Blockchains have matured and are now ready for B2B business.
Fintech is hot. Blockchain is hot. Most big financial institutions want to jump on board, at least to some degree. At the same time, there is some reluctance to even use the word Bitcoin, currently the major blockchain. In 2016, most bank executives realized Fintech’s current and potential capacity to disrupt traditional banking. Through Bitcoin, many clients have realized that banking can be done much more efficiently and at a lower cost compared to traditional banks.
B2B Pay is providing global B2B exporters a vastly cheaper way of receiving payments, with heavily reduced bureaucracy. Every presentation we give, we get at least one person jumping up and saying:
When will you be using bitcoin?
Will Bitcoin make your business model irrelevant?
"I know a startup doing exactly the same thing using Bitcoin."
We love Bitcoin (and blockchains), but we don't think you can just use it for everything. Bitcoin was only launched in 2009, and alternative blockchains are even younger. It's hardly a mature technology, and it cannot be applied to anything to make it better.
Here are 10 reasons why we have started building a bank account that interacts with Bitcoin and another blockchains:
1. Bitcoin is magic: super fast global payments
Any sufficiently advanced technology is indistinguishable from magic.
The first time you pay using Bitcoin, the magic becomes clear immediately - send money anywhere in the world! The Bitcoin magic is even larger when you do a major transaction on Saturday night and you see the confirmation in less than a minute, and it costs just a couple of cents. This is IMPOSSIBLE with current banks. If you own Bitcoin you can send money to bank accounts in 37 minutes. If you’re doing a traditional bank to bank transaction, you’ll wait the usual 24-48 hours (slowwww)…
But as amazing as it is, traditional institutions are not fond of magic. There is too much risk and uncertainty. Banks will be using banks technology not bitcoin!
How to transfer money from blockchain to bank account?
With Bitwala you can send bitcoin and other blockchain to bank accounts in Europe and many other countries. It often takes less than 1 hour to initiate the transfer.
2. Bitcoin is becoming mainstream
Everyone will agree that Bitcoin was controversial; it is a revolutionary technology and because of its decentralized nature, it can be used for illicit transactions. Fortunately, it's not just being used that way. The cost of online payments can be quite high. For a small payment of 1€, PayPal can charge a merchant 30 cents. That is a 30% transaction fee! For higher amounts with credits cards, fees are often around 2-3%. This is a lot of money for SME businesses - for any business really.
3. B2B Blockchain: corporate use of Bitcoin, Ethereum and Ripple
There's a lot of buzz around "blockchain", the technology behind Bitcoin. Except really innovative projects like Ethereum, we don't think there's much immediate gain from so-called private blockchains.
4. Blockchain security
But even assuming that, at least for now, Bitcoin and blockchain are synonymous, an important aspect of why we choose not to use Bitcoin/blockchain is safety.
B2B Pay provides global exporters to Europe with:
European IBAN accounts
A way to send money from these IBAN accounts to the exporters' local bank accounts
We can do both of these with existing technology. Some of this is also fairly new, but it's built around secure financial technology.
Existing financial technology is safe and heavily tested for massive amounts of transactions of any size every working day, backed by companies of massive size and resources. We estimate the chances of this technology failing to be 2 orders of magnitude less. But the most important is this: if this financial technology would fail, we would be in trouble. But there would be global financial mayhem as well.
5. Wholesale currency rates vs converting small amounts
When you look at purely trading in foreign currencies; money markets are very efficient. The spread costs for trading large amounts in liquid currencies can be as low as 0.0001%. The issues come when banks have to transfer smaller amount and costs go up to 3-6%. A lot of this is due to regulatory issues and inefficiencies in the system, not just about banks trying to make money.
We can improve these inefficiencies and move closer to the wholesale rates. We don't think Bitcoin can be more efficient than the wholesale markets when dealing with conventional currencies.
A side note about banking accelerators
Internally big banks are playing around with Bitcoin and blockchain technology, but they're not ready to move all their systems onto the blockchain.
Banks are also co-organising accelerator programs (we have participated in Nordea bank's accelerator program and as of March 2016 we're working with Barclays, powered by Techstars) in which they happily accept blockchain and Bitcoin startups - but this is predominantly a way to ride on the wave without taking any risk and for relatively little money (a budget for 10 startups in a 3 months program is unlikely to exceed $2M). In the likely event that the startup fails the bank is highly unlikely to suffer any damages. This is quite different with internal projects, which aren't usually below $10M.
