Some industries by nature are very sensitive to cash flow.
These industries are required to pay a large portion of their expenses up-front. The two largest examples are:
- Temp Agencies: They must pay the temps’ salaries on a tight schedule as required by law.
- The Transportation Industry: They must pay for gasoline upfront.
These businesses pay interest out of the bottom line every single day that their customers delay payment. They also pay interest for the days it takes for the checks to get processed: approved, printed, signed, mailed, post office holidays included. Once received, the check must still be deposited, and the amounts must clear.
Many times these industries find themselves borrowing by the day.
Many times these industries find themselves borrowing by the day.
When borrowing by the day, the effective interest rate can exceed 20%... sometimes even 30%.
The technical term for how these industries cope is "selling their receivables”. It is a very exacting and elaborate process, and there exist very sophisticated lenders called “factors” who go through it and help them out.
The technical term for how these industries cope is "selling their receivables”. It is a very exacting and elaborate process, and there exist very sophisticated lenders called “factors” who go through it and help them out.
It is only a matter of time before the cash flow sensitive industries discover that instead of days, Bitcoin payments are instant, and take about an hour to confirm. They will discover it either externally, or by eventually, over the years, by promoting some millennials into positions of power.
As soon these industries discover that Bitcoin payments take an hour instead of several days, they will (a) go an open an account at a 3rd Party Bitcoin Service Provider (BSP), and (b) go to their customers and offer steep time-phased discounts as long as the payment is made in Bitcoin.
These discounts will be smaller than the fees paid to factors, but large enough for the customers to notice. Once the customers notice the large opportunity, they will also engage a BSP and take advantage of Bitcoin - and they will be the ones managing their cashflow much more deliberately. (They might even use the factors themselves, although at lower rates.)
The price of Bitcoin does not matter. Here is an example:
Say an invoice is due for $1,000.
The customer is not in the business of holding Bitcoin. So they will spend $1,000 to buy Bitcoin from his BSP, and a few seconds later send it to the recipient’s BSP. (Some processors charge tiny fees; others don’t. Even when they do, it is lower than the cost of cutting a check and a buying a stamp.)
The recipient is not in the business of holding Bitcoin either. They have set the option to cash out upon receipt. So they will receive the $1,000 at their bank via ACH the next day. They have to wait until the next day because ACH runs overnight.
If at that time the price of Bitcoin is $330/BTC, the amount of Bitcoin transacted will be 1,000/330 = 3.0303 BTC.
If at that time the price of Bitcoin is 10 times higher ($3,300/BTC), the amount of Bitcoin transacted will be 10 times lower (1,000/3,300 = 0.30303 BTC).
Bottom line, neither the sender nor the recipient care about the price, because they buy/transact/sell very quickly. (Bitcoin has plenty of decimals, and more can be added.)
It gets better, of course. The recipient could persuade his upstream vendors to use Bitcoin as well, and give him discounts for paying sooner. He could pay them the very same day he gets the Bitcoin. (Sets his settings to cash out only a portion of the Bitcoin he receives. He gets an email when Bitcoin arrives. When that arrives, he immediately logs in and pays his bills in bitcoin, immediately, without waiting for ACH). He will thus earn a discount for his bottom line. The velocity of payments will increase. (This term velocity of payments is not to be confused with the term velocity of money from economics: https://en.wikipedia.org/wiki/Velocity_of_money).
The customer is not in the business of holding Bitcoin. So they will spend $1,000 to buy Bitcoin from his BSP, and a few seconds later send it to the recipient’s BSP. (Some processors charge tiny fees; others don’t. Even when they do, it is lower than the cost of cutting a check and a buying a stamp.)
The recipient is not in the business of holding Bitcoin either. They have set the option to cash out upon receipt. So they will receive the $1,000 at their bank via ACH the next day. They have to wait until the next day because ACH runs overnight.
If at that time the price of Bitcoin is $330/BTC, the amount of Bitcoin transacted will be 1,000/330 = 3.0303 BTC.
Bottom line, neither the sender nor the recipient care about the price, because they buy/transact/sell very quickly. (Bitcoin has plenty of decimals, and more can be added.)
It gets better, of course. The recipient could persuade his upstream vendors to use Bitcoin as well, and give him discounts for paying sooner. He could pay them the very same day he gets the Bitcoin. (Sets his settings to cash out only a portion of the Bitcoin he receives. He gets an email when Bitcoin arrives. When that arrives, he immediately logs in and pays his bills in bitcoin, immediately, without waiting for ACH). He will thus earn a discount for his bottom line. The velocity of payments will increase. (This term velocity of payments is not to be confused with the term velocity of money from economics: https://en.wikipedia.org/wiki/Velocity_of_money).
Future improvements include the splitting of the payment AT THE PROCESSOR, so direct payees can get paid at the point of sale. Commissioned salespeople will really like that, and so will Sales Tax collectors.
Lastly, if there exists a bank that already offers to facilitate Bitcoin transactions on behalf of a BSP, the industry will switch its banking to use that bank, so they do not have to open yet another account with the processor. The earliest adopter will gain the most. Click here for more on the opportunity for banks.
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