Bitpay is an Atlanta startup that says their mission is to make Bitcoin every merchant’s favorite form of payment. They claim that more than 20,000 businesses use their services. The official merchant count on Bitcoin Pulse is approximately 2,800 merchants. Whichever number you believe, adoption is clearly rising. Perhaps like others, I was curious about how a Bitcoin transaction would actually work, so I visited Overstock.com. The unusually cold weather in Florida had caused me to look for a long-sleeved shirt.
I found a nice steel blue canvas thermal shirt for $22.99, and I got a 10% discount for opening the Overstock account. At checkout, I was presented with a number of payment options including the “normal” credit cards plus PayPal and several other newer payment method including BillMeLater, RewardsPay, V.me, and Bitcoin. Overstock clearly doesn’t want to lose a sale for a buyer’s lack of ability to pay. The only thing they don’t take is fiat currency. I selected Bitcoin and clicked the Submit Order Now button. I then chose to use my Coinbase account to make the Bitcoin payment. The dialog presented the details: $23.64 purchase price after discount and shipping, which would result in a debit to my digital wallet at Coinbase of .02862804 BTC. The conversion rate was $825.76, about the same as the then current BTC price at Bitcoin Pulse. I am not sure of the exact timing used to lock in the price and convert the payment to U.S. dollars for Overstock, but I am sure it works for them or they wouldn’t accept BTC. The bigger question one might ask is why would anyone want to buy something with BTC when they could just use their credit card? I think there is more than one reason.
The folks at Bitpay say that credit cards were not designed for the Internet. True. They further say that merchant websites can reach 200 countries, but credit and debit card payment systems reach far fewer. Anyone with a bank account can create a digital wallet at Coinbase or other exchanges and convert their currency to BTC. I predict that people anywhere in the world will be able to go to a physical exchange (dealer) and deposit their currency into a BTC digital wallet on their smartphone. The difficulty of getting and keeping a credit card is well known to millions of people. In theory, a debit card should be easy for anyone to get, although some have hidden fees and restrictive policies of use. From a merchant point of view, BTC will provide a larger reach, fewer restrictions, and lower fees. Banks collect tens of billions of dollars in fees. Merchants face surcharges for Internet transactions, surcharges for “rewards” cards, surcharges for “high-risk” cards, and surcharges for cross-border transactions. Bitpay has none of these and in fact has no transaction fees at all for their merchant customers. They charge a flat monthly fee for operating the BTC services.
The billions in fees charged to merchants become part of their cost of business and are passed on to the consumer. The inefficiency of credit cards for online commerce provides a strong motivation for the adoption of BTC. Is it any wonder that Jamie Dimon, ceo at JPMorgan Chase said that the question isn’t whether the the bank accepts Bitcoin, but rather “The question is do we even participate [with] people who facilitate bit coin?” Sound familiar? Music companies 15 years ago decided not to participate with downloadable music. Publishers at the time decided not to participate in digital books. The Internet creates disintermediation industry by industry. Watch out Cable TV. Do you think people will continue to pay $150 per month for 500 channels of content, two of which they watch? Healthcare is not excluded from the threat (opportunity) either. Stay tuned.