Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why I'm Interested in Bitcoin

cdixon.org

Post reply on HN
Print view View original

151–160 of 178 posts

Re: Why I'm Interested in Bitcoin

#151

Post by abalone »

rictic wrote: post #143
abalone wrote: post #126

This is the same naive analysis everyone makes when they first look at the payments system. "Look at all that money. 2-3% on every transaction. A $500B tax. LOOK AT ALL THAT MONEY." The reality is this: Most of that money gets passed back to consumers via rewards, benefits and consumer protections. It's not a tax so much as an incentive for consumers to keep using their cards. And so it is considerably harder to come…

Aren't rewards also subsidized by interest rates charged on those cardholders who carry a balance at the end of the month? My understanding was that that's a very significant income stream, and that's missing from your comparison of ~1% rewards to the 1.5-1.65% interchange.

It's complicated. Rewards cards tend to be less competitive on APR, so they are less attractive to consumers who carry large balances. The wealthiest consumers who spend the most often have the best rewards programs and carry no balance. But you're right, that's a revenue stream that factors into it. There are other sources too, like penalty fees.

At the same time, some cards "magically" do more than 1%.. they do 2% or even 3% in some cases. You can guess where those funds come from.

But don't miss the bigger point here. The card issuer market is a competitive one. Regardless of where the revenue comes from, competition pressures issuers to hand more of that value to the consumer. It makes it a less lucrative business than the raw processing fee might suggest.

Re: Why I'm Interested in Bitcoin

#152

Post by patio11 »

saalweachter wrote: post #145
jval wrote: post #133

Earlier quoted context omitted.

If card companies are paying it all back to consumers, then what are their shareholders ending up with? I agree with you that not all the $500Bn is going directly into the pockets of shareholders, but the reality is that there is a huge transaction cost in taking a clip and then passing part of it back to a consumer. However much is lost in the process, it might not be $500Bn but it is definitely a lot of money, and…

Actually, where are all of these numbers coming from in the first place? I know I've heard a lot about the "credit card tax", but I can't seem to pull the numbers off the public data on these companies. Visa has $10.4 billion in revenue off of processing $4.4 trillion in transactions; that seems to make the credit card tax a mere 0.2%, which is off by an order of magnitude from the conventional-wisdom "credit card ta…

Visa is not the only party receiving money on the transaction: the processor/merchant bank and issuing bank also both receive cuts which dwarf Visa's.

Re: Why I'm Interested in Bitcoin

#153

Post by XorNot »

abalone wrote: post #149
cdixon wrote: post #139

Earlier quoted context omitted.

My view is that the whole system was designed for a different era and not for the web. The problems include 1) consumer having to fill out a form at each merchant, 2) consumer having to decide if she trusts the merchant (1 & 2 lead to the strategic asset of "cards on file"), 3) the bank trying to determine with probabilistic algorithms whether it was really me paying, 4) the security of the whole system is very flawe…

I agree with all those points, but the key question is whether the virtual currency community can come up with something significantly better to offset the considerable adoption costs. Another consideration: whether the entrenched players can simply make minor adjustments to counter that threat. For example, take your first point, filling out forms. It used to be you always had to do it. Then contactless payments too…

More importantly: NFC happened anyway.

Pretty much all my local merchants have machines that accept NFC payment taps - to the extent that the Commonwealth Bank has an app for the Galaxy S4 which will emulate a debit card tap and be accepted by any machine.

The only time I end up keying a pin or signing is usually when the staff themselves don't realize that I can just tap my card (the machines have big NFC icons on them, but they don't offer the machine to me to tap).

Re: Why I'm Interested in Bitcoin

#154

Post by XorNot »

pfisch wrote: post #140
abalone wrote: post #132

Earlier quoted context omitted.

Interchange is by far the biggest component. The second biggest part is the processor markup. The card network's cut (e.g. Visa itself) is extremely small in comparison. Just to define these terms for our fair readers: Interchange is the cut that goes to the bank that issued the consumer's card. That is standard and you can see Visa's rates here: http://usa.visa.com/merchants/operations/interchange_rates.h... Process…

It seems like you need a new security system to reduce fraud which will reduce fees, and that is what bitcoin offers potentially

Yeah that must be why people aren't losing Bitcoin and having it stolen every second week...

Re: Why I'm Interested in Bitcoin

#155

Post by XorNot »

quack wrote: post #116
foley wrote: post #95

Earlier quoted context omitted.

I've been working on a Bitcoin card over the past twelve months so I have had a lot of time to think about the benefits and drawbacks of using Bitcoins for everyday transactions and I completely agree with you, no compelling advantage. Besides the obvious problem of the volatile exchange rate there is just no trust in any of the Bitcoin institutions, if I can't trust anyone else to manage my Bitcoins I need to do it…

If someone hacks your netbanking details and sends the money before you realize it the bank most certainly not cover your losses. Debit card fraud transactions have a very short window to report. It's a good thing that you have a 4 digit pin because 4 digits is secure Bitcoin allows a merchant to recognizing a transaction without considering fraud/KYC. I've sold items on a forum with an escrow moderator and paid 0% i…

Conversely it's illegal to take money which wasn't intended to be sent to you.

Let's say you accidentally type in the wrong BSB (which my father actually did once) and it happens to line up with an account number in that bank (fortunately for him it did not). Even if you send say, $150,000 to that person....it's not legal for that person to accept it. Nor spend it.

