The Bankwatch

Tracking the consumer evolution of financial services

Bitcoin merchant costs–no evidence to suggest they would be cheaper

There is a growing misrepresentation about how Bircoin will change payments.  I have gone into this earlier.  But today we have a new issue.  Transaction cost.

How bitcoin makes transactions cheaper

bitcoin, I would have paid much much less than the c. 2.5% it cost me to process your credit card

Relevance to Bankwatch:

The argument made in this article is that Bitcoin merchant costs are different by not requiring a third party to validate the transaction.  This argument is made because Bitcoin is open because “It allows you to securely and anonymously transfer money to anyone, anywhere in the world”. 

Lets think that through and compare to the credit card example used. 

Payor sends money to recipient.  Recipient needs to trust payor.  How does recipient trust payor?  The post assumes that recipient is somehow magically and freely hooked into the bitcoin network.  Not so. 

Lets extrapolate to an ecommerce world where every e-commerce vendor accepts bitcoin.  This suggests two scenarios:

  1. vendors hire devs to create bitcoin integration which requires up front cost and ongoing maintenance
  2. vendors seek third party integrators, i.e. acquirer networks

History suggests option two is most likely.  Either way both options are not free.  The assumption that bitcoin is much cheaper is just that at this stage .. an assumption. 

I have complete faith in the various ecosystems to ensure a fair price is paid for something as intrinsically complex as bitcoin.  There is no evidence to suggest that price would be cheaper.

Written by Colin Henderson

January 22, 2014 at 00:24

Posted in Uncategorized

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  1. […] makes the point I did earlier that intrinsic payment support costs have not been absorbed by the Bitcoin […]


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