Bitwage sent out a press release today announcing the launch of a beta for a new feature: individualized Bitcoin payroll services. The new feature and service they’re adding is called zero-click Bitcoin payrolls – it’s an automated way to instantly, near-frictionlessly, and effortlessly convert a set percentage of your direct deposit paycheck into Bitcoin. This service has a lot of potential for helping to add consistent purchasing power to the Bitcoin price, by making it possible for anyone – regardless of their employer or nationality – to receive any percentage of their paycheck in Bitcoin instead of in their usual currency. How it works is simple: by running overtop of your direct deposit.
Rather than receiving your regular direct deposit of $1000, you could choose to split your pay by whatever percentages you’d like. The percentage you allocate to Bitwage.co’s new system will get converted directly into Bitcoin and sent to you (free of charge, at least currently, although some of their other services carry a small fee!). The best part? It doesn’t matter who your employer is – it could be an anti-Bitcoin lobbying group – they have no say in the matter. This is the most important aspect of Bitwage’s new program – it’s employer-agnostic. By allowing any member of the workforce to get paid in Bitcoin, Bitwage is showing just how disruptive Bitcoin has the potential to be. It’s busy giving choice back to individuals.
In the process of creating this service, Bitwage also solved a very commonly discussed problem regarding Bitcoin: taxes. Their new service promises, in partnership with Gocheto Financials, to provide easy capital gains reporting for employees or employers in just a few clicks. This is a big one: the current reporting rules for Bitcoin are needlessly complicated, but once properly understood and programmatically implemented, are nowhere near as big of an issue. Bitwage promises to have done so, and given my previous interactions with them, I’m inclined to be quite excited.
What other benefits does this service provide? Two groups in particular stand to benefit from it, once they are shown how to use it: the un-(under-)banked and individuals in countries whose national currency suffers from a very high inflation rate.
The former group – the unbanked – can use Bitcoin as a way to escape the predatory check cashing, payday loan, and prepaid debit card industry. Predatory is far from an understatement in this case – these individuals who are among society’s most vulnerable are frequently extorted to an extreme degree in order to merely receive access to the money they have worked hard to earn. Bitwage.co can solve this by having their direct deposit go directly to Bitwage, freeing them from needing to own a bank account, and sending them Bitcoin instead. The Bitcoin they receive can then either be sold in-person via a service like LocalBitcoins.com (which provides them cash-in-hand at a usually higher rate than offered on exchanges) or by using a service like Gyft.com to purchase gift cards at what amounts to a 3% discount for whatever goods they need to buy. It’s not a perfect solution – not yet, anyway – but it can certainly help. But I hear the criticism coming from readers already: Bitcoin is all well and good if you have money to spare, but it’s very risky. How can you be recommending a highly risky investment product to people who live paycheck-to-paycheck, and struggle to get by?
Two reasons. First, by using services like Gyft and LocalBitcoins, they can avoid the exchange rate risk for the most part. As soon as they get paid, they can convert the Bitcoin back into USD or gift cards, and not suffer the volatility of BTC. Second, even if they don’t do so, they’re still better off – usually. What’s worse, high volatility, or guaranteed loss? Let’s walk through some math.
A person works at minimum wage, 40 hours a week, and gets paid every two weeks. Each pay period, they receive about $500. A check cashing service will charge between $15 and $25 – at least, on average – to cash each check. Let’s call it $40 for the two checks. A prepaid debit card service? Those average fees of $30 a month in total. So imagining they need to use both – a relatively likely possibility, given that not everything in life can be paid for in cash – they might be looking at fees of $70. Out of their $1000, that’s 7%. So it’s already fairly certain that a well-used combination of Gyft and LocalBitcoins could serve their needs better. But even if they hold the money in Bitcoin for a period of time, the price would have to decline 4-5% before it became worse than the check-cashing service alone. It’s likely that some of the under-banked will still need to use reloadable debit cards with Bitcoin, but some of them may be able to avoid it, either through the clever use of services, a better version of Xapo that may come along, or simply companies accepting Bitcoin. But past that, any consideration of the downside of volatility must also consider the upside – Bitcoin simply has to not lose more than 5% of its value to be acceptable to those injured by the predatory financial services industry, but it can have a very significant impact on the lives of the poor when rather than losing 5% of its value it gains 5%.
The latter group – those whose home currencies have high inflation rates – can benefit in much the same way. Their check cashing and prepaid debit card fees are likely even worse, and converting their cashed check into dollars or another, more stable currency is just one more fee tacked on. Using Bitcoin instead frees them from several of these issues – making it easier for them to succeed with a deck stacked against them.
Ultimately, that’s what Bitcoin – and Bitwage.co – are doing: reshuffling a deck that was stacked against the poor centuries ago. The truth is, the poor aren’t that much worse at playing the game – it just looked that way.
So, will you be taking a portion of your pay home in Bitcoin? I take 100% that way.
You can read the full press release here.