Visa and Mastercard are reportedly on the cusp of hiking fees they charge merchants who accept credit and debit cards.
They could hike the fees they charge merchants as early as April, according to the Wall Street Journal.
While the behemoth credit card payment processors anticipate the move will help them further line their financial coffers, merchants could be chased away. In the wings waiting for them is the crypto space, where Bitcoin payments are a lot cheaper to process.
A few observers of the happenings told CCN about how merchants stand to gain from these looming higher fees.
Unrelenting Fees Could Backfire
Some of the changes relate to so-called interchange fees. Interchange fees are what merchants pay to banks when consumers use a credit or a debit card to make purchases.
Up to 2.5% of prices for goods and services go to cover card fees, according to the WSJ. It’s up to the merchant to decide whether to pass along these fees to their customers. In many cases they do. This is done by either hiking prices for their goods or services. Also, they can require customers to make minimum purchase amounts.
Reuters reported that card companies have said in the past that their credit and debit cards usually result in more sales for merchants. The key word here is the “past.”
Such language was largely bandied about during the pre-Bitcoin era.
Merchants around the world have already been in battles with these processors over interchange fees.
Last year, Mastercard and Visa were among the financial institutions that had to pay $6.2 billion to settle a lawsuit brought by merchants who accused them of violating federal antitrust laws. The giants forced merchants to pay swipe fees and prohibited them from directing consumers toward other methods of payment, the lawsuit claim.
Critics take issue with the gall of the pair to even consider raising fees.
Take this tweet, for example.
Not a really well thought out strategy to increase interchange fees. Why has the current fee not been lowered since no technological advancements have been made in our archaic system?https://t.co/god4wXzjmf https://t.co/SYDMVBSSHf
— JBall (@jonathanball) February 15, 2019
What Do Merchants Have To Lose
Considering this multi-billion settlement did little to curb the fee penchants of Visa and Mastercard, more merchants should look at alternatives.
The lower costs involved in accepting and processing Bitcoin payments make the space ideal.
Many merchants have been on the fence about accepting cryptos like Bitcoin as forms of payment. The nuances and volatility of cryptos are among the top reasons. However, the increasing amounts of fees they must surrender to the Big Dogs in the credit card payment networks space could mitigate concerns about accepting Bitcoin.
Mark Thornton, economist and author, at The Mises Institute, said:
If Visa and Mastercard raise their fees higher, that will, without a doubt, benefit Bitcoin. The reason is that many businesses have such razor thin margins, so they might see a good reason to focus on Bitcoin.
Many businesses do not accept American Express because its fee is higher and often wipes out most of the businesses margin, Thornton said.
At first, I believe that some independent, Mom and Pop stores will try it. But in the long run, big chains could probably adapt and end up using more Bitcoin in large numbers.
Merchants Must Sway Consumers
The many nuances of cryptos, especially their volatility and the lack of regulations, has made the unappealing to consumers.
Patrick Sells, the Chief Innovation Officer at Quontic, an adaptive digital bank said Bitcoin and other cryptos will strengthen this year. He said they will become more widely adopted by customers who can’t tolerate the risk of uncertain traditional currencies.
While the Bitcoin price volatility needs to stabilize in order for true mass adoption, it will become easier to use and can predict that customers will use as a form of payment - and will eventually become integrated into banking as a crypto wallet.
Sells noted how Bitcoin can also be a valuable financial tool and offer financial freedom to citizens of authoritarian governments. He pointed to Venezuela and Colombia as examples. CCN reported earlier this month that the weekly volume of Bitcoin trading in Venezuela had hit a new all-time high.
One of the challenges facing Americans in adopting crypto relates to the almighty dollar. The dollar has always been a stable currency, Sells said. So most Americans have had a harder time grasping the power of Bitcoin as a stable and safe store of value, he added.
When Visa and Mastercard officials look in their rearview mirrors, they see bitcoin. With a daily transaction volume of over $8 billion, Bitcoin (BTC) is on track to overtake Mastercard, the second largest credit card network in the world, in volume, CCN reported.