Why every online — and offline — merchant needs to consider Bitcoin as a customer payment option.
by Paul Racko
If you’re an online or brick-and-mortar merchant who accepts debit and credit card payments from customers, there’s an emerging online payment system you need to know about that is set to give these legacy payment systems a real run for their money. Bitcoin isn’t simply a new-fangled form of digital money – it’s an incredibly sophisticated and decentralized payment network unlike anything ever devised. Here’s why every merchant needs to consider incorporating bitcoin into their payment systems.
In 2009, credit card companies extracted $48 billion in fees from merchants*. If you’re an online merchant who cannot physically verify a customer’s card, you’ll typically pay 1.90% plus 10 cents per transaction in addition to the $10-$15 per month plus the 1-8 cent transaction fee charged by your online payment gateway. For the online merchant with annual sales of $100,000 and an average sale of $50, the annual cost of accepting credit cards is $2,300. With Bitcoin, the cost to the merchant is $0 per year because the buyer pays the transaction fee, which usually costs only 1 or 2 cents per transaction.
*Soaring Credit Card Transaction Fees Squeeze Independent Businesses ILSR.org
Average Credit Card Processing Fees CardFellow
What You Need to Know About Credit Card Processing New York Times – March 15, 2013
Have you ever had a customer receive a product that you shipped to them and then claim they didn’t receive it? In such a case, the credit card company will deduct this payment from your account and you the merchant must accept the loss unless you can prove otherwise. The bar of proof to dispute a chargeback is quite high, requiring additional staff time to track down the problem and collect evidence, incurring further hits to your bottom line. In 2009, the cost of chargebacks to merchants was $11.8 billion.* Bitcoin completely eliminates such chargebacks because the payment moves directly from buyer to seller without an intermediary, just like any cash transaction. When a customer has a dispute, they must take it up directly with the merchant for resolution.
*The Cost of a Chargeback (Infographic) Chargify.com
The Swipe That Never Was: How to Minimize Annoying Credit Card Chargebacks Bank of America – July 12, 2012
Credit Card Chargebacks: Your Secret Weapon in Merchant Disputes Daily Finance – July 31, 2012
Privacy & Security
Since bitcoin payments are “push” payments (unlike credit/debit card “pull” payments), a transaction does not have the buyer’s sensitive account information associated with it, therefore saving merchants the cost and hassle of PCI (Payment Card Industry) compliance. Consider what happened to Target this holiday season: malicious code was installed on point of sale systems across more than 1,400 of its stores, causing card data to be stolen from 40 110 million shoppers and an untold number of fraudulent charges made against these customers’ accounts. Target was thus not only financially on the hook for notifying customers of the data breach, but in order to restore confidence in their customer base, had to offer a 10% weekend discount as well as credit card monitoring to their shoppers. Compounding the problem, Chase then placed strict limits on customer debit accounts at the very height of the holiday shopping season. The cost and inconvenience of this data breach for both Target and its customers is staggering.
PCI Compiance Guide, FAQs and Myths
What does it cost to become PCI Compliant? Braintree Payment Solutions – June 25, 2008
Target customers hit in major credit card security breach CBS News – December 18, 2013
Target offers 10% discount after credit card hack CNN Money – December 20, 2013
Chase to Limit Use of Debit Cards From Target Breach New York Times – December 21, 2013
No Bank Account Required
Bitcoin allows anyone to issue or accept payments, even the un-banked and the under-banked. A creative 12-year-old writer can now sell their e-book directly to customers without an account with a third party. The 2.5 billion un-banked people around the world can begin establishing microenterprises with a global customer base. Bitcoin allows anyone with access to the internet the ability to start a business and accept payments from customers.
Measuring Financial Exclusion: How Many People Are Unbanked? CGAP.org – April 24, 2012
How Bitcoin Could Help the World’s Poorest People PolicyMic – May 14, 2013
Tween Authors Launch ‘Bitcoin for Kids’ Book Series CoinDesk – December 2, 2013
Easy International Transactions
Under the legacy banking system, moving money from one country to another is hugely expensive, time-consuming, and complicated. Bitcoin opens the entire world to your products and services. You are no longer restricted to the geographic limits set by your bank or merchant provider or by the fees bank fees required to carry out international transactions. If you own an import/export business or have foreign employees on your payroll, Bitcoin is your ideal international payment solution.
Local Restrictions on PayPal Accounts Wikipedia
Comparing Bank Wire Fees MyBankTracker.com – April 18, 2013
How to lower the fees on international bank transfers Telegraph – August 23, 2013
No Transaction Minimums
If you’re a writer, blogger or musician, Bitcoin makes the monetization of your talents easy and profitable. For charities and non-profits, a world of potential donors is now open to you. Until now, micropayments — those being defined as transactions under 99 cents — for creative content or donations were not profitable since merchant fees for card transactions on such low amounts eat up approximately 30%. Bitcoin makes it possible for you to collect the full amount of the sale or donation, whether its a dime or a dollar’s-worth. Bitcoin is set to change not only how writers, artists and musicians are remunerated for their talent and good work, it will also improve the speed and efficiency of targeting financial support to aid groups, non-profits, charities, and the communities they serve.
Micropayments now ready to slash price of online news NewScientist – August 14, 2013
Get Ready to Pay for Online Content in Bitcoins and Tweets Vice.com – December 2013
Charities Explain How Bitcoins Can Serve Their Cause PaymentsSource – May 28, 2013
And we’re still at the very early stages
On January 3, 2009, Bitcoin was launched. It’s still very young, and like the internet before it, holds an incredible amount of potential. The benefits outlined above are just a small representation of why Bitcoin is so important for merchants. What I’m personally most excited about is the amount of innovation, development and economic opportunities that will emerge around the Bitcoin ecosystem. If you thought email and the internet was world-changing, you ain’t seen nothing yet. 2014 is going to be a big year for merchant and consumer adoption, application development, and job creation. Buckle up, this is going to be an exciting ride!