Cryptocurrencies have been investors’ best flavor for the past few years. A single Bitcoin currently trades above $16,000, compared to about $1000 at the start of the year. Such meteoric rise has encouraged many big brands to adopt Cryptocurrencies (mostly Bitcoin) as a means of payment. Some of these big names include Microsoft Corporation (NASDAQ:MSFT), Tesla Inc (NASDAQ:TSLA), Zynga Inc (NASDAQ:ZNGA), Shopify Inc (US) (NYSE:SHOP) and many more.
Bitcoin Value Chart (Source: coinmarketcap)
Rising use of Cryptocurrencies as a mode of payment creates a lucrative opportunity for payment processors as well. And, this has inspired the formation of several Cryptocurrencyspecific payment processors. However, the rise Cryptocurrencies also provides an opportunity to existing payment processors to benefit from this trend as they already have the infrastructure in place.
We have already seen PayPal Holdings Inc (NASDAQ:PYPL) and Square Inc (NYSE:SQ) dive into Cryptocurrencies. On Monday, one more online payment service facilitator - GH Capital, Inc. (OTCQB: GHHC), announced to “actively” explore the “concept of utilizing blockchain capabilities as part of its core offering.”
“Over the last several months, our core CDP team has been seeking a unified solution capable of streamlining payments with access to online merchants and clients worldwide. In order to reach this in the shortest amount of time and provide the borderless service payment providers should offer, we are actively exploring the concepts of blockchain and cryptocurrency to propel this goal," said Mr. Wolfgang Ruecker, Chief Executive Officer of GH Capital, in the press release.
Following the announcement, GHHC shares, which have been very quiet for a while now, shot up almost 2%. As a FinTech holding company, GHHC offers ClickDirectPay (CDP) and IPO services. CDP has been constantly evolving, updating its service and charges to remain in-line with the changing technology. Just a few months back, GHHC updated CDP’s pricing model to make it more competitive. Now, it is exploring “blockchain capabilities” to complement CDP’s services.
In my last article on GHHC, i talked about how GHHC is a dark horse in the global digital payment industry. Now, this latest announcement of exploring blockchain capabilities just proves why I believed in the potential that GHHC holds. GHHC is making the right call at the right time. Cryptocurrencies are on the verge of becoming the universal mode of transaction.
We think, the decision to explore opportunities with Cryptocurrency would turn out to be an intelligent decision based on the below mentioned factors:
Universal Reach – unlike any other currency, Cryptocurrency has universal acceptance, and the seller or buyer do not need to worry about the forex exchange. Since GHHC is aiming to expand its services globally, utilizing blockchain capabilities would push their service portfolio more aggressively. We believe that the new addition would increase the appeal and acceptance of GHHC among oversees clients.
Quick Payment – with Cryptocurrency, GHHC is betting on the time efficiency, something that could be a game changer for the company going forward. Trimming the time between delivery of service and receiving payment would boost GHHC’s competitiveness and make it the preferred choice for many.
Europe: A Big Opportunity – Europe is the most important market for GHHC as the company is keen to grow in the European e-commerce market. In Europe, Germany has one of the most prolific e-commerce market, expected to increase from $62 last year billion to $82 billion next year. GHHC has already strengthened its position in Europe by partnering with local but significant players. Its partnership with Allied Wallet, which is already present in 200 countries, gives it a ready market to pitch its new service.
Complementing CDP – one ofCDP’s core strength is offering quick service to the clients. However, physical currency and bank transfers slow down the whole process. If CDP does come out with blockchain capabilities as part of its core offering, it would be a booster for the service, making it super-quick.
Not all confident - while Cryptocurrencies are shinning, experts remain divided over the authenticity and backing of these Cryptocurrencies. Mt Gox like incident keeps traders and investors wary of accepting or even transacting in Cryptocurrencies. Further, there are businesses, who are sitting on the edges adopting a ‘wait n watch’ mode until this digital currency gets the backing of their country’s Central Bank.
However, we believe it is only a matter of time before Cryptocurrencies gain the trust and acceptance of all, and become a mainstream payment mode.
Big Players – big names such as PayPal Holdings Inc (NASDAQ:PYPL) and Square Inc (NYSE:SQ) have already started accepting Bitcoin as a payment mode. So, GHHC will have to hard sell their services by coming up with competitive pricing and agile customer service, if they want to share (or even overtake them) space with juggernauts like PayPal and others. However, GHHC’s target market, small companies, would ensure that it does not cross paths with these big players. Even with comparatively bigger clients, we are sure it will come up with competitive plans to challenge big names, something that it is already doing with its CDP service.
Hesitant Economies – while Cryptocurrency fervor is scaling north in most of the economies, more traditional and closed economies such as China are coming hard on this digital currency. There was a time when around 90% of the Bitcoin trades came from China. However, with Beijing banning the Initial Coin Offering (ICO), the trade has slowed down if not come to a grinding halt in the world's second-largest economy.
India, another big economy, is still to clear its stance on the Cryptocurrencies. Since GHHC is also eying Asian economies for business, the aversion of two big economies towards this digital currency, could slow GHHC’s potential growth.
GHHC, however, has a presence in the United States and Europe, the economies that are in favor of Bitcoin. Also, asChina tightened the noose on the Cryptocurrency, Japan took the opportunity to stir the Crypto movement in its favor. The Asian country accepted the Bitcoin as the legal form of payment earlier this year. The Bitcoin trade in the country accounts more than half the volume of the global trade.
Throughout the year, this virtual currency had its share of up and down, but as the year concludes, this revolutionary mode of payment is emerging out to be the winner. And, GHHC by “actively exploring the concept of utilizing blockchain capabilities as part of its core offering” is surely taking a step forward to benefit from this revolution.
Adding Cryptocurrency to its core offering will compliment GHHC’s product portfolio, plus it has assets (in terms of partnerships) to pitch its latest service to the clients. Overall, we believe that GHHC has set foot in the right direction, and is poised to grow exponentially from the current levels on the back of embracing latest technology.
GHHC’s Ruecker also emphasized the same in the press release saying, "We truly believe that this solution could generate significant revenue for GHHC in the next few years as this market begins to mature out of its infancy stage."
We don’t have positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours.
Aman is an MBA (Finance) with over 8+ years of industry experience. He has worked as Risk Analyst for a CAT Modeling firm, and now heads a boutique-consulting firm with a focus on stock research, business plans, valuation and accounting.
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