No-chargebacks is a selling point for merchants (admittedly the target of the video), but consumers love chargebacks. And there are ultimately far more consumers than merchants.
Jeff there is a big difference between a cardholder filing a dispute with a merchant, a cardholder using the dispute process to execute a scam ("friendly fraud"), and a cardholder having their account compromised with unauthorized charges.
To the merchants, all 3 of those scenarios appear the same, in the form of a chargeback. However the account numbers being compromised are by far the major contributor to the $100B payment fraud. Friendly fraud is also on the rise as people have learned how to abuse the system to commit shoplifting.
The legitimate disputes can be resolved by using an escrow transaction.
No argument. But again, that is purely the merchant's view.
Consumers, at least here in the US, have been trained by well known consumer advocates such as
Consumer Reports,
Clark Howard,
NACA members and the local news "consumer beat" that credit card purchases, in particular, have a level of consumer insurance built into them. Every 5-10 years, a new layer of
consumer protection regulations are added or updated as well.
The hurdles at the consumer level are twofold, assuming a future world where bitcoins see 1000x consumer and merchant acceptance (hey, 1000x is easily realistic in a few short years, given how small we are right now):
1) Education. "Use an escrow transaction" is a foreign language, an alien concept to Aunt Tillie. It is not realistic for average consumer use, unless the software tools and legal system both evolve significantly from where they are today.
2) Rational economic actor choices. The current credit card system provides significant economic and legal protections to the consumer, while hiding the costs by making the merchants bury merchant fees inside the item price. Buying an item sans merchant fees is not likely sufficient economic incentive to abandon the legal protections currently available, for average consumers.
Now, please, don't misunderstand.
What BitPay is doing is great -- I retweeted and promoted the video. And it is a necessary step in bitcoin's evolution.In an optimistic forecast, one could see bitcoin taking over the majority of hard-cash-like transfers. I imagine merchants would prefer bitcoin over having to deduce whether or not a $20 bill is counterfeit, even using the latest ink tests and scanners one sees deployed at Wal-Mart, Target, payday loan and pawn shop locations.
But the huge amount of built-in consumer protections -- and associated consumer advocacy at all levels -- is an unquestionable hurdle.
It seems more realistic that bitcoin credit cards will arise, as an optional, supplemental layer on top of the base currency: credit cards, with standard protections consumers expect, denominated purely in bitcoins. Much like credit cards are an optional, supplemental layer atop the US Dollar right now.
That would at least be a familiar system to current consumers.
This post does raise a valid point in that if the consumer has a credit card and possibly a debit card attached to a bank account there is a significant incentive for the consumer to use the credit card over Bitcoin for an online payment. In my case I can use a credit card with 1%
cash back. At the end of the year I receive a cheque from the credit card company which I promptly use to purchase Bitcoin, and conservatively my last "cash back" Bitcoin purchase has appreciated over 100%. So what is my personal incentive to use Bitcoin here?
The answer is that I am not the target demographic. The real target demographics are:
1) Those that do not have credit cards or debit cards attached to a bank account
2) Those that do not have credit cards.
These are the people that regularly use cash for in person transactions. It is not the myth of the senior living 50 years behind the times, but rather those that are young (teens and tweens), those that are poor, and those that have poor or no credit. I posted a thread on this back in February 2012
https://bt.irlbtc.com/view/63526.0 In the United States we have 29% of adults do not have a credit card and in over 7% of households there is nobody that has a bank account!
I really did enjoy the video and I must add that what was presented in the video is very accurate and well researched; however I still believe that the real incentive for an online merchant to accept Bitcoin is to sell to someone who is either 14 years old or has a FICO score of 350 or thereabouts. By the way this is a huge untapped market which the current banking system simply ignores.
