Study: Do alternative currencies have staying power?

June 12, 2013

Alternative currencies often evolve in times of economic crisis, but few last much longer than the problems that made them seem necessary. This is the finding of a new study from payments and banking researchers at Mercator Advisory Group.

"Alternative Currencies: Is There Staying Power?" reviews various non-fiat currencies, some operating globally, some only in the United States.

The study suggests that traditional payments industry players should monitor the progress of alternative payment initiatives, but not necessarily shift their strategic direction in response.

Mercator identifies four virtual currencies with the potential either to circumvent or to complement traditional payment methods or complement them. Then it identifies markets and market drivers behind these four alternative currencies:

  • open, online currencies such as Bitcoin;
  • closed, proprietary virtual currencies, which are often tied to online games;
  • loyalty and reward points and miles tied to traditional payment cards; and
  • community-based paper currencies.

"Distrust of government-issued currencies, or competitive threats involving businesses, for years has prompted the occasional alternative currency to emerge, but few have had much staying power," said Jeffrey Green, director of the emerging technologies advisory service at Mercator Advisory Group, and author of the report. 

"Fears tend to subside once the situation stabilizes and conditions improve. But alternative currencies that complement and reward traditional payment card use have found a niche that will keep them prospering for years to come."

Highlights of the report include:

  • an overview of Bitcoin and its potential to disrupt the global online marketplace;
  • a look at Amazon's new Coins virtual currency and its place in current market trends;
  • an analysis of the potential threats or opportunities alternative currencies present for traditional card issuers and networks.

... and in other alt currency news:

Online payments provider Text2Pay has announced that it will now allow merchants to accept peer-to-peer digital currencies, such as Bitcoin.


"By offering Bitcoin to merchants, customers will experience faster payment processing, lower fees, and increased security and privacy," said Mark Reiken, managing director of Text2Pay.

Reiken said that Bitcoin is just the first of many digital currencies that will emerge over the next decade.

"Digital currencies are the future — much like gold, bitcoins increase in value over time and they're anonymous," he said. 

draperBitcoin also has gotten the nod from Draper University, a boarding school for young entrepreneurs aged 18–26. The alternative school received its first tuition payment in Bitcoin for the 2013 summer session.

"Some of the most forward looking entrepreneurs are active Bitcoin traders," said Tim Draper, founder of Draper University. "[W]e accept Bitcoin payment of tuition because it is a promising currency with appreciating value. For the time being, we still accept dollars too."

In keeping with its "out-of-the-box" approach to business education, Draper University has also excepted tuition in the form of personal training by a former NFL player and placement of the school's logo on the car of a female student who also happened to be a pro racecar driver.  

Read more about trends and statistics.

Topics: Trends / Statistics

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