One common criticism of bitcoin and other cryptocurrencies is that — beyond the wild price swings and uncertain regulatory climate — the digital coins are not widely accepted by merchants on any grand scale.
This means, of course, that using cryptos in commerce is, thus far, a limited proposition.
Against that backdrop, payments network Flexa said earlier this summer that it had expanded its reach into Canada with its SPEDN cryptocurrency wallet. The company said in a blog post that the wallet is available to iOS and Android users, and individuals will be able to transact with more than 7,500 merchants by next month.
In simple terms, SPEDN processes transactions made with cryptocurrencies such as bitcoin, Ethereum and Litecoin, among others.
Funds are insured and custodied through crypto exchange Gemini, where the SPEDN wallets are fully insured across the latter’s infrastructure.
“We’ve been trying to figure out ways of connecting closer and closer to a merchant point of sale and while also giving them more control over their own acceptance for a long time now,” said Trevor Filter, co-founder of Flexa, in an interview with PYMNTS. “We realized that cryptocurrency offers a lot of those benefits, natively, but it’s still something that’s very nascent and complex and difficult to integrate, especially across large corporations like the ones we work with.”
He said the company has devised and brought to market the technology to accept cryptocurrency in stores, today, through existing hardware and software, without the need to upgrade technology already in place.
“They can benefit from the fraud proof nature of cryptocurrencies while reducing transaction costs and sidestepping credit card and debit card infrastructure,” Filter said.
How it Works
The Flexa SPEDN app uses a proprietary barcode format that acts like a wrapper around more traditional barcodes, Filter explained.
That technology is backward compatible with multiple types of scanners, he said, and barcode scan brings the payments account or primary number into the merchants’ point of sale system.
In terms of the mechanics on the consumer side of the Flexa offering, he said users open the app and are able to see their “cryptocurrency spending power” rendered in U.S. dollars (or Canadian currency).
“We call it spending power because we’re actually showing you the amount of dollars you can spend based on your native cryptocurrency balance,” Filter said.
Behind the scenes, he said, Flexa generates a flex code and connects directly to the merchant payment processing platform, authorizing that transaction for the holder’s cryptocurrency balance. Tapping the phone and display against the terminal scans the code and authorizes the payment.
The transaction is secured by the FlexaCoin, and the network pays the merchant in cash, while payment is debited from the crypto wallet (exchange rates are set at the time of the transaction, said Filter) with no fees levied on the transaction.
Filter maintained that use cases expand as cryptos are accepted at merchants. And industries that may not have access (as yet) to traditional banking services, like cannabis (which is legal in Canada), are “on our radar, but [are] not necessarily on our roadmap.”
He said the opportunity to foster greater financial inclusion exists where a large part of the population does not possess and is denied access to credit and debit cards by virtue of the traditional credit system.
“We’re always looking to expand access to payments and simplify that system for as many kinds of people as possible,” he said.
Of course, with any nascent and non-traditional payment ecosystem, onboarding may be of concern. Flexa’s process, said Filter, is to go country-by-country to open up access to the network.
“Traditionally in order to transact with cryptocurrency people have had to go through a really thorough know your customer, or KYC track, and that often involves uploading photos of your ID or sometimes a selfie of yourself holding up a special message on a piece of paper,” he said.
The company has worked closely with bank partners and regulators, establishing thresholds for onboarding tied to actual commerce conducted with Flexa, Filter said. If individuals want to spend up to $100 a week worth of crypto across the platform, they have to pass sanctions and watch list checks. Beyond that $100 weekly threshold, he said, there exist additional layers of registration.
Asked about monetization, Filter said while the current network is designed to run at cost (operating costs are covered by fees paid by merchants), “it’s helpful to think about Flexa as a network or more of a platform in the sense that our Flexa software can actually be embedded in any app.”
The permission-less nature, he said, means that developers working with merchant apps or other cryptocurrency wallets or banking apps can integrate with Flexa technology. Extending that logic, it’s conceivable that an eCommerce giant like Amazon could embed Flexa code into their app and enable users to pay with crypto on Amazon’s platform.
“We want to improve payments for merchants and enable them to take greater control over their own payment acceptance so that they can then eventually pass those savings on the rest of us,” Filter said.
As for other use cases, he said, “We’re looking at online, we’re looking at retail, we’re looking at unattended retail verticals like vending machines and places where you would normally not even be able to use a credit card. And we think that the sky’s the limit.”