Bitcoin and cash: When two worlds collide, ATMs need to get it right
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|Charlie Allen is the OEM marketing manager at Glory Global Solutions.|
Wherever you look, cryptocurrencies are in the news. Love them or loathe them, you can't ignore them.
In the past few months alone, Lloyds Banking Group Plc has blocked customers from buying cryptocurrencies with their credit cards, becoming the first U.K. bank to ban borrowing for bitcoin. Furthermore, the South Korean government has barred its officials from holding and trading cryptocurrency, and a former Indian government official has stated that such currencies should not be allowed as it's impossible to regulate them properly. He claimed that unlike shares, which have an underlying value, "they are created out of a vacuum or thin air."
At the same time, Cardtronics, a non-bank ATM operator, has claimed that the growth in public interest in cryptocurrency could affect the general population's need or demand for cash.
Bitcoin was launched in 2009 as a digital asset designed to act as a medium of exchange. In May 2010, two pizzas were bought using 10,000 bitcoins. The price has fluctuated greatly, but at the time of writing, one bitcoin is worth £6,650 ($9,005.59). According to a Nov. 27 Forbes article, bitcoin saw a 55 percent increase in trading volume in 2017 with 30,000 new wallets created daily.
How easy is it to use bitcoin and what role do ATMs and cash play in this?
Bitcoin evolves, bringing new challenges
In recent years, bitcoin has become easier to use and more accessible. The evolution of bitcoin ATMs that enable users to buy and sell bitcoins for cash is an important element of this development. The first bitcoin ATM was introduced at a Vancouver coffee shop in 2013 and there are currently 115 of these ATMs in the U.K., 83 of which are in London.
Though the term "ATM" is used, these are specialist machines and there is no connection to a bank account. Rather, users are connected to a bitcoin exchange. Bitcoin ATMs are expensive to operate and the fees charged reflect this.
So how is this similar to a traditional ATM and how are the required technologies similar?
An exchange of value
Obviously, the process is more complex than a straightforward ATM cash transaction, but bitcoin purchases and sales via the machines do involve inward and outward cash payments. It is about the exchange of value to or from physical currency.
The machines therefore require the technology necessary to ensure only genuine cash is accepted and dispensed, and that the count is accurate. The ability to consistently detect doubles, even with severely degraded notes, cannot be understated and is where significant recent advances in technology have taken place.
That's not all. Recent reports have highlighted the potential for money laundering and fraud at bitcoin ATMs, which is where serial number recognition technology comes into its own, enabling full traceability of every note passing through the machine.
Optical character recognition exports the serial number of each banknote to a control computer through a direct communication application. Digital images of the banknotes can also be captured for enhanced security and risk reduction.
Technology must adapt to new demands
This technology gives customers the confidence to know that only genuine notes have been dispensed and provides the evidence to challenge the operator if they are at all suspicious of counterfeit notes being issued. Serial number recognition is being mandated by more and more central banks, with the Chinese among the first to adopt it.
Understandably, the rise in new payment technologies and the advent of cryptocurrencies could ultimately reduce the general population's need or demand for cash and negatively impact future transaction volumes for traditional ATM operators.
On the other hand, there is a definite opportunity for manufacturers to meet the growing demand for cryptocurrency by installing more self-serve kiosks in the market.