Another billion dollar year for BitPay as B2B world opens up

Setting a new record for transaction fee revenue, Blockchain payment pioneer BitPay has processed over $1 billion in transactions for the second year in a row. In the seven years since its founding, the bitcoin payment processor has grown from a two-person office in Atlanta, to a global business with 80 staff scattered in offices across the world.

In BitPay’s short lifespan, bitcoin has turned from a novelty payment network to a genuine business solution, and transaction volumes continue to grow.

Stable through bitcoin’s ups and downs, the company has demonstrated consistent growth. And even as other companies like ShapeShift have downsized in the crypto winter, BitPay has been hiring across the board in sales, engineering, support, and compliance. Certainly part of the company’s success is its financing. Whereas ShapeShift’s Eric Voorhees says his company’s "greatest and worst financial decision" was to "embrace substantial exposure to crypto assets," BitPay has instead gone a different route, raising over $70 million via the traditional venture capital route.

The BitPay bridge

The Bitpay business model is two-pronged; offering businesses the ability to accept bitcoin, and receive fiat, and offering consumers the ability to buy things with bitcoin that are denominated in fiat.

This has proved popular with a range of different businesses — including law firms, data center providers, and cybersecurity companies like HackerOne.

B2B payments, however, have been in particularly high demand — surging 255% in 2018 even as bitcoin dropped 80%. This was described in a blog post late last year by former Paypal executive Rolf Haag, who is now responsible for B2B at BitPay: "B2B payments is our fastest growing segment. Because BitPay only charges a simple 1% fee and settles within 2 business days, we’re already better than international wires, which can cost 3 – 4% and settle in 3 – 5 days."

Hagg says this makes BitPay Bitcoin payments cheaper and quicker in many parts of the world for current B2B customers include technology vendors, import/exporters, real estate developers, professional services firms, and Fortune 500 enterprise customers. "These businesses are executing payments more quickly and more cheaply than bank wires by accepting Bitcoin through BitPay today," he says.

With an estimated value of $150 trillion today, the global B2B money transfer industry is expected to grow to $218 trillion by 2022. This market is increasingly critical for connecting the world economy but remains slow and costly. Through BitPay, bitcoin has a doorway into this market, providing an alternative route to the existing payments infrastructure.

That said, merchant processing remains the mainstay of BitPay’s business, as CEO Stephen Pair told Brave New Coin: "While the B2B segment is the fast growing part of BitPay’s business, merchant processing is still the biggest."

A drop in the payment services ocean

Although BitPay was the first mover, a number of other companies have also launched similar services. Coinbase commerce, which offers integration with Woocommerce and Shopify, was released in August 2018, in the same month as Square’s crypto payment network.

Since then, Square has been promoting bitcoin as an alternative method of payment, and in its Q3 shareholder letter, reported that cryptocurrency revenue grew by a total of $6 million from Q2. However, this remains a slender proportion of the overall payments processed by Square, with total net revenue amounting to $839 million, up 43% year over year.

While BitPay’s numbers sound impressive in isolation, when compared with general B2B payment volumes, bitcoin is dwarfed, and the $1 billion processed by BitPay pales in comparison to the volumes processed by more mainstream payment platforms, like Visa which reportedly processed $950 billion in B2B payments in 2018.

Nevertheless, recent research from Satoshi Capital shows that the general bitcoin transaction volume has more than doubled year over year, reaching a median daily growth rate of 2.91 percent in 2017 and 2018. Should this continue, then general volumes could soon be expected to exceed the volumes processed by small B2B payment processors.

If BitPay CEO Stephen Pair is to be believed, then this could be just the beginning. Speaking on CNBC in December 2018, Pair said that he expects the adoption of ‘blockchain-based currencies’ in daily transactions to occur en masse in under half a decade: "I used to say ten years, but now I think it’s more like three to five years until you can go into a restaurant, a retail establishment, and everybody’s going to expect that that store will be able to accept a blockchain payment."