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7 Things Merchants Should Consider Before Hosting a Bitcoin ATM

7 Things Merchants Should Consider Before Hosting a Bitcoin ATM

In case you’ve missed it, the bitcoin ATM business is exploding.

From South Korea to South Boston, bitcoin ATMs (BTC ATMs) are rapidly gaining traction in an industry that is looking to provide consumers with simple interactions that separate the notorious digital currency from its media mystique.

To this end, BTC ATMs are already succeeding, providing users with their first taste of buying (and sometimes selling) bitcoins. So far, hundreds of customers have used the machines to create their own digital wallets and make bitcoin purchases, but the real goal is imparting this experience to millions more.

This potentially lucrative mission has, in turn, given rise to new players along the value chain, namely ATM suppliers like Genesis CoinLamassu and Robocoin, as well as a greater number of local operators seeking to build expansive networks of machines in high-traffic locations.

Depending on the operator (and how far they’re willing to go for publicity), this can mean partnering with shopping malls or even housing BTC ATMs in mobile trailers. But more commonly, it will mean striking up partnerships with bitcoin-friendly merchants – established businesses with loyal customer bases – like Imbibe, the New Mexico cigar bar that won the race to host the first US bitcoin ATM.

Robocoin CEO Jordan Kelley said he has already seen a surge in demand from small merchants who are clamouring to be introduced to ATM operators, some even offering to pay for such a meeting, and concisely explained why:

“We’re bringing in 1,500 high-paying customers [a month] in that coveted 18-40 demographic. Those are real numbers for any business.”

The figures are just as compelling for BTC ATM providers.

To date, Lamassu says it has shipped more than 200 of its $5,000 one-way bitcoin vending machines. Robocoin has likewise launched a lucrative incentive program to enlist bitcoin evangelists as unpaid sales reps for its larger, $20,000 two-way currency exchange kiosks, offering $10,000 in BTC for every new customer its reps enroll.

Manufacturers and operators

Though the exact specifications of each manufacturer differs, the responsibilities of their operators remains the same. BTC ATM manufacturers design, produce and sell the machines, while operators handle the local marketing and compliance.

Explained Kelley:

“Our operators have three jobs. One, make sure that they’re fully complying with all anti-money laundering and ‘know your customer’ laws in their specific jurisdiction. Two, make their customers happy [by] finding a kickass location and educating the customers and people in their community. Three, make sure [owners] never run out of inventory, so that people never go wanting for bitcoin.”

But, winning hearts and minds is no easy challenge, especially as bitcoin faces continued bad press, with the now-bankrupt bitcoin exchange Mt. Gox and the now-defunct online black market Silk Road being the most obvious culprits.

Such reports were top-of-mind for Cambridge, Massachusetts-based restauranteur Kathy Turner, when she received an email from the founders ofCoinShovel, a Maine-based bitcoin mining business, this January with the subject line “Opportunity – Bitcoin ATM”.

The time had come for execs Steve Govoni and Briton Callahan to think about scaling up their company, and they were in need of a local business partner for their first ATM. Veggie Galaxy, Turner’s vegetarian diner that regularly hosts local bitcoin meetups, seemed a logical first choice.

Yet, despite the promise of a partnership, Turner and her co-owner Adam Penn had their reservations. Turner was unsure of liabilities and compliance costs, as well as the potential dangers of attracting unsavory customers.

“I [was] really worried about shady people coming into Veggie Galaxy with tons of cash that they want to anonymously turn into untraceable bitcoin.”

Ultimately, Turner and Penn needed an hour-long conversation with CoinShovel to feel comfortable about considering the deal. The resulting discussion provides an overview of the seven major points merchants should consider as they seek to make their own determinations:

1. Security

Bitcoin ATM London

It may seem ironic, but ATMs face a security threat from the high volumes of fiat currency they need to hold to service users. Robocoin ATMs, which allow both cash-to-bitcoin and bitcoin-to-cash transactions, house up to 2,200 bills.

The Lamassu unit being considered for Veggie Galaxy is one directional, accepting only cash for bitcoin, but it still holds between $5,000 and $10,000, according to CoinShovel.

Kelly recognizes this risk, and drove home the idea that security will be paramount to increasing consumer adoption.

“You have customers walking up to these machines with thousands of dollars. [Operators] have to make sure [their] customers are feeling really comfortable, and that means [they’re] going into a really safe and secure environment.”

To assuage Turner’s concern, CoinShovel suggested setting a firm figure for the levels of cash it could keep in Veggie Galaxy, opting against setting regular pickups until spending data is known.

2. Supervision

 

Singapore ATM queue

One of the more sensational stories from the BTC ATM boom has been the tale of a Canadian man who was able to cut a machine’s profit simply by sitting next to it with a wallet app, siphoning off customers for trades at a reduced fee.

While this is an extreme example, BTC ATMs do require some oversight, owners acknowledge.

Anthony Di Iorio, who operates a BTC ATM in Bitcoin Decentral, a 5,500 square-foot working space for bitcoin projects in Toronto, told CoinDesk his Robocoin machine wasn’t perfect. He reported issues with his BTC ATM’s receipt printer that led him to stop using this functionality.

Still, Di Iorio is willing to give the machine his patience, suggesting others should to do the same:

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This entry was posted on March 18, 2014 by .

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bitcoinvancouver2013@gmail.com

bitcoinvancouver2013@gmail.com

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