More Israeli businesses accepting bitcoins

bitcoin

Some businesses accumulate the currency as an investment, while others regard it as a convenient and rapid means of payment.

"We started to offer the option of paying in bitcoins in order to appeal to the younger segment of buyers, which uses virtual currency. Since bitcoins are the most famous virtual currency, which has also passed the test of time, we included it. We can't rely on every new virtual currency, because it's hard to predict whether it will survive. Today, we’re considering adding other advanced means of payment, but only after we have seen that they have proved themselves in the market," says Anton Goldstein, co-owner and CMO of the Zipy online shopping platform. He is not the only one.

Bitcoin payments are becoming more common worldwide, and it sometimes seems that the trend is picking up steam in Israel, too. It is obviously a gimmick and a statement of "coolness," but there is also quite of a bit of economic justification. The fact that the virtual exchange range has risen meteorically with the years – the value of one bitcoin, which was less than $5 in 2013, soared to $3,000 last May - is giving business owners an incentive to accumulate the currency as an investment, while others regard it as a convenient and rapid means of payment.

The list of businesses in Israel that accept the virtual coinage is still quite short, and some businesses also leave and rejoin the list according to developments in the sector. The range of businesses is broad, including professionals such as lawyers; communications, electronics, and engineering service providers; cafes and restaurants; and optical stores and auto sales companies.

Payment using virtual currency, which began less than a decade ago, is conducted through a digital wallet on a smartphone. There are many such wallets; the most popular are mycelium for Android and breadwallet for Apple devices. The apps are managed like a bank account. When a person registers, the particulars of the credit from which the payment is deducted are typed in, and the balance is according to the currency. Money can be transferred to the business through a QR code scan, or through its account number.

Some businesses retain the bitcoins they have received in a transaction, but other prefer to convert them to shekels. Conversion is according to a representative exchange rate updated every 10 minutes and reported on various websites. For tax purposes, what is involved is a transaction for all intents and purposes, so that a business must report it and pay tax accordingly, and the customer receives an invoice/receipt in shekels as soon as the transaction is completed. In cases in which the business wants to convert the bitcoins it has received into shekels, a "pipeline" connecting the consumer to the business is added, similar to the clearance service of a credit card company.

"People prefer to keep bitcoins"

Zipy offers buyers to the option of paying directly in bitcoins, and also allows them to create a bitcoin account that is debited when a purchase is made. Goldstein explains that the volume of such deals is very small in comparison with total transactions, so that the risk to him of selling in the virtual currency is not great.

"It's like a social convention that can disappear. If the value of bitcoins plunges tomorrow, what I have will be burned, and that's the risk of virtual currencies. On the other hand, the bitcoin has proved itself so far, and therefore serves my interest as a business, and that of the consumers who hold bitcoins and want to make payments with them," Golstein says.

Palais des Thes teashop co-owner Charles Pagin has stopped accepting bitcoin payments, but he expresses a positive attitude. "During the six months in which I offered the service, we had eight transactions in which bitcoins were used. I kept the bitcoins as an investment instrument, and I'm glad about that, because I didn't have any before that, and their value soared. We decided to stop, not because I don't believe in the currency, but because of technical problems, because we worked with a clearing house that no longer works, which gave us the money after two weeks. I'm sure we'll go back to it at a later stage."

Another business that abandoned bitcoin transactions commented, "People don't want to pay with bitcoins, because they prefer to keep them. The exchange rates are going up at a crazy rate, and just like I'd like to accumulate bitcoins for the products I sell, people are keeping what they have in the hope that the rate will go on rising. I stopped offering this payment method simply because it's still irrelevant to Israel, but I believe that after it becomes more common worldwide, it will also penetrate here, and we'll be in the game again."

A media consultant who also accepts bitcoins, but prefers to convert the virtual currency into shekels, has a completely different opinion. "I have been accepting bitcoins since 2015, and today, over half of my clients pay me in bitcoins, because most of them are in the industry. I convert all of them into shekels immediately. I don't invest in shares or currencies; for me, bitcoins is part of my regular business activity. In other words, I get money, I pay tax and VAT on it, and I convert into shekels immediately. I don't want to move my monthly flow. If I decide to invest in bitcoins or any other instrument, I prefer to do it with the shekels I have received."

