Source: Flickr / BTCkeychain.
It has been one month since I wrote about bitcoin and e-tailers here on Fool.com, and a little bit more than two months since e-tailer Overstock (OSTK +10.75%) began accepting bitcoin payments on its website.
Overstock has already surpassed $1 million in total sales.
Overstock's CEO, Patrick Byrne spoke with CoinDesk, the world leader in news on bitcoin and other digital currencies, about its $1 million milestone and the steady growth in bitcoin payments:
In the first day there was an enormous surge of bitcoin sales, but we've also seen a gradual building of bitcoin sales in a week-by-week basis.
The initial projections for sales processed with bitcoin on Overstock.com this year was set at $3 to $5 million, but this number has since increased dramatically, according to Byrne.
Overstock's CEO now predicts that Overstock will see a total of $10-$15 million in bitcoin sales for 2014. He even suggested this figure could reach as high as $20 million if bitcoin sales maintain their current growth rate.
The e-tailer partnered with Coinbase to process bitcoin payments. They investigated the spending habits of bitcoin users on Overstock, comparing bitcoin users with credit card users in their research.
The findings show that clients who use bitcoin as a payment method spend on average $58 (34%) more on their orders than credit card users.
Byrne says Overstock has reaped the benefits of accepting bitcoin as a payment method, most notably in eliminating chargeback fraud from credit card payments and reducing payment processing fees:
Bitcoin payments have helped us avoid fraud in the form of chargebacks with credit cards, and we're also able to get paid faster than when payments are processed with credit cards. It takes three days for payments to finalize with credit cards, and with bitcoin we can get paid immediately.
E-tailer adoption
Bitcoin payment processor Coinbase is not surprised about the growing number of transactions:
We are more gratified than surprised with these recent milestones, as they illustrate our belief that we are near a tipping point for broad merchant and consumer adoption of Bitcoin.
Byrne hopes the news of Overstock surpassing $1 million in payments will continue to build the currency's credibility and adoption rates. He thinks bitcoin payments will account for several percent of all online transactions in the next year or two, and when this happens, Amazon (AMZN +0.31%) will be forced to start accepting bitcoin transactions on its website.
Another positive note for e-tailers came from Goldman Sachs. This major bank just released a report on digital currencies and promotes the idea that bitcoin could be a viable and cost-effective payments platform. The research, titled "All About Bitcoin," outlines the basics, citing bitcoin's advantages and shortcomings, backed by statements from critics and supporters.
Goldman Sachs' IT Services equity analyst Roman Leal estimates that the use of bitcoin could save up to $200 billion a year, based on current trading volumes.
The researchers concluded that bitcoin could have a significant impact in terms of innovation on payments technology, and it might force existing players to adapt to it or co-opt it.
Payments industry impact
Analyst Roman Leal also believes existing payment providers will have to adapt or co-opt bitcoin, in what he describes as "co-opetition."
Leal points out that the bitcoin network could solve some of the pain points involved in the current payments system, but only in theory. Bitcoin could make money transfers as seamless as email, businesses could have the same fees, regardless of purchase amount, and travelers would not have to pay cross-border fees.
Leal also looked into hypothetical savings and came up with very encouraging numbers. Based on 2013 volumes, up to $200 million could be saved in remittances, retail, and e-commerce. The biggest savings would come to remittances, with an average fee of 8.9%.
Bitcoin payment processors such as Coinbase typically charge a fee of about 1%. Consumers could also see enough savings. Money transfer networks like Western Union (WU +1.88%) tend to charge high fees of up to 10%, so Bitcoin transactions could reduce fees tenfold.
Bitcoin is here to stay, and e-tailers are the first to profit from it.
