Forbes
Monday, May 7, 2012
http://www.forbes.com/sites/jonmatonis/2012/05/07/bitcoin-funded-debit-cards/
Yes, it's entirely possible to fund your existing debit card, or credit card, with your accumulated bitcoin. And I don't mean that you are shipped a generic, low-limit prepaid VISA or Mastercard from some anonymous reseller. I mean that you convert bitcoin online to dollars or euros and the funds are available to spend with a card that you are most likely already holding in your wallet.
Why is this so significant? It's important because it leverages a little-known type of transaction that is available on the VisaNet system called 'Original Credit Transaction'. The other major card payment networks have a similar feature too. These transactions act like a refund or credit transaction when you return an item to a store except that they don't have to be associated with an original purchase. Essentially, they enable your card to be a two-way payment device. Surprisingly, not many financial institutions have taken advantage of this feature yet but I expect that to change.
Visa Personal Payments, already offered by financial institutions outside the U.S., became available in the U.S. market last year marking the first time that a major payment network has introduced a global requirement for account issuers to accept incoming funds. It's the technology behind now-merged P2P service providers ZashPay and Popmoney.
Previously, it was cumbersome for bitcoin account holders to transact in national currencies because they had to go through one or more exchanges and then wait further for funds to arrive in a bank account or other intermediary like the formerly bitcoin-friendly Paxum. Now these personal payments are being offered by e-currency exchanges as a way to provide easy worldwide access to e-currency account balances most notably by AurumXchange. The digital currency exchange operated by Dominica-based Aurum Capital Holdings, Inc. supports bitcoin as well as Liberty Reserve, Pecunix, Perfect Money, and c-gold and they offer two choices for cashing out into a card-based product.
The first option is the Withdraw2Card service that does not require any sender identity verification. Requiring only the destination card number and expiration date (name and CVV code are not required), funds can be transferred to any credit or debit card in any country in the world. If the destination account currency is not dollars or euros then it will be converted to the native currency automatically. Service fee is $9 plus 1.99% (for MtGox USD) with a $1,000 maximum transfer amount and you should not send more than the credit card's limit. The bitcoin portion of the transaction is accomplished through the use of redeemable coupon codes from the popular bitcoin exchanges that act as digital bearer certificates. According to AurumXchange, they plan to offer direct two-way convertibility for bitcoin in the near future so you won't need the redeemable code.
This service is ideal for regions of the world where a large majority of the population may not have bank accounts or where international wires are cost-prohibitive. AurumXchange's General Manager Roberto Gutierrez explains, "The service so far has been tremendously popular. Just counting countries alone where people don't have access to bank accounts or foreign wires are highly taxed or scrutinized, such as Africa, Brazil and China to name a few, we have processed over 3,000 orders since we started a few weeks ago. North American and European customers have been using the service quite a lot as well especially for small transactions that would otherwise be too expensive to conduct through means such as international wire transfers."
The second option is the AurumXchange Premium Mastercard issued through North Carolina-based Four Oaks Bank which comes with instant funds availability. After a $24.99 two-year membership fee, the card will be shipped for free anywhere in the world via first class mail.
OKPAY is another interesting provider in the bitcoin debit card space. They offer the OKPAY Debit Card which is issued by CSC24Seven.com Limited, a financial institution licensed by the Central Bank of Cyprus to issue cards. Founded in 2007, OKPAY, Inc. is a subject of British Virgin Islands (BVI) regulations.
Now that they have completed their bitcoin integration into the OKPAY system, it is possible to fund your OKPAY account directly with bitcoin, withdraw via bitcoin, and use bitcoin as a payment option for purchases of goods and services. Although, they do not offer the Original Credit Transaction feature to any card, they will provide timely and direct conversion of bitcoin to their proprietary Mastercard product.
By removing friction from the process, bitcoin becomes easier to spend overall because not every merchant will accept bitcoin directly for payment yet and not all transactions demand irreversibility and privacy. Logically as a consumer, you may still want your VISA chargeback rights for certain purchases. The Original Credit Transaction is an excellent way to leverage the legacy card payment network to facilitate the growth of the bitcoin network and these two exchangers are in the vanguard.
The twin pillars of retail banking revenue debit interchange and overdraft fees are under assault. As an integral part of consumer checking accounts, debit card transactions drive interchange revenue and are linked to overdraft fee revenue. On the heels of new check overdraft protection rules, debit interchange has been capped, and electronic debit transactions must now be processed over at least two unaffiliated payment networks. These changes are reshaping the debit card competitive landscape and driving sweeping changes in consumer banking relations, checking account and fee structures, and debit payment network economics.
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