6. B2B transactions will keep going from one bank account to another
Businesses use bank accounts to manage their business, you need a bank account to pay your staff, your suppliers, your phone bills. This is not going to change anytime soon.
Blockchain/Bitcoin is amazing when you’re doing Bitcoin-Bitcoin transactions. It's super easy and practical -- cost free with no regulation!
But 99.9% of business still need to deal in real currency using bank accounts, which means they need to pay from a bank account and the money needs to end up in another bank account.
As soon as you start creating a system that takes for example money from an account in Germany in EUR and then deposit the money into a Brazilian bank account in BRL, you are faced with all the same issues of banking fees and regulation. You cannot bypass it even though the underlying technology is actually really simple. In fact you must deal with another layer of unnecessary complexity instead.
Of course, in different circumstances things look completely different. If we were doing micropayments Bitcoin would be the obvious way to move forward. But we're not, unlike Satoshipay.
7. Changing from EUR to USD is a lot easier than doing EUR to BTC or BTC to USD, we are changing that
Unless you are exchanging money with a friend, there is always a cost involved in making a currency transactions. We can't foresee how adding another step in the currency conversion process will make it easier.
8. Currency fluctuation and risk
Exchange rates are some of the most volatile trades you can make. It's hard enough to trade from one currency to another and to hedge that risk. But the trade gets even more complex for smaller traded currencies like Indian rupees and Brazilian real. Now add to this the illiquid Bitcoin market it becomes very very hard to convert EUR to BTC to USD. Infact there is a good chance that you could be losing your customers huge amount of money!
For example: let’s say price of converting 1 EUR to USD is 1.2. If you are doing a straight conversion, things are a easy. But lets assume you are building a system which will use Bitcoin in between to effectively to convert EUR to USD. You need to first convert 1 EUR to BTC, then BTC to USD. By the time you have done this conversion the market price could have moved making a huge loss for you or our customer. Yes, in theory you could do this transaction simultaneously. But in reality it highly depends on the liquidity in the Bitcoin market between the currencies. Currently we don't see how you can hedge without taking risk.
Example of liquidity:
Everyday over $3 trillion in USD is traded. BTC trade is around $100 million.
9. B2B is a traditional business
B2B business owners have a lot to deal with. Whether they run a cafe or a manufacturing unit, handle a lot of things and are under a lot of stress. When they sell things they want the peace of mind that the money is there in the morning in their bank account. These are the sort of people who are the last to adopt new technology.
That's why our technology uses things they understand. To give them peace of mind. Lower costs are important, but a business will gladly give up 1% on transaction costs for certainty. It will be a long time before businesses trust alternate currencies.
10. Risk and uncertainties: blockchain hedging
The B2B world moves a lot slower and cautiously than the consumer space. Technologies have to be proven and tested for a long time before mainstream businesses start using them. There are still huge questions to be answered about blockchain technology. We still need more real world use cases. Once we see this technology being used more widely, we will see B2B players looking at this as an alternative.
At this point, we have a lot to do to improve how international trade and payments work. We will use blockchain technology in the future. But it will be in a very different way than most people think and for very different reasons.
When did we start considering Bitcoin or blockchain?
Apart from the accelerator programs inside individual banks, banks are also joining forces through consortiums such as R3. Given all this money and effort going into these technologies, there will likely be a moment that banks and other financial institutions switch over from legacy systems. Obviously we will consider switching over to the blockchain as well -- or we may in fact have de facto switched already!
Blockchain to bring down transaction costs?
We see blockchain as the future for simplifying and bringing down transaction costs. It is going to make the ledger side of international trade super simple and also bring down costs when it comes to issues relating to trust where two parties don't know each other.
But before we jump on the blockchain band wagon, we need to ask what are the costs incurred leading to the 3-6% transaction fees for say transferring €10,000 to China? The actual transfer itself is not expensive. Wholesale rates for B2B international bank transfers cost about €5.5 which makes up 0.055% for sending €10k. The other costs (which make up 95%) come from banking regulation, banking processes, currency conversion and BIG profits. So the question is: what is more important, improving the transaction process using Bitcoin or automating the currency conversion and regulatory processes?
