The card companies, banks and payment processors cooperate together to charge a good chunk of fees both to cover the cost of fraud and to protect against it. But can bitcoin offer better, or at the very least lower-cost, fraud protection for merchants and consumers?
It’s almost essential today for merchants to accept credit or debit cards. Indeed, it is often the only form of payment in a customer’s wallet. However, in exchange for accepting cards, merchants must pay for a number of services that they may not need or want as part of the blanket fees charged by payment processors.
There are even some examples where merchants offer customers a discount in exchange for paying in cash, such as gas stations in the US, which often advertise a cheaper price to customers using physical money.
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Alan Safahi, CEO of ZipZap and a veteran of the payments industry, said that banks should be interested in bitcoin’s potential for lower overhead operational merchant costs, explaining: “Banks don’t make a lot of money for payment processing. They couldn’t care if they are processing Visa, MasterCard or bitcoin.” One of the biggest issues with credit cards that merchants simply cannot avoid is chargebacks – when a card transaction is reversed after a payment for a variety of reasons.
“For more developed economies with stable currencies, chargebacks is one of the biggest selling points to bitcoin adoption for merchants,” said Michael Dunworth, whose startup snapCard allows users to pay for things online in bitcoin whether a merchant accepts bitcoin or not. “[Chargebacks are] a drain on all fronts, and an incomparable value-add of accepting bitcoin,” he added.
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