The success of Bitcoin during 2013 has lead to interest in the crypto-currency spreading like wildfire. And though there are still plenty of concerns about the anonymous digital currency, more than just investors have taken notice.
A patent application for a new anonymous electronic payment system has just been made public, with many citing the similarities between the proposed currency and Bitcoin. And the applicant behind the new Bitcoin rival? JPMorgan Chase (NYSE:JPM).
Cashing in on currency
The meteoric rise of Bitcoin's value over the past few months obviously drew the attention of other companies that provide means for payment of online transactions. With an estimated $1 trillion in online payments expected by 2017, the market size is nothing to be laughed at. As most banks have begun to realize, a larger and larger segment of the population prefers to do their banking online -- and the same is true of shopping.
JPMorgan Chase's patent states the company's intentions to develop a virtual wallet for consumers with a virtual currency that allows for anonymous, free payments online. The currency would be developed in order to compete with both debit and credit cards, which dominate the online payment market.
If you can't beat 'em, join 'em
Since JPMorgan Chase is one of the nation's largest credit card providers, any sort of competition online would result in the decline of its own business. So the company is joining the growing ranks of online payment systems in order to stanch the flow of revenue headed out the door.
But banks aren't the only ones threatened by the development (and wild success) of digital currencies. eBay's (NASDAQ:EBAY) PayPal is the current leader of digital wallets, with 137 million active accounts in markets spread across 26 currencies. But the payment processor has been losing ground to newer, easier systems that have popped up across the Internet -- including Braintree, which eBay just acquired.
Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) have also both gotten into the online payment melee, with Google Wallet and Amazon Payments. Both methods are widely accepted by merchants across the Internet, but still lag behind PayPal and credit/debit card payments. But the issue for consumers remains that each system still requires access to a bank account or credit card, plus the wallets or payment systems are not accepted everywhere. That leads to multiple accounts, which spreads out their money. Hence the attraction of a digital currency.
As we've seen with Bitcoin, there is a huge demand for digital currency. But there are a few roadblocks that still exist for any company or developer trying to get into the game. Despite its incredible popularity, Bitcoin is not accepted as payment everywhere online. Until merchants are assured that Bitcoin is recognized as a legitimate currency, there will be a large number of online sellers that won't allow its use for payment. The same will happen for the proposed currency from JPMorgan Chase, though the bank 's involvement may settle some seller's concerns -- an option unavailable to the open-sourced Bitcoin.
With the undeniable trend towards more and more mobile and online transactions, consumers will be deciding which payment method ultimately wins. But if JPMorgan Chase and the other established payment processors have anything to say about it, Bitcoin's appeal will fizzle out and consumers will rely on their newer payment options.
Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, eBay, and Google. The Motley Fool owns shares of Amazon.com, eBay, Google, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.