For now we want to focus on moving the currency conversion process to wholesale rates and automating the banking process to cut down the costs by 95%. Obviously in the future we want to also improve the ledger processes.
An amazing startup trying to improve international payments is Earthport.com. Their technology is going to make cross-border transactions super simple, fast, and cheap. We hope to piggyback off them rather than reinventing the wheel.
Meanwhile, what we do have in place now is our payment solution for exporters: a virtual bank account in Europe coupled with the best fees for sending back money to your local bank account.
The future: B2B blockchain
White there is currently an environment that offers little in terms of flexibility and security for blockchain based B2B Payments, we at B2B Pay are ready. Our system and business rules were created with blockchain compatibility in mind. We plan to offer B2B blockchain payments in the near future.
Bitcoin to bank
Bitcoins are kept in electronic wallets and it is quite a hassle to get hard currency deposited to your bank account because many banks do not want to deal with funds coming from bitcoin exchanges.
There is no easy alternative currently in the market that allows you to easily and seamlessly transfer money from your e-wallet to your IBAN. The only viable alternative is the use of a virtual bank account with IBAN which is connected directly to your virtual wallet and seamlessly integrates both.
For example, if you deposit euros into a virtual bank account, it automatically settles into your ewallet. If you want to get euros back, simply cash your money with a simple transaction.
How to deposit bitcoin to a bank account
- Get a virtual bank account with B2B Pay
- Connect it with your e-wallet of any kind
- Perform the transaction. B2B Pay would do all the behind the scenes work for you.
One of the problems with KYC processes is that it has to be replicated which is costly and a business pain point that slows down the onboarding process. In other words, businesses all over the world miss out on business opportunities because they cannot verify the authenticity of their prospects.
With an electronically verified IBAN, a user gets an IBAN with KYC information attached to it. If you want to verify a client that requires banking and financial levels of assurance which includes PEPs and sanctions, you could simply ping an eBAN with a small deposit and have that deposit be automatically sent back to you confirming the authenticity of that users.
This has the potential for revolutionizing the KYC industry because for users, the ease of getting approved by financial systems are not tied down to multiple manual checks. For businesses, the cost per conversion goes down massively because instead of costing dozens of dollars it would go down to cents.
If you could ascertain what the bitcoin price would have been 5 years ago, a 10 thousand dollar investment would today be worth millions. Bitcoin pricing varies greatly and there are many forces at play within the market that make it so the price can rise or fall massively in a matter of minutes.
If you want to keep track of pricing, you can google for bitcoin price or visit any of the many bitcoin blogs and news aggregators as well as your bitcoin exchange which will offer a stock market like graphs with detailed information that will enable you to monitor your bitcoin investments. Coindesk has a nice tool for this, as well as coinbase and bitcoin.com.
If you want real time pricing compiled from a variety of sources, try https://realtimebitcoin.info
A bitcoin wallet is where your bitcoin keys are held, in other words, a bitcoin wallet is like a bank account for virtual currency and where you can receive and send bitcoin payments. Because it is a way to hold your crypto keys and you can hold multiple of these keys, a better analogy would be that a bitcoin wallet is actually a keychain where you hold the keys to a vault where all your money is.
There are 2 main types of e-wallet: one that you install on your computer yourself and therefore it is a bit more secure but harder to setup and maintain and one that is hosted by a third party on the internet that is easy to setup but as a user you will have to trust this third party with your information and therefore it is important to due your due diligence and choose your wallet provider wisely.
Bitcoin wallets are available as physical devices that you can purchase which look similar to a USB key and there are also mobile application versions of all main wallet systems in the market.
A bitcoin exchange is a sort of bitcoin bank and they work similarly to a traditional bank. These work by taking in fiat currencies and selling and buying bitcoin peer to peer in a massive open ledger.
You can pay into a bitcoin exchange using all the traditional methods available in the market and those include debit and credit cards, wire transfers and sometimes other cryptocurrencies. You can also use all major currencies in the world, including the Japanese Yen, US Dollar, the Euro, British Pound and so on.
When dealing with multiple bitcoin exchanges located in multiple currencies, the transactions are also similar to traditional banks where exchanges have a way to talk to each other and perform transactions according to the local market prices of the fiat currency being exchanged.
Blockchain to bank account
Holding a financial stake in the blockchain with a cryptocurrency of any kind requires knowledge of best practices that take some time to master. If you want to transfer money from blockchain to bank account the ideal situation is when you have your blockchain based crypto currency account connected to a bank account with an IBAN.
