Expedia embraces -- and legitimizes -- Bitcoin
Some are leery about the virtual currency's legitimacy and volatility. But for travel booking site Expedia, Bitcoin is just another way to buy stuff.
Bruised by a series of business problems earlier this year, Bitcoin stands to recover some of its cachet: travel site Expedia said Wednesday that it's accepting payments made in the virtual currency.
Bitcoin enables electronic purchases, even though the currency isn't linked to any particular country. It's got technophiles excited, but its shift toward the mainstream has been difficult over the last year.
But Expedia sees Bitcoin as just another payment mechanism, and people now can reserve hotel accommodations at the site through a partnership with Bitcoin transaction processor Coinbase. Other Expedia booking services such as cars and airplane flights will be get Bitcoin support later, said Michael Gulmann, Expedia's vice president of global product.
"Bitcoin is becoming a viable currency," Gulmann said. "This is no different from going into any market, understanding how we can do business, and offering the forms of payment customers want."
Actually, it's more than that. Here we have a major e-commerce site lending its brand clout to a new technology and making its sizable customer base aware that it believes Bitcoin is legitimate, not risky. That could reassure people to come on in -- the Bitcoin water is fine.
"It does make Bitcoin a little more serious," Gulmann said. "From our viewpoint, Bitcoin is young, but it is a cryptocurrency that's here to stay."
Expedia's faith contrasts with Bitcoin's difficult growth beyond its early uber-technical niche. In 2013, the price of a bitcoin soared beyond $1,000 as speculators -- and perhaps market-manipulating programs dubbed Willy and Markus -- drove up its value. Shortly afterward, the value plunged to half of the high-water mark. That volatility, combined with the bankruptcy problems of an exchange site called Mt. Gox where people could buy and sell bitcoins for ordinary currency, didn't reassure anyone worried about Bitcoin's stability.
There's something else in it for Expedia, too -- purchases made in bitcoins have lower transaction fees than those using payment cards that typically charge between 2 percent and 4 percent, Gulmann said. That's not the main reason the company embraced Bitcoin, especially since the initial sales volume will be small, but it helps. However, he added, "as Bitcoin becomes more widely accepted, we expect those transaction costs to go up a little bit."
Gulmann sees Bitcoin as analogous to eBay's electronic payment service, PayPal, which rose to fame in the 1990s. "I remember when PayPal was a strange thing -- you'd use an email address to send money from one person to another. Now PayPal is fairly mainstream," he said. "The path Bitcoin is on is in some ways what PayPal was on. At first it seems strange, something that only the technocentric crowd uses, but it's going to become more mainstream."
Coinbase processes transactions for Expedia, meaning that customers purchasing services with bitcoins will use Coinbase's services. That also means Expedia is sheltered from some of the volatility risks of Bitcoin, since it gets paid in ordinary currency after the transaction is complete.
"Coinbase has the largest e-commerce presence and the largest customers," Gulmann said. "As we started dipping a toe in the water, Coinbase was the natural choice for us."
In the US, the vast majority of customers pay with credit cards, but many other forms of payment are popular in other countries, and Bitcoin is particularly popular in southeast Asia, he said. "I expect as percentage of overall payments, that's where we'll get the quickest uptick," he said.
Some economists have bashed Bitcoin and some countries have issued warnings. Gulmann is more sanguine.
"Any currency is as valuable as people believe it is. As a former economist, I studied these things. Currencies today aren't backed by gold. It really comes down to whether general consumers have the belief that this currency is a valid form of trading between people: if I give you this, will you give me something else? Bitcoin has passed that bar. You can get goods and services or trade it for legal tender," Gulmann said. "Some economists may rail against it or say it's speculative. They're right, it is speculative. But that doesn't mean it's not a valued currency."