Guest Column | May 20, 2014

What The Mobile Payment Industry And Bitcoin Can Learn From Napster

Bitcoin Virtual Currency

By Mostafa Razzak, Principal, JMRConnect

Years ago when the first BlackBerry “smartphones” came out there was a running joke among flip-phone advocates that when BlackBerry users answer their phones it looks like they’re holding a wallet to their faces. Who would have thought 10 years ago that this snarky remark was actually a prophetic word, with smartphones now playing a key role in the $235 billion mobile payment space?

What’s even more impressive is the fact that leading research firm Gartner estimates that mobile payments will top $720 billion a year in the next three years. Lots of big name companies are battling to become our mobile digital wallet of choice, such as Amazon, Apple, Google, MasterCard, Visa, PayPal, and Square. While the competition heats up among these companies, there’s another contender that has the potential to cause a bigger disruption in the market: Bitcoin.

Although Appinions Inc.’s recently released 14-page mobile payment study, Digital Mobile Payments: An Industry Influence Study,  makes no mention of Bitcoin, and leading spokespersons from Apple, Google, and PayPal avoid opportunities to comment on Bitcoin’s role in this evolving market, it’s too important to overlook.

So, who or what exactly is Bitcoin?’s definition of itself is a good place to start: “Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.”

What makes this digital currency (currently valued at $10 billion) so appealing is that it eliminates the middlemen associated with other mobile payment systems, such as OEMs, carriers, mobile platform companies, credit card companies, and banks. Additionally, Bitcoin transaction fees are about a third of what other mobile payment companies charge.

The Downside Of An Unregulated Mobile Payment System

So if Bitcoin is easier to use than other payment methods and it has lower fees, what’s keeping Bitcoin from becoming the de facto standard in mobile payment? To answer that question, we need to take a quick trip back to 1999 and look at the digital music world. Prior to iTunes and the other online media stores, the world of digital music was mired in proprietary formats (think Sony) and digital rights management (again, think Sony). Then, along came Napster and revolutionized the online media experience with its peer-to-peer platform, making millions of “MP3” songs easily available to the masses. The Napster solution replaced the previous digital challenges with a new problem, however, which was the illegal downloading of copyrighted music. Today, Napster exists as one of several legitimate digital media subscription services, but its path to legitimacy has been a rocky road that’s block-buster movie worthy. Bitcoin’s story is shaping up to be similar to Napster’s. First, it uses peer-to-peer technology to eliminate all the bureaucracy and limitations surrounding traditional mobile payment services. And, Bitcoin’s unregulated digital transaction model is also super easy for drug dealers and cybercriminals to use — anonymously. Anyone who’s experienced the nefarious CryptoLocker ransomware virus can attest to this.

So, the bottom line question people often ask, “Is Bitcoin a good thing or a bad thing?” My first answer to that question is, “Yes,” followed by a more qualified response, “Bitcoin has the potential to do for mobile payment what Napster did for the digital music industry. It’s going to play a key role in moving things in the right direction — but the journey is going to be messy and real progress won’t happen until we see a convergence between Bitcoin and the traditional financial ecosystem.”

Mostafa Razzak Bio: Mostafa Razzak is a tenured public relations, corporate communications, and marketing executive with nearly two decades of experience covering the IT financial services industries. He is a Principal of JMRConnect and regular blogger at