Bear in mind that there are also going to be fees paid by the customer in order to get Bitcoins, unless they're one of the tiny number of people who mine Bitcoins profitably. Those fees are probably going to be enough to bring the total cost close to that of a normal payment processor even with the cheapest options.
Also, right now the value of their bitcoins will probably drop by more than 2.9% in the time between them buying the coins and being able to send them.
I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). The CC processors charge the % + fee, and the services that build on top of that tack on their cut. MtGox charges a % cut (I forget what it is, but it's below CC rates by a lot) and so you tack on your cut on top of it to end up with a lower cost than CC processors.
I really do feel that MtGox will move to a higher fee schedule as Bitcoin volume increases, so it'll be interesting to see the convergence of Bitcoin fees vs CC/Stripe/Paypal fees and how processors reconcile the two and balance growth (driven by lower cost) vs immediate profits.
I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges).
And thats one of the reasons Satoshi started Bitcoin to begin with - transactions within the traditional money network have become very complex and expensive. One of the aims of bitcoin is more economically efficient transactions:
The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need.
A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party
That might not happen, credit card fees are usually broken down as so:
1. Receiving Bank Fee
2. Sending Bank Fee (most of the charge)
3. Network fee (visa, mastercard, etc)
And a good amount of fraud built into those fees. Fees often vary by fraud risk, with internet and telephone charging ~3% and supermarkets getting around %1 already. Debit cards can be flat fee also.
Sure, it's all optional. But if all the miners are charging a small amount, and you face a choice between "wait a week for the transaction to complete" or "pay 1%", then BitCoin essentially has fees.
It'll be interesting to see how the model and fees develop, as Btc exchanges move from the current x% model to the inevitable x% + $y, $y, or $y/share model.
Comments
See "instant exchanges" https://coinbase.com/docs/merchant_tools/payouts
Did anyone else read the fees?
1% and 15cents? That's incredible.... Compared to the 2.9% and 30 cents most other payment processors charge.
I will be migrating my start up soon!
Bear in mind that there are also going to be fees paid by the customer in order to get Bitcoins, unless they're one of the tiny number of people who mine Bitcoins profitably. Those fees are probably going to be enough to bring the total cost close to that of a normal payment processor even with the cheapest options.
Also, right now the value of their bitcoins will probably drop by more than 2.9% in the time between them buying the coins and being able to send them.
I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). The CC processors charge the % + fee, and the services that build on top of that tack on their cut. MtGox charges a % cut (I forget what it is, but it's below CC rates by a lot) and so you tack on your cut on top of it to end up with a lower cost than CC processors.
I really do feel that MtGox will move to a higher fee schedule as Bitcoin volume increases, so it'll be interesting to see the convergence of Bitcoin fees vs CC/Stripe/Paypal fees and how processors reconcile the two and balance growth (driven by lower cost) vs immediate profits.
I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges).
And thats one of the reasons Satoshi started Bitcoin to begin with - transactions within the traditional money network have become very complex and expensive. One of the aims of bitcoin is more economically efficient transactions:
The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party
That might not happen, credit card fees are usually broken down as so:
1. Receiving Bank Fee 2. Sending Bank Fee (most of the charge) 3. Network fee (visa, mastercard, etc)
And a good amount of fraud built into those fees. Fees often vary by fraud risk, with internet and telephone charging ~3% and supermarkets getting around %1 already. Debit cards can be flat fee also.
As bitcoin volume increase, miners will probably start charging transaction fees themselves. So that'll increase.
That's not how Bitcoin works. Miners can't charge me anything. They can choose to not process my transaction if it doesn't have enough fees for them.
Sure, it's all optional. But if all the miners are charging a small amount, and you face a choice between "wait a week for the transaction to complete" or "pay 1%", then BitCoin essentially has fees.
You just wait until they have to take dispute resolution and fraud seriously or face losing business - the fees will increase.
Thx for the info!
It'll be interesting to see how the model and fees develop, as Btc exchanges move from the current x% model to the inevitable x% + $y, $y, or $y/share model.