See, while they could claim to have spent a portion of it unknowingly the courts would probably view that as fair, they couldn't go "hey I'm rich!" and buy a house that they would be allowed to keep.

I mean, you might not get all the 150k back in the end, but they would definitely not be keeping any of it. And through this process, you'd generally find your bank would be fairly enthusiastic about getting that money back, since as long as it's not on their ledgers they can't lend against it.

Re: Why I'm Interested in Bitcoin

#156

Post by XorNot »

PureApeshit wrote: post #96
cdixon wrote: post #12

Earlier quoted context omitted.

Here's one model that could work. Think of Bitcoin as analogous to physical cash. Cash = small casual payments in offline world. Bitcoin = small casual payments in online world. (btw, the original Bitoin paper says this pretty explicitly). I don't keep my savings in (physical) cash. I keep some spending money there. Similarly you will have your internet spending money. You'll converts to and from USD occasionally but…

Bitcoin being deflationary, storing value in it is very good idea, apart being a bit risky. I also do not see why it should be limited to small payments, bitcoin is full currency not a toy.

Bitcoin being deflationary, the value will never settle. No government wants deflationary money, and you don't either because no one who doesn't have it has any reason to accept permanent servitude from a deflationary currency.

Or as I like to put it: why do you think you should get wealthy for doing literally nothing? Not investing, not loading, not accepting any risk, not working?

Re: Why I'm Interested in Bitcoin

#157

Post by grovulent »

nicholas73 wrote: post #37

I don't think Bitcoin will ever be a viable currency, at least not on the scale of national currencies. Despite all the flaws fiat currency has, it is actually backed by something - the power of the country's government to tax. Thus, any buyer of sovereign debt has a calculable probability of return. Despite America's printing of dollars, inflation has actually been mild so far. Bitcoin has nothing backing it but an…

Folks make this statement: "but a currency must have backing, or intrinsic value" and feel that they have just proved bitcoin can't work. But not many contributors seem capable of stating WHY they believe this. Care to elaborate?

In any case, I think it's entirely possible that you're wrong, and I've written a long argument against your claim if you're interested:

http://reviewsindepth.com/2013/12/bitcoin-krugman-and-the-me...

The TLDR is that yes, historically currencies have required intrinsic value or government backing of some kind - but it is not an economic law of nature that a currency has to be backed as such. If you can get the economic costs of securing agreement over a currency, then a currency of "mere agreement" is possible. Given that the internet and the design of Bitcoin itself have dramatically reduced those costs - it may actually have a shot at gaining wide acceptance.

Re: Why I'm Interested in Bitcoin

#158

Post by abalone »

XorNot wrote: post #153
abalone wrote: post #149

Earlier quoted context omitted.

I agree with all those points, but the key question is whether the virtual currency community can come up with something significantly better to offset the considerable adoption costs. Another consideration: whether the entrenched players can simply make minor adjustments to counter that threat. For example, take your first point, filling out forms. It used to be you always had to do it. Then contactless payments too…

More importantly: NFC happened anyway. Pretty much all my local merchants have machines that accept NFC payment taps - to the extent that the Commonwealth Bank has an app for the Galaxy S4 which will emulate a debit card tap and be accepted by any machine. The only time I end up keying a pin or signing is usually when the staff themselves don't realize that I can just tap my card (the machines have big NFC icons on t…

You might consider that the reason staff don't realize you can tap is that nobody uses it, because you can just swipe without a PIN for small purchases. I am not saying this is superior, just observing an example of how even changing consumer behavior is difficult when the value add is minor.

Re: Why I'm Interested in Bitcoin

#159

Post by kybernetikos »

abalone wrote: post #126

This is the same naive analysis everyone makes when they first look at the payments system. "Look at all that money. 2-3% on every transaction. A $500B tax. LOOK AT ALL THAT MONEY." The reality is this: Most of that money gets passed back to consumers via rewards, benefits and consumer protections. It's not a tax so much as an incentive for consumers to keep using their cards. And so it is considerably harder to come…

> Total earnings for the year 2011 for the entire credit card industry were $18.5 billion, which was up slightly from the 13.6 billion earned in 2010.

http://www.bcsalliance.com/creditcard_profits.html

18.6 billion is still quite a bit of money to extract for the service of letting people spend their own money.

All those extra benefits should be unbundled and it'll be interesting to see how many consumers purchase them when their costs aren't being subsidized by cash buyers.

Re: Why I'm Interested in Bitcoin

#160

Post by XorNot »

abalone wrote: post #158
XorNot wrote: post #153

Earlier quoted context omitted.

More importantly: NFC happened anyway. Pretty much all my local merchants have machines that accept NFC payment taps - to the extent that the Commonwealth Bank has an app for the Galaxy S4 which will emulate a debit card tap and be accepted by any machine. The only time I end up keying a pin or signing is usually when the staff themselves don't realize that I can just tap my card (the machines have big NFC icons on t…

You might consider that the reason staff don't realize you can tap is that nobody uses it, because you can just swipe without a PIN for small purchases. I am not saying this is superior, just observing an example of how even changing consumer behavior is difficult when the value add is minor.

No in this case it's because they don't present the reader to you - they punch in the sale, then ask you to hand them the card and swipe it.

Also in Australia I've not seen swipe without PIN used very much - a swipe usually requires a pin, whereas tap does not (and is also a lot faster).

Post reply on HN