Coinbase to Allow Recurring Bitcoin Debits for Balanced

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Allowing merchants to set up recurring debits or pull money from a Bitcoin account seems in conflict with the Bitcoin protocol itself, which was built for push transactions, allowing consumers to have a better handle on what payments they make. But pull transactions are just what a partnership between Coinbase and Balanced will enable.

"This will end up making Bitcoin a lot more mainstream because you're making the experience of purchasing with Bitcoin as close to the understood e-commerce experience as possible," says Matin Tamizi, co-founder and CEO of Balanced, which provides technology for marketplaces.

Coinbase, a Bitcoin wallet and merchant services provider, is allowing Balanced to store user's "token" in its PCI-compliant vault, where other consumer payment credentials, such as debit and credit card numbers, are stored.

In this way, marketplaces can set up automatic recurring payments and consumers don't have to enter their wallet address or scan a QR code every time they want to purchase on a marketplace, says Tamizi. Instead, it becomes a one-click transaction, and users could later revoke the permission to perform recurring payments, he says.

But Bitcoin enthusiasts could disagree that Bitcoin should be used in a manner that so closely resembles traditional payment methods. There is also an inherent risk to storing a user's Bitcoin credentials for repeated use, since the private keys that enable bitcoin transactions can't be reissued like credit card numbers. Since Bitcoin transactions are irreversible, there is no recourse for individuals to recover lost or stolen funds.

The digital currency has received much attention from mainstream media outlets because of its price volatility, every drop spurring talk of the "Bitcoin Bubble." But more interesting are Bitcoin's practical uses, providing pseudonymity for donations, real-time transfers and near-free transactions for micropayments and the remittance industry. Bitcoin is attracting more merchants aiming to eliminate the high fees of card transactions and to take advantage of the protocol's design for irreversible transactions.

The U.S. government issued guidance on virtual currency such as Bitcoin in March 2013 and the New York Department of Financial Services has moved to create virtual currency-specific state requirements that protect consumers without stifling innovation.

The partnership between Coinbase and Balanced opens bitcoin acceptance up to more than 450 online marketplaces.

Gittip, a company that allows people to set up recurring payments to groups such as charities, will be the first Balanced client to integrate the acceptance. "For Gittip specifically there's been a lot of demand from people publicly requesting [Bitcoin]," says Tamizi.

Marketplaces will not directly see bitcoin, as Coinbase will facilitate merchants being paid directly in U.S. dollars, so they don't have to take the currency volatility risk, says Tamizi. Coinbase did not provide executives for an interview by deadline.

This process is similar to that of BitPay, a popular Bitcoin merchant services platform, which processed 55,288 transactions in November, up 165% from October's volume. In comparison, Coinbase handles transactions for more than 23,000 merchants and 960,000 consumer wallets.

"Our focus has been, from the beginning, what we can do to enable more commerce," says Tamizi. "There are a growing number of people that want to be able to spend the bitcoins they have." 

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