This post is also available in: Deutsch
VISA, MasterCard, and other credit/debit card companies recently announced plans to increase fees charged to merchants when consumers use said cards, which brings renewed attention to how cryptocurrencies solves many problems created by credit/debit cards.
The fees charged to merchants are typically broken into two groups; “interchange fees” paid by the merchant to the card issuer/bank and “fees that card networks charge financial institutions for processing card payments on behalf of merchants”. While merchants often raise prices on consumers just 1%-2.5% to cover these fees, interchange fees amounted to $64 billion in 2018, which is up 77% from 2012. These and the other numerous fees that card companies charges are often used to pay out the “rewards” and “points” that consumers receive, in addition to revenue for the card companies.
Visa and Mastercard plan to raise fees on credit and debit cards, putting renewed strain on retailers https://t.co/zTyC4Jl9Tv— The Wall Street Journal (@WSJ) February 15, 2019
However, these charges are increasingly receiving push back from merchants through antitrust lawsuits since merchants alleged credit card companies are “forcing merchants to pay swipe fees and prohibiting them from directing consumers toward other methods of payment”. After numerous appeals, VISA, MasterCard, and others have agreed to pay $6.2 billion USD in compensation.
Fees are now becoming obsolete
These fees are continuing to increase the burden on merchants and unknowingly costing consumers, but they are also becoming obsolete as new payment methods are evolving. Cryptocurrencies are lowering these fees to near-zero by making peer-to-peer transactions possible, and even when a middleman party is involved, the fees are still minimal. Dash, for example, charges a network fee of less than $0.0005 USD per standard transaction, which is constantly becoming cheaper (currently around $0.0003 USD). Additionally, automatic InstantSend is about to be rolled-out with version 0.13 to make sub-2 second transactions possible for that same low fee.
Then consumers and merchants can move in and out of Dash through Uphold, built right into the Dash wallet, and only be charged a 1.25% exchange fee and $3 USD to move funds off the platform. While this can seem expensive for every small transaction, if merchants wait to convert and move funds until after a couple hundred dollars then it becomes cheaper than many other services. Plus, there are POS devices like AnyPay, Spark, CoinText, DashText, Salamentax, QR.CR, and others that charge little or no fee to facilitate a merchant’s acceptance of cryptocurrency.
The acceptance of cryptocurrencies offers numerous additional advantages to consumers and merchants other than only fee savings. One of the most notable benefits for merchants is no chargebacks since when consumers challenges payments, rightful or not, merchants will not always get the cost of the product reimbursed by the card processor, let alone the processing fee they were forced to pay for the now invalid transaction. For consumers, cryptocurrencies give the ultimate approval power to consumers so they do not have to worry about their account being auto-billed at unexpected times, which can be devastating for any individual living paycheck to paycheck. Perhaps the biggest benefit for consumers and merchants is privacy and censorship-resistance, since card companies can easily track or shut down/deny service to anyone they wish or are forced to via government. These advantages are helping sway merchants and consumers cost-benefit analysis when deciding to use cryptocurrencies, but as the costs continue to become lower, adoption will begin to increase even more rapidly.
Hurdles cryptocurrencies have to overcome
While cryptocurrencies offer many benefits, it cannot be denied that they still have volatility and usability issues, which impedes mass adoption by consumers and merchants. However, Dash is taking steps to break down these barriers to adoption. First, Dash is getting closer to the release of Evolution and the DashPay wallet, which aims to make cryptocurrency super easy to use by adapting to what consumers are already accustomed to in payment apps, such as usernames instead of cryptographic addresses. Second, Dash is continuously working on more exchange and merchant adoption, which is adding liquidity and everyday usage. As Dash continues to focus on increasing usability in everyday scenarios, its velocity will increase as well, which will help lower volatility and create a virtuous reinforcing circle of adoption.