By Andrew R. Johnson
The fervor over the digital currency bitcoin has drawn interest
from two of the world's largest movers of money.
Western Union Co. (WU) and MoneyGram International Inc. (MGI)
are studying ways their customers could use their services to send
and receive money transfers denominated in bitcoins, the companies'
executives say.
Both companies run remittance networks commonly used by
immigrants to send money to friends and family members in foreign
countries. Western Union also operates a business-solutions unit
that sells services to companies for sending payments to other
businesses.
The firms have no immediate plans to add bitcoins as a currency
option for customers, though both say the increasing popularity of
the virtual money has prompted them to consider whether they should
make it available in the future.
"If bitcoin continues to grow and the value is defined more
internationally, we may find an opportunity for bitcoin to be used
to pay for commerce transactions through a Western Union business
solution," David Thompson, an executive vice president and chief
information officer of Western Union, said in an interview this
week.
The Englewood, Co.-based company is primarily exploring ways its
commercial customers may want to use bitcoins, Mr. Thompson
said.
Bitcoin is the name for both the peer-to-peer payments system
that allows people to pay each other from virtual accounts accessed
online and on mobile devices as well as the digital currency
itself. Launched in 2009 by a developer whose true identity remains
unknown, the digital money is not backed by any central governing
body, such as the Federal Reserve, and allows users to remain
mostly anonymous--save for their "bitcoin address"--in
transactions.
Buzz about bitcoins has grown in recent weeks due to wild swings
in the currency's value, driven by economic turmoil in the euro
zone, outages at the largest bitcoin trading exchange and U.S.
Treasury Department guidance stating money-transmitter rules that
apply to the likes of Western Union and MoneyGram also apply to
exchanges and sellers dealing with the currency.
"We've been contacted by folks who are doing various things in
this space to see if there's opportunities for us to help enable
greater functionality for some of these [bitcoin companies] but
we've not committed and don't have any imminent plans to announce
anything," Peter Ohser, senior vice president of U.S. and Canada
for MoneyGram, said in an interview.
While MoneyGram has no direct relationships with bitcoin
companies currently, its money transfer agents can already help
people complete the purchase of bitcoins if they've made
arrangements in advance with a payment processing company called
BitInstant LLC.
BitInstant has a deal with a company called ZipZap Inc., which
in turn has a relationship with MoneyGram to allow consumers to pay
bills and purchase goods from online merchants with cash. That
means a BitInstant customer can place an order for bitcoins on its
website and then complete the transaction at a participating
MoneyGram location with cash, the same way they would pay a
bill.
The bitcoins purchased through such transactions can not be used
to make a MoneyGram money transfer; rather, they are added to a
person's BitInstant account, allowing them to move the bitcoins to
trading exchanges and other companies that accept bitcoin.
Because a large portion of Western Union's and MoneyGram's
customers initiate or receive remittances in cash, new digital
payments services are often viewed as threats to their business.
Other payments companies, including Visa Inc. (V) and MasterCard
Inc. (MA), have also faced growing questions from investors over
how their businesses will be affected by the emergence of online
and mobile technologies that eliminate the need to physically hand
over a credit card to a merchant to pay for goods.
Analysts say most existing mobile-payments systems pose little
risk to Visa and MasterCard because transactions that customers
make with the services are often still funded behind the scenes
with credit and debit cards. But experts say if a digital currency
such as bitcoin, which eliminates the need to use credit cards or
bank accounts, garnered enough users, it could put a dent in their
businesses.
In its current state, bitcoin doesn't pose much of a threat,
executives and analysts say, noting it's not a widely accepted
payment option by online or physical merchants and is extremely
volatile, limiting its appeal.
This month bitcoin's value has traded between a high of $266 and
a low of $50.01, according to bitcoincharts.com. The bitcoin market
is valued at $1.03 billion, according to the site.
"It's something we generally follow but we at this time don't
see a significant impact," David Nelms, chairman and chief
executive of Discover Financial Services (DFS), said in a response
to a question about bitcoin at the credit-card company's annual
shareholder meeting on Wednesday. "It's a fairly niche type of
thing. It's outside the standard banking system, so I guess I would
be a little surprised if bitcoins actually had an effect ... on us
over time."
Because 95% of MoneyGram's consumer money transfers done through
its agents involve senders and receivers using cash, investing
money to allow its customers to initiate or receive money transfers
in bitcoin doesn't make sense, Mr. Ohser said.
"Remittances go to pay for housing and for food and for
maintaining your family," he said. "If you're sending to a rural
part of Mexico, my guess is that the merchant is not going to be
accepting bitcoins. They want pesos."
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com