Confusion about Merchant Costs

[ShakeyX]

Not that I am planning on being a merchant, just an inquisitive question.

I watched a Vice documentary on bitcoins recently and it stated that "There is no transaction cost per swipe for merchants, like with major companies such as Visa, Mastercard" then went on to say that "The merchant costs are low".

This lead to total confusion... is there merchant costs or not?

As I understand it on a very basic level banks hold the money, Visa/Mastercard deal with digital transactions. So when we talk about transaction costs that is the merchant paying Visa to be able to accept Visa cards in his store? (Sound pretty correct in lamen terms?).

So what are these transaction/merchant costs we are referring to when talking about merchants using bitcoin. The only transaction fees i'm aware of at current are the optional ones a payee can send in order to give incentive for his transaction to be processed faster. But in what sense would merchants have to pay "MERCHANT FEES"? Who would they pay? How much? Why.. for what service?

If a person walks into the store, pays or doesn't pay a transaction fee when sending money to the merchant... what fees would ever be imposed on the merchant. I am missing this bit of knowledge to understand why the Vice documentary talked about "small merchant fees"

Thanks.

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[runam0k]

They might be referring to payment processor fees (ie if you use BitPay or Coinbase).

In any other scenario, the buyer would pay the nominal tx fee (unless there is a way for merchants to elect to pay it).

[farlack]

Mastercard/Visa cost anywhere from $0.25 to $1 per swipe + a % fee from 1%-3% depending on what you're selling can be up to 10%.

[BittBurger]

Runamok said it right.

There's the ability to send bitcoin free of charge if the customer simply sends directly to the business owner's Bitcoin address.

Then there are "merchant fees" if you use BitPay or some other payment processor, and their fees are "low".

There's always that awesome option of literally zero fees, if they just accept direct payment to their Bitcoin address.

-B-

[amspir]

There's always that awesome option of literally zero fees, if they just accept direct payment to their Bitcoin address.

Pragmatically, there's still a fee being paid by the user.  Most software enforces a 0.0001 fee, so at the current XBT price, user pays a 1% fee on a $6.20 USD purchase.

[ShakeyX]

There's always that awesome option of literally zero fees, if they just accept direct payment to their Bitcoin address.

Okay, so just explain for me... if this awesome option exists, I don't see why transaction fees for merchants exist.. what benefits would they have for using such 3rd party systems.

[Foxpup]

Okay, so just explain for me... if this awesome option exists, I don't see why transaction fees for merchants exist.. what benefits would they have for using such 3rd party systems.

Because accepting Bitcoin transactions directly requires merchants to manage and secure their own software and retrain their staff, which is costly and inconvenient. This is not necessarily a huge expense (which is why payment processors can offer their services so cheaply), but it's misleading to say there are no fees and outright false to say that it's free.

[DannyHamilton]

There's always that awesome option of literally zero fees, if they just accept direct payment to their Bitcoin address.

Okay, so just explain for me... if this awesome option exists, I don't see why transaction fees for merchants exist.. what benefits would they have for using such 3rd party systems.

Due to the high volatility in the exchange rate between bitcoin and other currencies right now, many merchants are uncomfortable with holding bitcoin proceeds for more than a few seconds.  They need to pay their employees, suppliers, taxes, rent, and other business expenses with non-bitcoin currencies, so when they set a bitcoin price for something that they are selling they need to be relatively certain that they will be able to exchange that bitcoin for a particular amount of other currency.

Since there are no good reliable sources for buying and selling bitcoin futures, currently the only way to "lock in" an exchange rate for a particular amount of bitcoin is to actually exchange it.  Therefore, many merchants that accept bitcoin as a payment method need that bitcoin converted to their local currency as quickly as possible after the bitcoin transaction occurs.

If the merchant didn't use a payment processor such as BitPay or Coinbase, they'd have to create and maintain a program that placed and monitored automated trades as an online currency exchange.  They'd also have to maintain a bitcoin balance at that exchange so that they could place an immediate trade and not have to wait while funding the exchange account with the newly received bitcoins.

Many merchants are willing to pay a very small fee to a service such as BitPay or Coinbase to handle this process for them.

[IrishFutbol]

There's always that awesome option of literally zero fees, if they just accept direct payment to their Bitcoin address.

Okay, so just explain for me... if this awesome option exists, I don't see why transaction fees for merchants exist.. what benefits would they have for using such 3rd party systems.

Speed of transactions.  It's the same reason that many companies will often write clauses into their bills that allow the customer to receive a discount if they pay within 30 days (mainly business to business deals).  If a business can't quickly and reliably process transactions, they have to keep a ton of cash sitting in their bank account to ensure they can pay their expenses.

[5thStreetResearch]

If you are accepting bitcoin's and keeping them, the only fee should be the transaction fee which is paid on the buyers end, so no fees for you.  If you use a bitcoin payment processor allowing you to immediately convert your money to fiat, then you pay fees to them.

[Bitcredits]

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