The 1st order effects are on business. It's mostly the 2nd order effects that consumers feel. Marginally higher costs that inevitably pass to consumers . Merchant refusal to ship to "high risk" locations. More difficult international transactions generally. Fewer online vendors (=less choice & higher prices) of high risk (easily resellable) items.
Then there are the effects of having such a thick intermediary, a duopoly. Some consumers can't get a credit card. It's hard for consumers vulnerable to overspending & borrowing to avoid the card's expensive credit component.
There's also a general brokenness (IMO) of the "pull" nature of credit cards. I want to send vendors money, not authorize them to take some themselves while reserving the right to dispute the charge. Even for recurring transactions I would rather an easy bill paying service that works like invoices & checks do, but with a 10X simpler UI.
> Some consumers can't get a credit card. It's hard for consumers vulnerable to overspending & borrowing to avoid the card's expensive credit component.
Aren't debit and credit cards 100% interchangeable these days? I've for sure never had my MasterCard debit card rejected.
Almost certain of it, some places even tack on a fee for using a credit card instead of a debit card.
However, consumer protections for a debit card are nowhere near as good. e.g. in the UK at least, if you experience fraud you have to wait for your bank to refund your account, whereas you don't experience any loss with a credit card. As such I avoid using debit unless the merchant charges for credit.
Maybe not in the next few years. But people who pay with cash because they aren't allowed to be in this country and don't want a bank account (some portion of the unbanked) might enjoy shopping in the digital world by using some "digital cash".
They can already shop in the digital world with prepaid Visa, Master Card or even AmEx cards. Going after people without bank accounts is big business.
As others have said, risk=chargebacks which bitcoin does fix. with CCs merchants basically have to trust customers and being overseas makes you untrustworthy (like to chargeback).
Lots of other things imply risk. The only way to reduce it is by finding out more about customers: full name, current location, previous location, chargeback history and anything else that the merchant, CC company, payment gateway and 3rd parties hired by any of these can find.
That segways nicely into the high profile brokeness that bitcoin aims to fix: privacy. I prefer a world where people can buy stuff without their name being crosschecked and recorded by all these parties, at least by default. If we want to require porn or ammunition or whatnot to be purchased by verified individuals, lets do it with some explicit identity check instead of by default in some opaque way.
The concept that credit cards are lower risk to consumers than ANYTHING is laughable to me, but I can stop laughing long enough to consider it for BTC. BTC has a lot of consumer risk right now, anything OTHER than BTC is better than CC's though.
> The concept that credit cards are lower risk to consumers than ANYTHING is laughable to me
Can you explain why? Imagine I buy a car for £5000 and put £100 on my visa credit card and pay £4900 in cash. If the dealership goes under I can get all of my money back from visa. Similarly if they just fail to deliver or there are serious problems I can push visa and get my money back.
That gives a massive amount of protection against a wide range of things.
What would be better, or what are the staggering other risks?
Higher risk for consumers on a purchase, lower risk for consumers of being defrauded by billing scams or skimming from those who have access to their card numbers.
Consumers are accustomed to the risk of cash; and many would be more than happy to use Internet cash since they trust their vendors. They'd still have the card option for unknown vendors. Bitcoin simply adds a cash choice. This isn't an either or situation; it's a now you have two options situation.
For me this depends on the price. While I would want to have protection for (say) £100, I'd be less concerned about that and more concerned about fraud if I was buying something for £1.
No bitcoin will fix that because you can't reverse the charges. So there is no risk in shipping because you are 100% positive that you have the money you expect you have.
What if I use bitcoins to buy something and then the vendor doesn't ship it to me?
I fully expect this is part of the user experience Stripe will sell. If I buy something through Stripe using bitcoins and get stiffed, is Stripe going to tell me "too bad" when I complain to them?
Stripe isn't the vendor, they're the payment processor for the vendor; that decision isn't up to Stripe, it's up to the vendor. Your relationship isn't with Stripe, it's with the vendor. Your recourse is with the vendor as well, not Stripe.
The solution to this is block chain escrow through a third party.
So there is no risk in shipping because you are 100% positive that you have the money you expect you have.
Only if you wait for a significant amount of time (days?) to verify the transaction. If you use a payment processor and they allow you to pass through transactions without verification, they are assuming that risk for you, but the risk is still there, and there is of course also risk caused by the currency volatility, chance of theft or loss of coins (very different from digital cash, more like paper cash), etc.
I'd be interested to know how companies like bitpay hedge that risk, or the risks caused by Bitcoin volatility, if indeed they do.
> Only if you wait for a significant amount of time (days?) to verify the transaction.
What? Two or three confirmations are generally irreversible. Six - an hour, give or take - has been generally agreed to be absolutely irreversible since the original Bitcoin client (if it's not, there's something really wrong and Bitcoin isn't as valuable as we thought).
If you're using a payment processor which takes risk that doesn't need to be there because you're not going to have your items in the post in an hour anyway (i.e. the vast majority of merchants), you're simply wasting money.
Credit cards generally verify in seconds, so this is a significant difference, even if the time is hours (I'd read somewhere it could be days for 7 confirmations, but thanks for the correction if that is never true and it is hours) - that confirmation time varies wildly and is not predictable is also an issue. A lot of merchants ship almost immediately after orders are completed (e.g. digital goods), so introducing another delay is not great and a significant downside for both merchants and consumers.
These and other technical challenges like blockchain size are probably soluble though, esp. if it hit scale and people were working on it, what worries me more in terms of mass adoption is the attitude to other risks like security, volatility and lack of insurance in the Bitcoin community, the insane requirements for sending in copies of passports etc that exchanges still have for purchasing bitcoins, and the fundamental problems caused by giving individual cryptographic keys perpetual value.
