For now, banks continue to profit from crowdfunding. They get a percentage of each credit card transaction.
However, they could be in serious trouble if an alternative payment system becomes popular. The stage is set - NFC and Bitcoin are growing in popularity, and the federal government recently began allowing merchants to charge a credit card fee.
If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.
They already force retailers to not give discounts for using cash. If they've figured out how to make that legal, why do you think BTC would be any different?
What we really need is for the justice department* to explicitly include the goal of making markets competitive in its short list of (un)official objectives.
* Or any branch of government. I mention the judicial because I think it is the branch least susceptible to bribery. Since competitive markets are bad for business, that makes it the most likely candidate to promote this kind of change.
> They already force retailers to not give discounts for using cash.
It's been illegal to prohibit stores from offering cash discounts since 2010; those contract terms are no longer enforceable. That was part of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
> They already force retailers to not give discounts for using cash.
The contracts actually say that merchants cannot add a surcharge for paying with a credit card. It's still okay to give a 3% discount off the final sale price for paying cash, or a 10% discount, or whatever they feel like. As far as I know these contracts are intended to mirror the laws about cash: you can't ask for 3% more because somebody wants to pay with cash, since cash is legal tender.
Not true since January. Part of a class-action settlement with Visa and MasterCard allows merchants to add a surcharge of up to 4% for paying with credit cards. The Dodd-Frank bill in 2010 banned prohibitions on the other terminology for the same thing -- cash discount. Cash discounts, credit surcharges, and minimums to pay with credit as low as $10 are all currently legal, and old merchant account agreement terms that prohibited them are void or unenforceable.
I suspect that's more or a contractual thing than a legal thing. I know gas stations around South Florida are now advertising cash and credit prices (so my thought is---the gas companies have enough pull to get favorable terms from the credit card companies).
To date it has been contractual. However, as a result of an antitrust lawsuit, Visa and Mastercard changed the provisions that ban merchants from charging a credit card surcharge. But states are now trying to bad adding those surcharges: http://www.cnbc.com/id/100485094.
Of course. I'm implicitly claiming that this kind of contractual requirement should be illegal since it's blatantly anticompetitive (my opinion, not the court's, naturally).
Bitcoin has no real advantage over credit cards, assuming the bitcoin processor (and there will be a middleman - not everyone is going to run a digital wallet) offers the same level of service. Credit cards cost a lot, because of fraud protection.
Now, maybe the banks are getting fat and lazy, and some new entrants will stir things up a bit. A secure token (maybe an app) could cut the costs of fraud protection, but I can't see how bitcoin can work better. Sure, you can have a 20 character password on you bitcoin collection. But there's no reason why banks couldn't give consumers the option of doing the same (a 20 character pin on a app, which validates transactions), if there was much demand for it.
There is no concept of chargebacks with bitcoin, so transaction costs can be kept lower. As the industry matures, I predict fraud rates in line with debit cards/ACH transfers.
Do note that to do expedient bitcoin transactions you need to offer a tip for accepting your transaction on some mining node to start getting confirmations quickly. If you don't offer a tip it can take upwards of an hour for some idle miner to pick your transaction up and start confirming it.
>and the federal government recently began allowing merchants to charge a credit card fee. If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.
And I know how the law would be changed in a moment's notice, if the banks found this scheme looses them money.
However, they could be in serious trouble if an alternative payment system becomes popular. The stage is set - NFC and Bitcoin are growing in popularity, and the federal government recently began allowing merchants to charge a credit card fee.
If a taco cost $1.50 with my smartphone, or $1.75 with my credit card, I know how I'd pay.