Here are 10 reasons why we have started building a bank account that interacts with Bitcoin and another blockchains:

1. Bitcoin is magic: super fast global payments

Any sufficiently advanced technology is indistinguishable from magic. Clarke's third law

The first time you pay using Bitcoin, the magic becomes clear immediately - send money anywhere in the world! The Bitcoin magic is even larger when you do a major transaction on Saturday night and you see the confirmation in less than a minute, and it costs just a couple of cents. This is IMPOSSIBLE with current banks. If you own Bitcoin you can send money to bank accounts in 37 minutes. If you’re doing a traditional bank to bank transaction, you’ll wait the usual 24-48 hours (slowwww)… But as amazing as it is, traditional institutions are not fond of magic. There is too much risk and uncertainty. Banks will be using banks technology not bitcoin!

How to transfer money from blockchain to bank account?

With Bitwala you can send bitcoin and other blockchain to bank accounts in Europe and many other countries. It often takes less than 1 hour to initiate the transfer.

2. Bitcoin is becoming mainstream

Everyone will agree that Bitcoin was controversial; it is a revolutionary technology and because of its decentralized nature, it can be used for illicit transactions. Fortunately, it's not just being used that way. The cost of online payments can be quite high. For a small payment of 1€, PayPal can charge a merchant 30 cents. That is a 30% transaction fee! For higher amounts with credits cards, fees are often around 2-3%. This is a lot of money for SME businesses - for any business really.

3. B2B Blockchain: corporate use of Bitcoin, Ethereum and Ripple

There's a lot of buzz around "blockchain", the technology behind Bitcoin. Except really innovative projects like Ethereum, we don't think there's much immediate gain from so-called private blockchains.

4. Blockchain security

But even assuming that, at least for now, Bitcoin and blockchain are synonymous, an important aspect of why we choose not to use Bitcoin/blockchain is safety.

The basics:

B2B Pay provides global exporters to Europe with:

European IBAN accounts A way to send money from these IBAN accounts to the exporters' local bank accounts We can do both of these with existing technology. Some of this is also fairly new, but it's built around secure financial technology. What if? Existing financial technology is safe and heavily tested for massive amounts of transactions of any size every working day, backed by companies of massive size and resources. We estimate the chances of this technology failing to be 2 orders of magnitude less. But the most important is this: if this financial technology would fail, we would be in trouble. But there would be global financial mayhem as well.

5. Wholesale currency rates vs converting small amounts

When you look at purely trading in foreign currencies; money markets are very efficient. The spread costs for trading large amounts in liquid currencies can be as low as 0.0001%. The issues come when banks have to transfer smaller amount and costs go up to 3-6%. A lot of this is due to regulatory issues and inefficiencies in the system, not just about banks trying to make money.

We can improve these inefficiencies and move closer to the wholesale rates. We don't think Bitcoin can be more efficient than the wholesale markets when dealing with conventional currencies.

A side note about banking accelerators

Internally big banks are playing around with Bitcoin and blockchain technology, but they're not ready to move all their systems onto the blockchain.

Banks are also co-organising accelerator programs (we have participated in Nordea bank's accelerator program and as of March 2016 we're working with Barclays, powered by Techstars) in which they happily accept blockchain and Bitcoin startups - but this is predominantly a way to ride on the wave without taking any risk and for relatively little money (a budget for 10 startups in a 3 months program is unlikely to exceed $2M). In the likely event that the startup fails the bank is highly unlikely to suffer any damages. This is quite different with internal projects, which aren't usually below $10M.

6. B2B transactions will keep going from one bank account to another

Businesses use bank accounts to manage their business, you need a bank account to pay your staff, your suppliers, your phone bills. This is not going to change anytime soon.

Blockchain/Bitcoin is amazing when you’re doing Bitcoin-Bitcoin transactions. It's super easy and practical -- cost free with no regulation!

But 99.9% of business still need to deal in real currency using bank accounts, which means they need to pay from a bank account and the money needs to end up in another bank account.

As soon as you start creating a system that takes for example money from an account in Germany in EUR and then deposit the money into a Brazilian bank account in BRL, you are faced with all the same issues of banking fees and regulation. You cannot bypass it even though the underlying technology is actually really simple. In fact you must deal with another layer of unnecessary complexity instead.

Of course, in different circumstances things look completely different. If we were doing micropayments Bitcoin would be the obvious way to move forward. But we're not, unlike Satoshipay.

7. Changing from EUR to USD is a lot easier than doing EUR to BTC or BTC to USD, we are changing that

Unless you are exchanging money with a friend, there is always a cost involved in making a currency transactions. We can't foresee how adding another step in the currency conversion process will make it easier.

8. Currency fluctuation and risk

Exchange rates are some of the most volatile trades you can make. It's hard enough to trade from one currency to another and to hedge that risk. But the trade gets even more complex for smaller traded currencies like Indian rupees and Brazilian real. Now add to this the illiquid Bitcoin market it becomes very very hard to convert EUR to BTC to USD. Infact there is a good chance that you could be losing your customers huge amount of money!

For example: let’s say price of converting 1 EUR to USD is 1.2. If you are doing a straight conversion, things are a easy. But lets assume you are building a system which will use Bitcoin in between to effectively to convert EUR to USD. You need to first convert 1 EUR to BTC, then BTC to USD. By the time you have done this conversion the market price could have moved making a huge loss for you or our customer. Yes, in theory you could do this transaction simultaneously. But in reality it highly depends on the liquidity in the Bitcoin market between the currencies. Currently we don't see how you can hedge without taking risk.

Example of liquidity:

Everyday over $3 trillion in USD is traded. BTC trade is around $100 million.

9. B2B is a traditional business

B2B business owners have a lot to deal with. Whether they run a cafe or a manufacturing unit, handle a lot of things and are under a lot of stress. When they sell things they want the peace of mind that the money is there in the morning in their bank account. These are the sort of people who are the last to adopt new technology.

That's why our technology uses things they understand. To give them peace of mind. Lower costs are important, but a business will gladly give up 1% on transaction costs for certainty. It will be a long time before businesses trust alternate currencies.

10. Risk and uncertainties: blockchain hedging

The B2B world moves a lot slower and cautiously than the consumer space. Technologies have to be proven and tested for a long time before mainstream businesses start using them. There are still huge questions to be answered about blockchain technology. We still need more real world use cases. Once we see this technology being used more widely, we will see B2B players looking at this as an alternative.

At this point, we have a lot to do to improve how international trade and payments work. We will use blockchain technology in the future. But it will be in a very different way than most people think and for very different reasons.