It would certainly be nice to have a payment system not controlled by Visa/Mastercard, and I imagine one is coming, but I'm not convinced Bitcoin is that alternative because of the assumptions baked into its design that we need to exchange tokens in order to exchange value.
> the insane requirements for sending in copies of passports etc that exchanges still have for purchasing bitcoins.
If you've ever bought foreign currency in a bureau de change, you'll have had to provide ID. It's the same set of laws which require Bitcoin exchanges to require ID. Take it up with your Government.
> Credit cards generally verify in seconds, so this is a significant difference
Which is equivalent to a 0 confirmation transaction, so no it's not a difference. Cards can be reversed for months, that's what 6 confirmations is competing with.
Which is equivalent to a 0 confirmation transaction, so no it's not a difference.
The CC issuer is queried for the card status, funds available, address etc, and transactions are accepted or declined based on that information. Sometimes there's even an extra verification step directly contacting the issuers bank to check a passcode (SecureCode), and all that is reversible afterward if a mistake or fraud is detected.
In what way is that analogous to a 0 confirmation irreversible bitcoin transaction?
Safety for the merchant. First off, funds don't need to be checked, there is not a card status or funds available, address is not necessary so all of those things are problems cards have that Bitcoin doesn't; they aren't relevant.
It is just as safe to accept a 0 confirmation transaction as it is to accept a credit card. In both cases, the transaction could be essentially reversed either by a double spend or by a charge-back. And frankly, a charge-back is far more likely than a double spend.
In both cases, the merchant is equally out. Bitcoin typically clears in less than an hour while cards don't clear for months. There is far more risk of a charge-back in months than there is of a double spend in the milliseconds it'd have to occur to be successful.
Cards offer more safety to the consumer of a fraudulent vendor of course, but that's the nature of cash and that's when you use escrow if it's big enough to worry you. However, fraudulent customers are far more common than fraudulent vendors; it's the vendors who need the most protection here and it's the vendors the current system disfavors.
I'm not convinced vendors are the important party here, they are making a sale and the onus is on them to provide an easy method of payment. Convincing customers to give up the protections of CCs or other digital cash payments would be a very hard battle. Escrow is not a viable alternative to verified identities in transactions, and for most consumers the slim advantages of Bitcoin are far outweighed by the numerous disadvantages.
> If it's 0 confirmation, what exactly is checked?
That's it's been broadcast to the network.
> Convincing customers to give up the protections of CCs or other digital cash payments would be a very hard battle.
No it won't, customers don't like sharing their credit card information online, it's why Paypal is still in business.
> and for most consumers the slim advantages of Bitcoin are far outweighed by the numerous disadvantages.
Not when they trust their vendors. I trust Amazon for example, I don't need to pay a few extra percent to the card company for consumer protection. Bad reviews work far better in getting a vendor to act.
>> No it won't, customers don't like sharing their credit card information online, it's why Paypal is still in business.
Paypal is in business because it's easy, nothing to do with giving out CC details.
>> Not when they trust their vendors. I trust Amazon for example, I don't need to pay a few extra percent to the card company for consumer protection.
Then you'll end up paying a few percent to amazon to protect you from vendors in their marketplace. Comes down to the same thing.
>> Bad reviews work far better in getting a vendor to act.
Typical libertarian nonsense. It doesn't matter if I get ripped off, I'll leave a bad review! We don't need health regulations for restaurants, if I get food poisoning and die I'll just never eat there gain!
Reality does not work that way, and we have all of recorded history to prove it.
Libertarian nonsense huh, despite what I said being completely true on amazon, and me not being a libertarian but a bleeding heart liberal, I'm just going to say you're trolling for a political argument with such idiotic abandon that I'm not wasting another breath on you. Go troll reddit.
I'm sorry you feel it's trolling, I'm not making a political point, and it's not how amazon works now, amazon are a broker in trust and take their cut, just like the companies you object to.
Sorry, but f*ck the merchant. We have thousands of years of history of consumers being ripped off by merchants. Laws and payment methods have spent the last few decades arranging themselves on the consumer's side and you want to rebalance evrything in favour of the people who have (historically and continually) been ripping the rest of us off?
Merchants are ripped off by consumers far more then consumers are ripped off by merchants. That's reflected in the prices of goods which means the consumers are still being fucked by it. Saying fuck the merchant is profoundly ignorant; it's always the consumer who is fucked in the end.
No, it's completely different from sales tax because while the company will have slightly increased costs (usually ~2.5%), they will also move significantly more inventory which will allow quicker reinvestment cycles, and thus more growth. This is the value of credit/debt in general: assuming everyone trusts everyone else transaction volume can greatly increase. And that trust comes from the credit card companies.
I think the point is that if we can replace credit cards with a no-fee payment method, merchants will save 3% on every transaction. Of course, it has to be as easy for the consumer as credit cards (which I think Bitcoin can become).
No, the point is that credit cards give people a line of credit, which increases overall liquidity. People buy things on credit cards they wouldn't otherwise be able to. When they buy that thing on a credit card, the company selling that thing gets the money earlier, and can thus take it and buy more from their suppliers and so on and so forth.
Bitcoin removes overall liquidity, by behaving like cash. The merchant may save 3% on bitcoin transactions, but they will have fewer transactions.
Then there are the effects of having such a thick intermediary, a duopoly. Some consumers can't get a credit card. It's hard for consumers vulnerable to overspending & borrowing to avoid the card's expensive credit component.
There's also a general brokenness (IMO) of the "pull" nature of credit cards. I want to send vendors money, not authorize them to take some themselves while reserving the right to dispute the charge. Even for recurring transactions I would rather an easy bill paying service that works like invoices & checks do, but with a 10X simpler UI.