As Amazon Takes on Visa, Does Cryptocurrency Offer the Real Alternative?
01 Diciembre 2021 - 01:51AM
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The cost of traditional banking transactions has come into focus
once again as Amazon announced it would no longer accept Visa
credit cards for payment in the UK. It was part of a battle that
began earlier this year in Singapore and Australia where the
e-commerce giant took steps to deter Visa credit card payments. An
Amazon spokesperson explained, “We believe the cost of accepting
credit card payments should be going down over time to allow
merchants to reinvest savings into low prices and shopping
enhancements. Yet despite technical advancements, some cards’ cost
of payments continue to stay high or even rise.” Citing Britain’s
exit from the European Union, Visa increased its fees on purchases
with UK credit cards from 0.3% to 1.5%. Mastercard also imposed a
similar increase. Despite Amazon’s pushback, the truth remains that
merchants have always been at the mercy of card issuers. Credit
cards have been a global standard for decades but the financial
services landscape has changed. The cryptocurrency sector,
underpinned by the security and transparency of blockchain
technology, offers functional alternatives which could feasibly
take the place of credit cards in the not-so-distant future. Credit
Cards vs. Blockchain-Based Payments Bloomberg noted that in the US
alone, merchants spent $110 billion in card processing fees in
2020. Most consumers are barely aware these costs exist or that
they are responsible for higher prices on everyday goods and
services. To accept credit card payments, merchants pay interchange
fees, assessment fees, and processing fees. These fees go to the
card’s issuing bank, the card’s payment network, and the payment
processor. The typical credit card processing fee ranges from about
1.3% to 3.5%, plus the payment processor’s cut, which varies
depending on the processor and the merchant’s plan. These are fees
that, in many people’s eyes, do not follow principles but rather
reflect the choices of issuers who monopolise the market. Payments
are essentially loans from the acquiring bank and the risks
involved for the lender add to the costs. Because banks often don’t
have direct relationships with each other they have to use the
SWIFT network for a correspondent bank that has a relationship with
both banks and settles the transaction – another third party for
another fee. Furthermore, banks maintain their own ledgers which
have to be reconciled with other banks, adding more time and cost.
By contrast, most cryptocurrencies run on public blockchains which
share their ledgers globally, providing a way for untrusted parties
to verify and agree upon data. By providing this open ledger that
nobody needs to administer, blockchains can provide financial
services without the need for many of the traditional banking
processes. The technology allows for access to information about
account holders and every transaction, meaning there is less risk
and less need to place trust in third parties. The payment network
bypasses the need for interchange fees by being more direct and
transparent. The increased efficiency, as well as inherent security
of blockchain, significantly reduces fees and settlement times.
Cryptocurrency Payment Solutions Are Already Here So if the costly
intermediaries associated with credit cards are eliminated then
merchants will surely have noticed what blockchain can do for their
businesses. Not quite. With new technology, awareness and trust
tend to build slowly until a tipping point is reached. Regardless
of the rate of adoption though, the reality is that there are
already crypto payment solutions leveraging this technology and
offering to revolutionise payments for merchants. A report
published this month by the analytics firm, TokenInsight, provided
research into a number of cryptocurrency payment solutions. While
the report pointed to well-known projects such as Stellar and
Ripple which cater to large institutions for cross-border
transactions, it also observed what Alchemy Pay is offering to
online and in-store retailers. It allows merchants to accept
cryptocurrency while receiving payment in their local fiat currency
via its unique backend process. The network takes crypto and
converts it to stablecoins and then on to fiat, via partnerships
with OTCs and other exchanges. This overcomes a major barrier to
entry by requiring very little from merchants and integrating
crypto and fiat currency for them. This is the kind of solution
that was not possible even just three years ago and demonstrates
the progression of financial applications built on blockchain
technology. All in Good Time So, while Amazon is battling the
credit card giants on behalf of the merchants, it is worth knowing
that real alternatives are already out there. Nevertheless, retail
habits that have built up over decades will not disappear overnight
and there still remains a need to educate both retailers and
consumers about the issues of traditional finance and the
advantages cryptocurrency provides. As exciting as blockchain
finance is at this time, those in the know will need to be patient
until the word gets out.
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