Enterprise payments processor Digital River opens its $30B network to bitcoin
What do companies like Microsoft, Citrix, Autodesk, VMWare, Spotify, Logitech, Trend Micro, and the University of Phoenix have to do with bitcoin? Until today, the answer was very little. But now, thanks to an announcement by payments processor and ecommerce platform provider Digital River, they’re among the thousands of companies that are now a click away from accepting bitcoin payments.
Minnesota-based Digital River processed some $30 billion in transactions last year from customers across 200 countries. Today, the company announced that its ecommerce-as-a-service customers will have the option of enabling bitcoin payments, a feature that expects to be particularly compelling from a savings perspective for international transactions. Consumers can currently pay Digital River merchants via credit/debit card, wire transfer, bank transfer, or third-party wallet. The company previously teased plans to add such an option in a January interview on Pymnts.com.
VP and GM Souheil Badran told the WSJ today, “We don’t see it as just a fad going away. We see it as something that is here to stay, even if people are seeing it as just a payment method in general. But for me it is a game-changer.” But despite this optimism, Badran at the same time struck a cautious tone, citing the black eyes that crypto-currencies have suffered thanks to the Silk Road and Mt. Gox incidents. “We are always going to be cautious in view of the historical reputation of bitcoin.”
Small and mid-sized merchants (and the occasional enterprise) have turned to processors like Coinbase and Bitpay to facilitate bitcoin payments. These platforms allow those accepting bitcoin payments to immediately convert these digital funds to fiat currencies (such as US Dollars), thereby minimizing exchange rate volatility and secure storage risks.
Digital River has looked to simplify things further for its clients by partnering with Coinbase itself. As a result, it hopes to save its customers from having to evaluate and implement such integrations individually. This is a key distinction, given the privacy, security, and scalability demands of the enterprise payments environment. Digital River is in essence telling its existing (and presumably satisfied) customers, don’t worry, we’ve done the necessary due diligence and implementation work so that you don’t have to. Just click a button and you’re good to go.
Tom Peterson, Digital River’s EVP and GM of Commerce explained in a company statement today:
Because Digital River acts as the merchant- and seller-of-record, our international base of customers can accept and process bitcoin payments in their U.S. online stores with less risk than they could on their own. In addition, this business model creates an opportunity for our customers to offer payment solutions that may be in earlier stages of adoption in their domestic markets.With the bitcoin community looking to extend its reach and broaden its appeal, announcements like today’s by Digital River are cause for celebration. The news follows similar announcements by Expedia, Overstock, Tiger Direct, and other large enterprises.
Digital River joins Square and Stripe as prominent payments platforms supporting bitcoin. For the most part, these existing solutions have been met with mixed reviews from the bitcoin community for charging excessive fees more comparable to those commonly associated with traditional payment networks.
NASDAQ-listed Digital River (DRIV) saw its share price rise by 0.71 percent in late-day trading today, following rocky morning trading. The stock is down 16 percent year-to-date. Digital River has a market cap of $478 million and lost $24.6 million in net income on $389 million in 2013 revenue.
The question for bitcoin bulls and DRIV shareholders alike to ponder is, is this more than a marketing stunt? Put more bluntly, will the company’s merchants choose to adopt bitcoin payments and will it lead to an uptick in sales or, relatedly, a savings in cross-border payment fees? If the answer is yes, expect to see similar announcements by other payments giants like PayPal, Authorize.net, and so forth, all of which today are subject to a byzantine legacy payments settlement infrastructure.
The future of payments is indisputably digital, despite the financial services industry’s reluctance to adopt to this trend. But whether bitcoin is the answer to this puzzle, or if the answer lies in another existing or yet-to-be-created altcoin, remains to be seen. Either way, the more marquee logos that the bitcoin ecosystem adds to its masthead, the more likely its long-term success becomes.