Everybody says payments will be on the blockchain in the future
"If you talk to any financial institution today, everybody says payment will be on the blockchain in the future," the CEO of Danish cryptocurrency business told Business Insider.
"I think we're beyond where we're wondering if the blockchain will be used for payments or not."
It's true that banks are going crazy for the potential of blockchain technology, which was first developed to underpin cryptocurrency bitcoin. Forty two have signed up to a working group, R3, looking at possible uses for the technology. Payments is just one of them.
Copenhagen-headquartered Coinify is not involved in the discussions but is hoping to ride the wave of blockchain enthusiasm in the financial service world right now.
The company runs a bitcoin trading platform for users to buy and sell digital currency. But it is also a payment service provider (PSP) that lets banks and merchants accept payment in 17 different cryptocurrencies while getting paid in their own local currencies.
"Once we get bitcoin coming in from our payments side, because we keep the bitcoins and pay out local currencies to our merchants, we can use those in our trade facility where we have demand of bitcoin," Højgaard says. "We make actually a profit on receiving bitcoin and selling bitcoin."
It is on the payments side rather than the trading side that Coinify wants "to place our big bets," according to Højgaard. The company is signing partnerships with payment service providers around the world, offering a simple digital plug-in called an API that lets clients of the PSP easily accept payments in bitcoin and other digital currencies.
"9 months ago, you couldn't get in touch with anyone from the payment services industry," Højgaard says. "But today, we see people calling us for our services in the PSP sector and we have 15 contracts."
Coinify's ambition is to be the go-to service provider for anyone who wants to accept any blockchain-based payment, be it bitcoin or otherwise. Højgaard says: "If there is a payment to be done on the blockchain, we are the ones to use, based on our great, very versatile platform."
Blockchain - also known as distributed ledger technology - is a name for a protocol underpinning bitcoin that uses complex cryptography and distributed ledgers, or copies of records in multiple places, to regulate, record, and enable transactions using bitcoin.
Finance firms hope it has the potential to be faster than current systems and cut costs by eliminating the middle men who usually sit in between any transaction. But many are looking to use alternative blockchains to bitcoin's.
Højgaard says: "There will be hybrid models, there will be a lot of new alternatives, there might be a new blockchain - not the bitcoin blockchain."
Between the two sides of the business, Coinify is the fourth biggest bitcoin company in the world by volume. Over 15,000 merchants around the world are signed up and it has 10 to 15 new ones signing up each day. Højgaard highlights Danish food delivery start-up Hungry.dk as one of its biggest clients.
But Coinify's "big bets" rely on uptake of bitcoin or other cryptocurrencies for payments. US bitcoin companies that have banked on big consumer take up have faltered because people aren't using the digital currency anywhere near as much as they hoped. Coinify is hoping to avoid the same pitfalls by keeping things small.
"We are a lean startup business and we still act and think as a lean startup," CEO Mark Højgaard told Business Insider. Despite the volumes it deals with, Coinify still only employs 18 people.
"We spend out money wisely and we are hopefully having enough traction to maintain our position. We have great volume, we are actually making money, but we are not making more than we are spending of course. But we don't have that same kind of burn rate that you see in the US."
But Højgaard concedes: "Nobody can tell the future right now. We had a big discussion yesterday with a lot of banks in a blockchain masterclass. We had a lot of financial institutions talking about what the future can be like and nobody can actually see at this point. That's a risk factor in this.
"You cannot see when the user will adopt this and you can not even say that it's going to be bitcoin. I cannot even say when the big uptick will be." Still, he thinks there will be an uptick.
Many banks also believe that bitcoin will be eclipsed by its underlying technology, with Goldman Sachs saying: "Bitcoin was just the opening act, with the Blockchain ready to take center stage."
Højgaard is unfazed. He says: "Us as a company, we are independent of the bitcoin and blockchain. We simply aggregate to the merchants. In that sense I think the technology will be used in some sense. Maybe the consumers doesn't even need to know because it will be the underlying platform."
Coinify is currently in the process of raising a Series A round of funding but Højgaard would not disclose how much the company is targetting. He said Coinify hoped to transact €100 million (£76 million, $108 million) this year.