Whenever someone tells you to start using new technology, the first question that comes to your mind is why? You might think: “I’m already happy current solution, so why change anything?”
Therefore let’s look at current online payment gateway situation and see why merchants should start accepting Bitcoin or other crypto currency payments.
What type of online payment options there are?
- Online wallets: PayPal, Neteller or Skill.
- Card payments: Visa and Mastercard.
- Bank transfer: direct or via payment gateway.
And how are they? Well honestly they all suck, for various reasons.
1. You don’t control your money
When you use banks, credit card companies or online wallet providers, they control your money and can legally do things with them that are not in your best interest. One of these things are freezing your account or just withhold your funds.
Sure this doesn’t happen often, but when it happens the damage is massive. When you have millions stuck on your account for months, it can literally bankrupt the whole company. And this happens every day to some unfortunate businesses.
The reason for such tragedy can often be very minor. Maybe someone sued your company, or there were some suspicion in money laundry and the financial institution or the government just overreacted. There’s always a risk something like that happening even if you didn’t do anything wrong.
In order for things in point 1 not to happen, when dealing with financial institutions you have to comply with their bureaucracy, and it’s terrible. There are entire teams who’s only job is to monitor that clients to go thought painful KYC and AML procedures, because if they don’t, even if one $1 of “criminal” or “illegal” money slips by, that’s just another excuse for a financial institution to lock your payment account.
Imagine how much money merchants spend per year for complying with all the regulations set by the government?
3. High transaction fees
Credit card companies take on average 3% fee. Same goes for all online wallets that use card payment. With non-card payment online wallets may take “only” 1–2%. While in some countries bank transfer may be cheap, in USA it costs $25 per transfer on average.
That’s quite a lot. Imagine if your business makes $10M revenue per year, 3% from that is $300k per year. That’s just huge!
4. Payment limits
Most cards have a payment limit per day or per month. Usually it’s few thousand per day and tens of thousands per month. Even if you have more money on the account it’s still impossible to surpass those limits if bank has set them.
This means that if you are selling expensive goods, it may be quite hard for some customers to purchase them even if they want to.
Whenever someone says charge-back, merchants go into panic. Charge-back basically allows consumer to dispute the payment, even if everything went by the book. And even if they fail in getting back the money, it’s still extra work the merchant and you also and up paying charge-back fee anyway, even if you won. And I’m sure you know that people often do a charge-back even if they got what they paid for. There’s even a name for that — “friendly fraud”.
6. Country restriction
It’s pretty common that payment providers restrict specific countries. Usually it’s USA, China, Russia, or some 3rd world countries. That’s practically half of the world. How are you supposed to grow your business if you have to say “No” to every other client that comes to buy something from you? Or you need to set up multiple payment gateways for different geographical regions?