Though many have tried and failed to get bitcoin into the mainstream, iPayYou CEO Gene Kavner is ready to take a page out of the playbook of Amazon.com, his former employer, to bring attention to his new bitcoin wallet.
Kavner, an experienced software developer and the former worldwide director of the Amazon Associates program, wants to present the iPayYou bitcoin wallet, in part, as a teaching tool.
"When we first got on the Internet in the early 1990s, no one knew what to do with it," Kavner said. "Amazon, Google and Yahoo came along and created search engines and told us how to use it and how to purchase things. The same thing must happen with bitcoin."
Kavner wants to overcome the legal snarls and general perception of uncertainty about bitcoin by establishing iPayYou as a Web-based bitcoin wallet with easy instructions about how to buy bitcoins and how to use the digital currency for purchases — eventually, even from merchants that do not accept bitcoin payments.
"We are trying to take something very technical with the understanding that the target customer has likely never heard of bitcoin," said Kavner, who also has experience in software and digital commerce at Microsoft and Expedia. "These customers simply want value out of the wallet and to be able to do certain things they could not easily do with other mobile wallets."
First, Kavner won't use the term "virtual currency" when talking about the iPayYou wallet because "you automatically lose 95% of the people when you use that term." Instead, iPayYou will always display values in the bitcoin wallet in U.S. dollars, he said.
"The customer has to understand it in a way they are used to," Kavner added. In that sense, iPayYou will charge small transaction fees but won't burden the customer with what the appropriate bitcoin miner fee is for each transaction, a loophole that can often stall a bitcoin payment.
"We figure all of that out and tell them what the fee is, and we take care of moving the payment along the iPayYou network," Kavner said.
The conventional bitcoin payment process is much more complex. A pure bitcoin transfer requires the user to know the recipient's bitcoin address, pay a miner fee, determine the current value of the digital currency and various other factors, Kavner said.
IPayYou handles all of that busy work and streamlines it into a process that most consumers know how to use. It supports payments to recipients in bitcoin, but converts bitcoin to U.S. dollars when needed to complete a transaction.
"We send it by e-mail, so if you owe someone $20, you send it to an e-mail address and we automatically pre-create an account for them," he added. Users are asked to register an e-mail address and a mobile device for communication when iPayYou introduces a mobile app in the coming months.
Part of bitcoin's appeal is that its payments are irreversible, like cash transactions, but iPayYou plans to include the ability to cancel a payment that has been directed to the wrong recipient.
Seattle-based iPayYou enters a virtual minefield of bitcoin wallet operators, from the likes of Coinbase, Bitserve and Circle to Airbitz, Bitserve, breadwallet and Green Bits. Some have stayed the course, some have folded and others have changed their missions.
A company called Snapcard, which initially felt it had solved the bitcoin acceptance code through a mobile app, quickly realized the number of potential users and costs to operate such a concept was a difficult proposition at best. It left the wallet premise behind and instead began concentrating on developing bitcoin storage hardware and bitcoin terminals.
Still, many companies are sticking to their roots, trying to get consumers and merchants to use bitcoin without sugar-coating the process. For example, last year USAA set up a partnership with bitcoin wallet provider Coinbase to serve USAA's mobile customer base and allow Coinbase users to monitor their account when logging into their USAA bank account.
That move came on the heels of partnerships and investments the major card brands began making in bitcoin companies and projects. And just this week, BitPay introduced a Visa-branded bitcoin debit card.
IPayYou's mission to become a mobile wallet provider adds other challenges to its bitcoin payment model, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
"They are essentially talking about a new currency through a new funded account," Crone said. "If merchants were really aggressive about the opportunity for this, they would be translating their private label prepaid debit accounts into spending accounts on their own, in the same way a Starbucks does it."
Bitcoin wallet operators have missed out on being part of that formula because merchants like the idea of creating their own alternative currency, gaining customer loyalty, lowering the average cost of transactions and interacting with customers through a loyalty/payments program, Crone added.
Even Amazon.com, the inspiration for this model, maintains its own virtual currency in the form of Amazon Coins.
"There isn't a merchant acquirer/processor out there flipping the switch on for bitcoin wallets for all of their merchants," Crone said. "Until a bitcoin wallet provider can make that announcement, it won't get any traction without that common acceptance."
Kavner says someone has to try to make bitcoin less mysterious and then, over time, the currency's advantages of near-instant settlement and immediate global acceptance will draw more attention. He figures his company is best suited to do it.
"Our vision is trying to ease the individual into using bitcoin by explaining their options and how to use it," Kavner said.
In the future, Kavner wants the iPayYou mobile app to sell merchant gift cards and other products. If a merchant does not accept bitcoin, iPayYou works as the go-between in taking the payment and providing the merchant with U.S. dollars.
"We don't want our users to sit and wait for more merchants to accept, but we also are not holders of their bitcoin," Kavner said. "The iPayYou account is the consumer's account and nobody else can touch their money."
The iPayYou network operates through a private key and various layers of encryption, Kavner said. It also has the security of the user's mobile device when receiving funds, and the log-in operates under a system in which the network password changes every 30 seconds and must be combined with the user account password to make transactions.
While bitcoin is accepted globally as a currency, iPayYou is first targeting consumers in the U.S., a country in which consumers currently buy and sell bitcoin.