A very brief news article on a trade website recently caught my eye with the title “Florida dentist accepts bitcoin for treatment”. Susan Crawford, a Harvard professor, said this:
“There is nothing more imaginary than a monetary system. The idea that we solemnly hand around printed slips of paper in exchange for food and water shows how trusting and fond of patterned behavior we human beings are. So why not take the next step? Of course we’ll move to even more abstract representations of value.”
The substitution of bitcoins for dollars is this next step.
How does it work in a dental practice?
Dr. Mitchell Pohl is the Florida dentist who now accepts this as payment for his services. If you go to his website (http://www.bocaratoncosmeticdentist.com/) and scroll down to the bottom you’ll find the icon:
I spoke with him a couple of weeks ago and got a little “how-to” education. As I delved deeper into the technology that was being used he had to refer me to his chief technology advisor, his 15-year old son Matthew. Matthew is pursuing Bitcoins as part of his involvement with the Young Entrepreneurs Academy, an offering of the Boca Raton Chamber of Commerce. Here’s the process that takes place when accepting a bitcoin payment.
1. A patient who wishes to pay with bitcoins makes this known to the practice.
2. Software from a third-party vendor (in this case CoinBase) is used on the doctor’s computer to convert the amount to be paid from dollars to bitcoins. It is not necessary to use a third party, like CoinBase. Bitcoins can be a true peer-to-peer exchange. Dr. Pohl uses Coinbase because he does not wish to hold funds in bitcoins beyond the life of the transaction.
3. This software generates a QR (Quick Read) code unique to the transaction. You’ve seen QR codes before. They look like this:
4. The patient scans the QR code with his or her mobile device using an e-wallet application.
5. The e-wallet application authorizes the bitcoins to move from the patient’s account into a CoinBase account for Dr. Pohl.
6. CoinBase then converts this bitcoin payment into dollars and deposits them into Dr. Pohl’s bank account within 24 hours. This piece sounds like a standard credit or debit card transaction.
Why consider this as a payment option for your practice?
• According to CoinBase’s website they have a 0% transaction fee for the first $1,000,000 in payments. Considerably better than the 2-4% you may now be forfeiting on credit and debit card payments.
• The bitcoin transaction is highly encrypted providing safety as the value changes hands.
• Some major retailers have adopted the use of bitcoins for payments: Overstock.com and Tigerdirect.
• The newness gets noticed. I would not be referring to Dr. Pohl’s practice in this blog if he were not on the leading edge of this payment technology.
Why not to consider this as a payment option for your practice?
• The value of bitcoins can be volatile. In January 2013 one bitcoin was worth $13. In Dec of that same year a bitcoin could buy you over $700. As I write this post the price of a bitcoin is $543. So there is risk in accepting this payment type. You might find yourself benefitting from this volatility or being on the losing end. Dr. Pohl only holds his bitcoins long enough for the transaction to clear through CoinBase, minimizing his exposure to the volatility.
• You need a community of patients who will use this service or it’s not worth the set up and learning curve for your staff.
• Government action may do away with the entire bitcoin industry. The U.S. congress seems to be inclined to embrace and regulate it. There has been no legislative action but hearings have been held before the Senate Government Affairs Committee. Canada welcomed the first bitcoin ATM last year. On the other side of this “bit”coin, China has declared it “not a currency”, Iceland has prohibited trading with bitcoins and Russia has declared that the ruble is the exclusive means of payment in the federation.
The easiest way to envision bitcoin use is as a foreign currency. You take payment in pesos or euros and then look to convert them to dollars. Exchange rates can fluctuate, so you minimize the time the value is held in the foreign currency.
Those peso notes you have stashed away in your sock drawer from your 2012 visit to Mexico may be gaining or losing value as they sit. A risk you may not want to extend to your practice accounts receivables.
Is this the beginning of a trend that will sweep through all levels of retail? It’s a little too early to predict, but certainly a noticeable right click for Dr. Pohl.
