesn’t seem so robust and continues to be printed haphazardly. Simply put, yes, an independent company wanting to offer modern options and diversify its portfolio should consider Bitcoin.
Leslie Brown, CLFP, is the owner of Mak Global Corporation and an 18-year equipment finance professional. She has served as an elected member of the CLFP Foundation board for two years. She is also an active member of the AACFB and has served as a staff writer for the official publication of the AACFB. Brown has become equipment vendors’ “go-to” finance professional while consistently maintaining and growing a strong book of referral business with vendors and borrowers.
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