At a recent conference on tech trends in financial technology, Jason Henrichs provided his thoughts on BitCoin, the growing digital currency. With Jason’s self described “very promiscuous” experience in the FinTech sector, it’s smart to listen; he has been a part of over 40 financial technology start-ups, and has helped bring to market several technologies such as high-reward debit cards. In addition, he is regularly paid to consult and serve on the boards of financial technology companies. With his extensive regulatory and operations experience, he has seen first-hand the challenges in launching and developing new forms of payment.
In order to analyze the future of BitCoin, it’s prudent to look at a similar technologies that have tried working their way into the POS (point of sale) terminals. For instance “Secure Credit Cards” or “Chip and PIN” technology highlights the long implementations cycle and challenges in financial innovation.
Called “Chip and PIN” or “Smart Cards”, these credit cards embed a chip that is used to verify the identity of the user. This makes credit card fraud much more difficult, since it’s no longer possible to simply reproduce the magnetic strip. According to Jason, the technology has been highly promoted by the German government and forced onto consumers. Consumer credit card protection laws are weaker in Germany, and many of the automated kiosks in Germany only support Chip and PIN cards. Still, despite these aggresive efforts, less than ten percent of credit cards in Germany actually implement Chip & PIN.
Chip & PIN cards are also starting to gain momentum in the U.S. After several high-profile data breaches, payment processors, merchants, and legislative entities in the United States have started taking credit card fraud more seriously. In response to security concerns, Target has been making a very strong push for implementing secure credit cards. The state of California has taken it to the extreme, by requiring mandatory use of secure credit cards by 2015. Still, despite hundreds of millions of dollars of investment in Chip & PIN, we are still likely 4-5 years away from widespread adoption.
Due to the slow implementation of technology that is unilaterally accepted as a good idea, it’s no wonder that Jason predicts at least a twenty year period before BitCoin will see significant traction. The primary challenge with the digital currency is getting merchants to accept it as payment, and if history is any indication, it looks like there is a long road ahead for a new alternative to the tried and true U.S. dollar.
Written by Andrew Palczewski
About the Author
Andrew Palczewski is CEO of apHarmony, a Chicago software development company. He holds a Master's degree in Computer Engineering from the University of Illinois at Urbana-Champaign and has over ten years' experience in managing development of software projects.
Google+