By having an IBAN connected to a blockchain account such as your bitcoin wallet, it means that you have instant access to the fiat currency exchange value of your bitcoin held in your wallet. It means that you are able to convert your any amount of cryptocurrency into cash and have it available to be used whenever you need.
Bitcoin credit card
A bitcoin credit card is exactly as it says: a card with a traditional label such as Visa or Mastercard that takes bitcoin and you can pay anywhere where these labels are accepted which means you can pay with your bitcoin in millions of retail establishments from the large department store to the niche hipster boutique.
There are a few companies offering these and they vary in fees and features. It is possible to get a virtual card only so you can do online shopping only and a physical debit card that you can use in retail outlets. They are international meaning if does not matter where you are located: companies will mail your card directly to your residence.
One interesting feature of bitcoin cards is that there is no need for ID verification as long as there are limits to the transactions. This makes it very easy to perform transactions and keep your privacy when desired.
- 1. When will you be using bitcoin?
- 2. Will Bitcoin make your business model irrelevant?
- 3. Here are 10 reasons why we have started building a bank account that interacts with Bitcoin and another blockchains:
- 4. How to transfer money from blockchain to bank account?
- 5. The basics:
- 6. European IBAN accounts
- 7. A way to send money from these IBAN accounts to the exporters' local bank accounts
- 8. What if?
- 9. A side note about banking accelerators
- 10. Example of liquidity:
- 11. When did we start considering Bitcoin or blockchain?
- 12. Blockchain to bring down transaction costs?
- 13. The future: B2B blockchain
- 14. Further reading
- 15. Bitcoin to bank
- 16. How to deposit bitcoin to a bank account
- 17. eBAN
- 18. Bitcoin price
- 19. Bitcoin wallet
- 20. Bitcoin exchange
- 21. Blockchain to bank account
- 22. Bitcoin credit card
How to open a bank account in Europe
We have a few guides to guide you through the process of opening a bank account in multiple European countries and explaining why a virtual bank account with B2B Pay may be a better alternative if you are transferring money outside of Europe and taking advantage of a better rate.
- How to open a bank account in Andorra
- How to open a bank account in Austria
- How to open a bank account in Bulgaria
- How to open a bank account in Croatia
- How to open a bank account in Czech Republic
- How to open a bank account in Cyprus
- How to open a bank account in Denmark
- How to open a bank account in Estonia
- How to open a bank account in Finland
- How to open a bank account in France
- How to open a bank account in Germany
- How to open a bank account in Greece
- How to open a bank account in Hungary
- How to open a bank account in Ireland
- How to open a bank account in Italy
- How to open a bank account in Latvia
- How to open a bank account in Liechtenstein
- How to open a bank account in Lithuania
- How to open a bank account in Luxembourg
- How to open a bank account in Malta
- How to open a bank account in Monaco
- How to open a bank account in the Netherlands
- How to open a bank account in Norway
- How to open a bank account in Poland
- How to open a bank account in Portugal
- How to open a bank account in Romania
- How to open a bank account in San Marino
- How to open a bank account in Slovakia
- How to open a bank account in Slovenia
- How to open a bank account in Spain
- How to open a bank account in Sweden
- How to open a bank account in Switzerland
- How to open a bank account in the UK
How to open a bank account overseas
We have a few guides to guide you through the process of opening a bank account in multiple countries all over the world and explaining why a virtual bank account with B2B Pay may be a better alternative if you are transferring money outside of Europe and taking advantage of a better rate.
- How to open a bank account in Australia
- How to open a bank account in Brazil
- How to open a bank account in Canada
- How to open a bank account in the Cayman Islands
- How to open a bank account in China
- How to open a bank account in Colombia
- How to open a bank account in Dubai
- How to open a bank account in Hong Kong
- How to open a bank account in India
- How to open a bank account in Japan
- How to open a bank account in Malaysia
- How to open a bank account in Mexico
- How to open a bank account in New Zealand
- How to open a bank account in the Philippines
- How to open a bank account in Russia
- How to open a bank account in Singapore
- How to open a bank account in South Africa
- How to open a bank account in South Korea
- How to open a bank account in Thailand
- How to open a bank account in Turkey
- How to open a bank account in the United States
- How to open a bank account in Ukraine