I realize they are going to get the money, from interest on consumers and fees on merchants, but if I steal a card and use it at a merchant, the merchant is not going to pay the cost back most of the time. Maybe this changed since my brief merchant experience several years ago, but when I got disputes and proved I followed the proper procedures, I didn't pay the fraud charges. I only remember 1 chargeback in 3 years. I guess 'absorb' the cost isn't the right word, more like 'distribute' the cost. Either way, if I have to pay visa 3% or bit-pay 3% and learn a whole new technology, what's my cost incentive? Yes I'll be hit for fraud cost with visa a few times, but I can also be hit with double spends with bitcoins.
You misunderstand me. I don't mean indirectly I mean directly. For signature not present (internet, MOTO) you will lose even if you follow procedure. You can se geo-location, CCV, address verification, etc and if it is fradulent the merchant loses all funds, pays $30 chargeback, and still pays the discount rate.
There are some rare exceptions (like theif using social engineering to get data on credit file changed) but 99% of the time the merchant eats the cost.
Yes I'll be hit for fraud cost with visa a few times, but I can also be hit with double spends with bitcoins.
I have yet to heard of a merchant getting hit with a double spend. Credit card fraud costs US merchants tens of millions every single year.
This isn't intended to start an argument, it's a question I get from merchants. And I don't really have a good answer.
Not arguing. THAT is the answer. For a face to face merchant in low risk industry that has a low discount rate and low % of fraud it likely isn't much incentive. For a higher risk industry (digital downloads, porn, gambling, gift cards, etc) the costs DIRECTLY paid by merchants go way beyond the 3%.