Can anyone please explain the OBSESSION that bitcoin supporters have with the idea of getting rid of credit card fees and having that savings passed to the consumer? I don't work in the finance department at my company, but from what I have heard, transaction fees for credit cards cost us about 4% of revenue (lets ignore the fact that they also ENABLE 100% of our revenue).
If all of a sudden that went from 4% to 0%, what would actually happen? Lets say we decide to pass ALL that savings to the customer. Wow... now a $100 product costs $96.
Profit margins in many business are in the double digits; for high tech firms (SaaS) its higher than 50%. There is a lot of markup happening in all businesses, its inherent to our capitalist model; and trust me, credit card transaction costs are not the main source.
Many other businesses have incredibly slim margins and chargebacks hit them hard. Airlines where I live in australia charge big extra fees for credit card payments, but no transaction internet banking payments are free. These payments are actively encouraged. These don't work for international payments and are clumsy even for australians. If bitcoin becomes mainstream enough to offer a minimal fee alternative to credit cards (and over time the 1% bitcoin processor fee will get smaller and smaller as it is a competitive market) then it will get widespread acceptance on many low margin merchants.
At this point, a number of people will adopt bitcoin to avoid the obvious extra credit card charges.
At that point, my stash of bitcoins will suddenly be worth $10000+ each, and THAT is why bitcoin supporters are obsessed with getting rid of credit card fees.
Can you explain more about the fees they charge? As we have been discussing, usually transaction fees are 5% or less. Obviously for the airlines this is significant to their small margins, but isnt the fee they charge for using a credit card nearly equal to the 5%?
Surely no one wants to pay a surcharge for using a credit card, but if Im buying a $500 plane ticket, is a $25 extra fee really "large"? and is it the number one priority for cost cutting? If the fee is much larger than $25 then its not in relation to how much the transaction fee is.
Also, chargebacks are discussed here as if they happen often. If you are providing good service they should never happen. While it is an undesirable expense for businesses, it is a very important feature for consumer protection. At my company around 1/10,000 transactions is charged back. I would guarantee the number of sales lost if customers knew they had no ability to dispute payments would be much greater than 1/10,000.
I think bitcoin is a fascinating product. I'm not sure what the real world value may be though. Lots of thoughts on what parts of bitcoin might make life better for the masses but we haven't seen it yet. I think we will but for the moment we have to conjure up these things in ways that are immediately made possible by bitcoin.
I think 1) eliminating fees of all sorts (credit card, foreign currency exchange, etc.) 2) anonymity of purchases are just a few examples.
I don't think anything I've heard to date really strikes me as what will make bitcoin (in whole or in part) as successful as I believe it will be.
But this is what startups do. Figure that part out. Bitcoin isn't any different from other disruptive ideas. We will get it wrong many times before we get it right.
I guess what I'm saying is that this is the process of innovation and it often seems boring and wasteful. But have faith in the process!
If I spend $20,000 a year on my credit card and I get back 4% that's $600. That's a lot of money being wasted. I could get a new flagship Android phone every, what, eight months?
First of all, thats from the consumer point of view, I am specifically talking about from the business point of view. (With a credit card btw, you DO get money back - its called cashback. I get 2% back on my Discover card. Bitcoin does not give me any money back.)
If all of a sudden that went from 4% to 0%, what would actually happen? Lets say we decide to pass ALL that savings to the customer. Wow... now a $100 product costs $96.
Profit margins in many business are in the double digits; for high tech firms (SaaS) its higher than 50%. There is a lot of markup happening in all businesses, its inherent to our capitalist model; and trust me, credit card transaction costs are not the main source.