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An estimate of the real savings for merchants from Bitcoin

thebusinessofbitcoin.com

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Re: An estimate of the real savings for merchants from Bitcoin

#21

Post by davidrangel »

TwoFactor wrote: post #20
dror wrote: post #12

Most of these savings could be accomplished by having the merchant withdraw the payment from your bank account rather than a credit card. Frankly, I'm surprised that Amazon doesn't offer this service. Just take the money out from my bank, offer me the same protections as a credit card, and we split the credit card fee: 1% for you and 1% for me :-). Used to be that violated their credit card agreement to charge more f…

There is a lot more risk on the consumer allowing a merchant (and vicariously the consumer's bank) full "pull" access to a bank account. You'll need a dispute resolution system, which is what debit cards are basically providing in addition to point of sale systems. Imagine a security compromise like with Target, but if there was full bank account access as well... it would be a nightmare. Bitcoin is "push" based whic…

Agreed. Giving someone full access to your bank account is very risky. At least with credit cards you can always dispute charges and it is the merchant who is usually on the hook, not the consumer.

Re: An estimate of the real savings for merchants from Bitcoin

#22

Post by davidrangel »

al2o3cr wrote: post #13

"Assuming consumers will be ok with only 0.5% in rewards" And assuming they'll be OK with having ZERO chargeback rights in case the purchase turns out to be not-as-advertised and/or defective. That second article (explaining why consumers would want to do this) best be a doozy, because so far consumers have had to swallow a requirement for them to provide a "mobile wallet", lower rewards, AND increased vulnerability…

I agree that foregoing the rewards is a fairly big assumption and it might not be realistic. But I do think there are other advantages and will write about those. The I don't think people will (or should) absorb the merchant risk and that's why someone does have to take up an acquiring bank-type role (and charge for it).

Re: An estimate of the real savings for merchants from Bitcoin

#23

Post by davidrangel »

waterlesscloud wrote: post #19
al2o3cr wrote: post #13

"Assuming consumers will be ok with only 0.5% in rewards" And assuming they'll be OK with having ZERO chargeback rights in case the purchase turns out to be not-as-advertised and/or defective. That second article (explaining why consumers would want to do this) best be a doozy, because so far consumers have had to swallow a requirement for them to provide a "mobile wallet", lower rewards, AND increased vulnerability…

Assuming Bitpay, Coinbase, and company don't get into providing some sort of chargeback protection for consumers, which of course they could do. It's also possible that merchant reputation will become key, which isn't exactly a bad thing.

Agreed on both counts. They (e.g., Coinbase) will likely have to do this, and charge for it.

Re: An estimate of the real savings for merchants from Bitcoin

#24

Post by davidrangel »

waterlesscloud wrote: post #18
pmorici wrote: post #15

Earlier quoted context omitted.

That sounds shady. Unless that was explicitly agreed to before the purchase I don't think that would fly.

It's pretty much how the merchants that accept bitcoin are handling it right now. It's flying fine.

I believe the larger merchants (e.g., Overstock) may not even be giving refunds right now. When buying with Bitcoin you can only get store credit.

Re: An estimate of the real savings for merchants from Bitcoin

#25

Post by davidrangel »

sergiosgc wrote: post #6

20% savings is not ground shaking. Remember that BTC is tackling an entrenched opponent, quasi monopolist. It'd take an order of magnitude in savings to guarantee success. Think 50% to 90% less.

As the two other comments here state, 20% is nothing to sneeze at when you are a low margin retailer (which many are). And I think 20% is the low end of possible savings (I'm the author of the post) - it's possible that the savings will end up being significantly higher, especially if retailers can keep some of the money in Bitcoin (because business partners start accepting Bitcoin and/or volatility comes down) and if fraud costs come down.

Re: An estimate of the real savings for merchants from Bitcoin

#26

Post by davidrangel »

philrapo wrote: post #14

Shouldn't we be asking what the savings to the consumer are? I use my credit card all the time for 2 reasons: 1) fraud protection and 2) reward points. Interchange fees paid by the merchant are essentially being passed to the consumer via reward points. Why would people switch from credit cards to bitcoin en masse?

