Why would anyone convert their money to bitcoins to then spend somewhere where they could use paypal or their bank card?
Holding bitcoins as an investmentBitcoin also functions as a store of value -- one with the potential of increasing in value over time. Just as people will put money in gold, silver, bonds or Apple stock even, some will buy and hold bitcoins.
Non-reversibleChargebacks get abused, and the merchant suffer losses. What this means is that if a merchant can't rely on the status of funds -- with no chance of reversal, then there are some businesses that won't or can't accept either paypal or bank card payments. As we are learning, not even a "cash payments" system like Dwolla is non-reversible.
Low feesWhen a business does accept PayPal or bank payment card, the merchant loses a certain amount of each sale to the payment processor. PayPal's rate is $0.30 per transaction plus 2.9%. So the merchant gets just $19.42 when you send $20.
No settlement delayWhen receiving bitcoins, those funds can be used for spending in just minutes. For a merchant or individual even with a tight cash flow (i.e., nearly broke), not having to wait three days for your money to clear the settlement process is a big advantage over payment cards.
These reasons are why the recipient of the funds might like for you to pay using bitcoin. To help persuade you, a discount might even be offered. This is similar to how some merchants offer a discount for paying with cash. Some gas stations have two prices -- one for when paying with cash and another for when paying with a credit card.
Now, when you receive bitcoin as payments, you end up on the other side of your argument. Why would the merchant want to convert bitcoins received to PayPal or to a bank card if they could simply use those bitcoins for the purchases they make.
Not only does that merchant save by not having to convert at an exchange the funds that were received, that merchant might also receive a discount when using bitcoin as the payment method for its purchases.
We are not there yet, but as the Bitcoin economy continues to build this scenario is an entirely possible outcome.
All good points, I hadn't even thought of the low fees and settlement.
Good to see there is another side to it, it would be amazing if sometime soon you could walk to the corner shop and use your bitcoin card/mobile app to pay for things. I think the price needs to be a bit more stable though for that.
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