Banking with Bitcoin

by Albert Morales, Product Manager on Jul 10, 2015
With the news of the first Bitcoin ATMs being installed in Athens and the feverish buzz around Citicoinyou're probably wondering: hey, when do we actually get to start banking with Bitcoin?

A few of our developers* were asking the same question lately and, bright inquiring minds that they are, began dreaming up all kinds of possibilites and ideas to mainstream virtual currencies like Bitcoin into retail banking and integrate it into personal finance manager tools like Strands PFM


So what would Bitcoin-enabled PFM software actually look like?

First things first: we would initially need to have Bitcoin incorporated as a new currency in the system, and then we could display the updated exchange rates as we would with any other currency. Next we would need to be able to aggregate and categorize Bitcoin transactions. 

This is what we're most excited about: developing an API-based plugin that will add Bitcoin and other virtual currencies to our new aggregation engine. Although quite complex it is technically possible, since Bitcoin provides APIs to access wallet transactions.

These APIs allow us to integrate any personal finance management tool with users' wallets that list their transactions and balances. This information would be securely stored as any other bank transaction. What's more, the extra data would provide banks with additional insights about their customers' consumption patterns and how much they are actually using these new decentralized currencies, further enabling them to take actions to retain their customers.

To make the above a reality we will probably use bitcoinj, an open-source library for working with the Bitcoin protocol. It can maintain a wallet, send and receive transactions without needing a local copy of Bitcoin Core along with many other advanced features. Although implemented in Java, bitcoinj can be used from any JVM compatible language and many large, well known Bitcoin apps and services are built on it.

Luckily for banks, tracking Bitcoin transaction data is not without precedent. Early last year, Mint and Coinbase partnered to allow users to link their Bitcoin wallets and view those transactions alongside their traditional accounts. 


Banks have even more possibilities should they decide to embrace virtual currency, including allowing online banking users to pay their expenses or future transactions with Bitcoin. APIs and Paypal-like services that are Bitcoin-based already exist, such as Bitpay, through which banks could receive bitcoins at a profitable exchange rate. Although the legal and regulatory aspects surrounding decentralized currencies are still unclear, banks would do well to start carving out their role in a world that is rapidly warming up to Bitcoin. 

In addition to using blockchain technology and investing in R&D to better meet end-user needs, banks should capitalize on the opportunity to replace their existing clearing systems. Take Citicoin for example:  by using their own "currency", Citibank can perform clearings and settlements much more efficiently. Banco Sabadell and a few others are working with Ripple Labs toward that same end.
Apart from that, there are other important benefits for banks, online merchants and consumers:
  • Digital transactions are cheaper (essentially free) and expenses can be shared more convienently via peer-to-peer (P2P) services
  • As the use of notes decreases, transactional data increases allowing both banks and their private and business customers to gain a clearer an more complete picture of their whole financial landscape.
  • For merchants, the opportunity to add an addtional method of payment that works within existing checkout infrastructure means more satisfied customers and no extra work for the retailer
  • Virtual currency payments happen in real time which means analytics can happen in real time, too. No more waiting for days on end for cleared transactions to appear in online banking  


When it comes to PFM, adding this feature will be essential for meeting changing financial needs of consumers as virtual money gains, well, currency. As Bitcoin and other decentralized currencies become increasingly mainstreamed, banks will need to accept and incoprorate them if they want to provide their customers with a complete and holistic picture of their finances. 

With the installation of more and more ATMs across Europe and around the world, Bitcoin is well on its way to becoming an established currency. The question is, which banks will be intrepid enough to start accepting and incorporating these virtual currencies directly into their online banking systems?
TechCrunch recently cited a Citigroup presentation "that should remove any doubt that banks are definitely interested in this technology":
"Due to the potential benefits, we believe the adoption of Digital Money is inevitable,” they wrote. “While we believe that the use of Digital Money is certain, the future of specific cryptocurrencies such as Bitcoin is less clear."
For us, the future couldn't be clearer: the latest leg of the FinTech race is officially on, and it's time to start banking with Bitcoin! 
*AUTHOR'S NOTE: Special thanks to my colleagues who contributed their thoughts to this post: Marc Torrens, Axel Pompa, Adrian Perez & Pablo Reyes. 
Albert Morales, Product Manager
Albert Morales, Product Manager

Albert is Channel Partners Manager, overseeing partnerships with major systems integrators, management consulting firms, technology providers and academic institutions.

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