For him, the main advantage is the convenience of getting paid in bitcoins. "In this way, my clients can pay me any way they want, and in any currency: dollars, euros, or pounds sterling - as long as I get shekels at the par value according to the transaction date. Payment in bitcoins is quick, the real value is available, and the price is not subject to dispute

"In comparison with credit cards, for example, the procedure is easier. While with credit, the amount can be lower, because of the clearance commission, with bitcoins, because of the exchange rate, it's possible that I'll get more in the end. For example, if the amount of the transaction is NIS 1,000, with a credit card it will be NIS 950 net of the 5% clearance fee, while with bitcoins, I might get NIS 1,020, depending on the exchange rate. Furthermore, a bitcoin transaction can't be canceled, and as a business, this gives me important confidence."

The question arises of whether a small business, such as a cafe or psychologist, offering to accept payment in bitcoin is getting into this game as a gimmick, or as a legitimate means of payment.

Pagin makes no attempt to conceal the gimmick's advantage. "When we began to introduce bitcoins as a means of payment, we were interviewed about it on a television program. We got five minutes of prime-time exposure. For me, that already made it worthwhile."

Other businesses that have already given up on bitcoins as a means of payment agree that they initially joined for the gimmick value. Some of them, however, abandoned the idea due to lack of response. An owner of the Yamit garage in Tel Aviv says, "We joined the service more than two years ago, and something didn't work the way it was supposed to. Given the fact that there was also no interest among the customers, we decided to give up the idea."

The owner of a pet shop in Haifa who accepted bitcoins also says that he got 2-3 transactions a year, and therefore decided to abandon the idea. The Peacock Bar in Tel Aviv, which temporarily halted the service, will renew it in September, and expresses real confidence in the method, beyond the gimmick value.

Saving on commissions

At this stage, at least, the Israeli consumer encounters the use of bitcoins in transferring money to international suppliers, such as Microsoft. Some of these suppliers, incidentally, now work only with bitcoins. Youval Rouach, CEO of Bits of Gold, the largest company in Israel providing bitcoin services (selling, buying, and clearance services), explains that the rising trend in bitcoin use is clear. The number of transactions conducted through the company grew from 397 in 2016 to 589 in the first seven months of 2017, and the shekel volume of the transactions increased from NIS 1.14 billion in all of 2016 to NIS 4.8 billion in 2017 so far.

Should these figures make banks, credit card companies, and means of payment like PayPal uneasy? "It's not creating uneasiness, because the world's major banks not only understand the significance, but are also trying to use the technology behind it (blockchain, the digital currencies technology, M. R.-C.) to build their own system. Furthermore, Falcon Private Bank in Switzerland has started giving its customers the option of buying and selling bitcoins through the bank. That says it all.

"I know a computer store that manages entire turnovers only in bitcoins. There are now businesses, such as Israeli companies whose supplier works overseas, that have to keep bitcoins in order to get services from other businesses. You can't say it's taking over the credit market, but it's arousing great interest among people in both directions: those getting paid and those doing the paying.

"Most of the bitcoin activity in Israel is by Israeli companies paying overseas suppliers. For businesses, if it's a gimmick or just a cool thing to do, why not? There is also a business element. A grocery store owner who pays a credit card company a 3% clearance commission can save himself this cost, depending on the clearance volumes of the transaction. I regard 2017 as a watershed in this matter. In my opinion, the list of businesses accepting bitcoins will continue to grow."

Bitcoin currency, which was invented in Japan in 2009, was designed to make the use of ordinary coins unnecessary. One of the advantages of using bitcoins is therefore for tourists all over the world

"I was in Japan a while ago, and I paid for coffee and cake in bitcoins without any local currency. It's true that I could have used my credit card and paid a conversion commission for the currency, but the simplicity with which the transaction was conducted tells the whole story: from the cellphone directly to the cafe according to the given rate at that precise moment. Bitcoins belong to no one; that's what is great about them," Rouach concludes.

Published by Globes [online], Israel Business News - www.globes-online.com - on August 9, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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