Through a partnership with Bitcoin payment processor BitPay Inc., Gyft now accepts bitcoins for its mobile gift card product. This extends the virtual currency's reach to more than 50,000 retail locations.
"The biggest issue with Bitcoin to date is: Where do you spend these bitcoins?" says Vinny Lingham, CEO of Gyft.
With its approximately 200 retailer relationships, including Burger King, Lowes, American Eagle and Nike, Gyft gives Bitcoin users more options. Gyft supports Bitcoin purchases only on the Android platform.
BitPay's arrangement with Gyft "opens the door to let people that have bitcoin spend them at major retailers," says Tony Gallippi, co-founder and CEO of BitPay. Gyft "converts bitcoin into a tender that merchants can already accept at their point of sale, which is a big step forward."
This arrangement also allows merchants, fearful of directly accepting the cryptocurrency because of its recent volatility, a chance to attract Bitcoin devotees.
"When you deal with a lot of retail you look at the point of sale system, the terminals and the whole payment structure it's very much a legacy system," says Gallippi. "It's difficult to add any new types of payment because they have to then upgrade all their terminals."
Users of Gyft's mobile app can buy virtual cards to use in-store. Users can also send and receive virtual gift cards across the platform.
To offset the risk for Gyft, BitPay guarantees the funds. BitPay gives consumers 15 minutes to pay a merchant in bitcoins. It charges its merchant clients 1% of the transaction amount. Last month, BitPay announced its new pricing model after significantly increasing its processing volume. The company lets users store and access bitcoins online or offline. It also lets users receive funds as a bank direct deposit.
"We're very excited about bitcoins and their potential for innovation in the financial services sector," Lingham says. "As a startup we can move quickly, we can pioneer, and we can innovate in this space."
Gyft was attracted to Bitcoin for its potential to change how companies fundamentally do business, Lingham says. Already the Financial Crimes Enforcement Network issued guidance on virtual currency in March to provide regulatory clarity.