Walmart Canada has decided to stop accepting Visa cards as it feels that the fees charged by Visa are too high. Can Bitcoin provide a viable alternative to high charging payment processors like Visa?
Credit Cards – An Expensive Affair
Credit cards are popular among customers as they provide a convenient way to pay, at no additional cost. However, merchants who accept credit cards are charged up to 2.5% of the transaction value as fees. Merchants are also subject to chargebacks over disputed transactions, which eats into their profits.
Strong duopoly controls the market
The payment processor market is dominated by 2 companies – Visa and Mastercard. According to Nilson Report, these two companies accounted for 92% of purchase transactions on global cards in 2015. Other companies like Union-Pay, Amex, JCB and Diners account for the rest. Given the network effect of large number of merchants accepting their cards, Visa & Mastercard have managed to keep transaction fees high.
Heavy cost to Walmart
Walmart Canada pays over $100Mn in fees to credit card companies every year. This is a significant cost to a company whose focus is on keeping prices affordable to its customers. While Mastercard offers lower fees to large retailers (purchase volume of over $3Bn), Visa does not. Hence Walmart Canada has decided to stop accepting Visa cards in a phased manner and has started informing customers about its decision.
Bitcoin has obvious advantages
Compared to payment processors like Visa and Mastercard, there are obvious advantages to using Bitcoin. There is no middleman to be paid if you directly accept bitcoin and there is no risk of unfair charge-backs. If merchants are hesitant to deal directly in Bitcoin due to its price volatility, there are processors like Coinbase who can remove that risk for a small fee (1%). Moreover, the advantages of Bitcoin are universal - there is no special advantage that large retailers obtain through the use of Bitcoin, giving all merchants a level playing field.
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