PayPal Files Patent for an “Expedited Virtual Currency Transaction System”
After forging a trail for retailer acceptance of Bitcoin payments back in 2014, PayPal has been surprisingly quiet when it comes to digital currency developments. That is, until now. On March 1st, 2018, PayPal filed a patent application for an “Expedited Virtual Currency Transaction System” with the U.S Patent and Trademark Office (USPTO).
Faster digital currency payment processing for retail transactions
In the patent application, PayPal details a method of expedited digital currency payment processing that reduces the time taken for payments to be sent between consumer and merchant. The system will avoid the delay of sending a transaction and waiting for it to be included in the next block on the blockchain.
PayPal is proposing secondary wallets with unique private keys for buyers and sellers where payments can occur instantaneously. The secondary wallets increase transaction speeds by using “predefined amounts” of digital currency. They hope the system will eventually encourage more users of digital currencies to complete their purchases with digital coins rather than reverting to traditional payment methods.
PayPal acceptance of Bitcoin payments in 2014
After separating from eBay in 2014, PayPal announced its merchants would be able to accept Bitcoin and digital currency payments through an integration with Braintree.
The move came at a time when few online retailers had adopted Bitcoin payments. Overstock.com was the first major retailer to accept Bitcoin, commencing in January 2014. After that, Ottawa-based ecommerce platform Shopify enabled their 75,000 merchants to receive payments in Bitcoin via BitPay. Though not a sole move in the industry, PayPal’s announcement in 2014 was a key marker for digital currencies due to the volume of merchants who use PayPal.
Purchasing goods or services directly with Bitcoin, or altcoins, is still slow to expand due to slow transaction speeds, coin price volatility, and high fees. Companies and digital currencies who innovate to overcome these hurdles could see substantial gains.
In PayPal’s government relations pages for blockchain they state:
“PayPal was one of the first payment companies to enable merchants to accept Bitcoin through Braintree, by way of partnerships with payment processors BitPay, GoCoin, and Coinbase. We’re working to understand how to leverage blockchain to better serve merchants and users.”
Competition between peer-to-peer payment processors
The competition between payment processing applications is strong. PayPal has led the industry since their inception, boasting 10 million users by 2017, according to Verto Analytics.
Closely on PayPal’s heels are Square who reported seven million active users in the fourth quarter of 2017. Square tested a Bitcoin purchasing facility with a limited number of users in November 2017, opening the facility to most of its users in January 2018.
Square plans to extend support for Bitcoin and may enable consumer-to-merchant Bitcoin payments in the near future.
“Bitcoin, for us, is not stopping at buying and selling. We do believe that this is a transformational technology for our industry, and we want to learn as quickly as possible,” said Square CEO Jack Dorsey in a call to Market Watch. Dorsey believes Bitcoin offers “an opportunity to get more people access to the financial system”.
FinTech companies are being propelled to innovate quickly by the growth of digital currency usage and the advantages for financial infrastructures provided by blockchain technology.
PayPal, almost a dinosaur in terms of online payment processors, is certainly overdue to demonstrate further innovation in the marketplace.
Image credit: PayPal logo
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