It's a good question and also needs to be answered. I'm the author of the post and have one coming on the consumer side.

Re: An estimate of the real savings for merchants from Bitcoin

#27

Post by wyager »

al2o3cr wrote: post #13

"Assuming consumers will be ok with only 0.5% in rewards" And assuming they'll be OK with having ZERO chargeback rights in case the purchase turns out to be not-as-advertised and/or defective. That second article (explaining why consumers would want to do this) best be a doozy, because so far consumers have had to swallow a requirement for them to provide a "mobile wallet", lower rewards, AND increased vulnerability…

I'm ok with not having chargeback rights on these transactions, because it's not like I'm going to do a chargeback on my local burrito place or grocery store or whatever.

Also, the article factored in a "Bitcoin discount" for customers, and .375% of revenue is a hell of a lot more that .375% in profit. That's easily 20% of profit for small margin businesses. The article was also very conservative on credit card fees.

If a Bitcoin user wants chargeback ability, they can use a third party mediator for a fraction of what credit card companies charge.

Re: An estimate of the real savings for merchants from Bitcoin

#28

Post by pmorici »

waterlesscloud wrote: post #18
pmorici wrote: post #15

Earlier quoted context omitted.

That sounds shady. Unless that was explicitly agreed to before the purchase I don't think that would fly.

It's pretty much how the merchants that accept bitcoin are handling it right now. It's flying fine.

No, it's one of the things you have to consider before accepting Bitcoin. Overstock for example gives store credit and is explicitly says up front that is what they are doing. Anyone that tries to refund in USD at the current exchange rate instead of returning the original payment w/o stating upfront that is what they are going to do is being hugely dishonest. Think about it what if you tried to return your laptop to Sony and they said find but we are going to refund your money in JPY instead of USD and o by the way the exchange rate has changed 10% since you bought this so here is a refund for 10% less. No way that would fly so I'm surprised people would think doing the same with Bitcoin would be ok.

Re: An estimate of the real savings for merchants from Bitcoin

#29

Post by pmorici »

JeffJenkins wrote: post #17
pmorici wrote: post #16

Earlier quoted context omitted.

If that were a profitable scheme then why don't people do it with other currency pairs and goods?

Generally multiple currencies aren't accepted and the volatility is much lower. You probably couldn't make a profit on normal consumer goods that have a return policy. For this to work you'd need potentially extreme currency changes over the course of a few weeks.

I don't think accepting multiple currencies is a requirement to do what you are saying. But I think the real answer is that you could do this with other currencies but it isn't profitable and the only reason it looks like a reasonable scheme with BTC is because of the large price movements which as it grows will lessen making this a non-issue if it even is right now.

Re: An estimate of the real savings for merchants from Bitcoin

#30

Post by philrapo »

davidrangel wrote: post #26
philrapo wrote: post #14

Shouldn't we be asking what the savings to the consumer are? I use my credit card all the time for 2 reasons: 1) fraud protection and 2) reward points. Interchange fees paid by the merchant are essentially being passed to the consumer via reward points. Why would people switch from credit cards to bitcoin en masse?

It's a good question and also needs to be answered. I'm the author of the post and have one coming on the consumer side.

Nice, looking forward to reading your thoughts. I've been thinking about this myself recently.

I'd suggest using a higher estimate for the value of rewards points. (You used a 1%.) You can explicitly get >1% cash back on many cards, so I'd argue that's really the lower bound.[1]

Most reward points can be redeemed for ~2%, with conscious consumers getting even more than that. [2]

Consumers are very aware of the value they're getting, too. If you read AMEX company filings, the redemption rate on MR points is >90%. I found that shockingly high. It's tough to get consumers to switch to bitcoin when it's worse value and more risk.

[1] https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/... [2] http://boardingarea.com/onemileatatime/2012/05/25/my-updated...

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