[natrius]

Merchants are paying 3% or so to accept money from their customers today. There are zero-fee, instant conversions for customers and merchants to use Bitcoin (Circle and BitPay, respectively). Once the user experience is right, customers will pay using funds from their bank account via Bitcoin with near-zero costs (slight exchange rate differences between services), and merchants will offer their customers discounts to pay that way.

Two years from now, merchants won't be paying 3%.

[jaredandrews]

Every HN thread that discusses bitcoin contains this claim. What can you do to support this? Will the providers of this superior user experience not expect compensation for their efforts? Will miners not expect compensation once the coin limit has been reached? Will bitcoin transaction companies not need extra coin around to account for fraud? How can there possibly be no fees when a third party is required for the common man to use bitcoin?

I am pro bitcoin but, I am very skeptical of the frequent claim that bitcoin will enter mainstream usage without fees similar to that of credit cards.

[jnbiche]

There will be (and is now) the possibility for a merchant to accept Bitcoin with 0 fees. These will be the merchants who are able set up open source payment processing system by themselves (or willing to pay someone to do this).

Others will pay a small fee for the convenient that a full-service solution provides. Right now, bitpay charges 0% and a small monthly fee for payment processing. To be honest, I see them staying with that business model, perhaps permanently.

If they or other incumbents start jacking up the fees, someone else will take their place. Bitcoin community is swarming with entrepreneurs.

[natrius]

Debit cards cost half of what credit cards do. Bitcoin will be at least that cheap. Miners will be compensated plenty by mining rewards for the foreseeable future. Bitcoin service providers will charge fees that they don't today, but the competition that now exists will drive those fees as low as possible.

[biot]

Businesses simply build fees into their product/service cost. That it's 3% or 1.9% or whatever rate they can negotiate is largely irrelevant except for those businesses which focus entirely on price for commodities which are fungible regardless of provider.

If you run a SaaS company and your Pro service level costs $20/month, would you change your price to $19.40/month if you were able to eliminate credit card transaction fees? What if your service involved a little bit of manual data entry by your employees every month and you found a more efficient way to do that; would you reduce your monthly fee by the effective cost of the few seconds a month of employee time you've just saved? Perhaps drop it from $19.40/month down to $19.37 a month? Of course not. Whoever signs up for your service sees value in paying $20/month and they honestly don't care what your underlying fee structure looks like.

[githulhu]

Bitcoin transactions won't always be free though, as the block reward decreases and transaction fees become necessary to incent the network to verify transactions. The fees for bitcoin may end up being roughly the same as traditional banking fees.

[natrius]

We'll see. In the near term, merchants can accept Bitcoin for 0%. Customers can send Bitcoin for five cents, and some wallets pay that for you.

[rstupek]

We'll see? There is no refuting argument in there. Please provide an example of how you expect bitcoin to remain "free" going forward based on arguments already providing showing how it can't be free.

[natrius]

I never said anything would be free forever. I said "we'll see" in reference to credit card-like fees.

[lmartel]

There will always be intermediaries taking a few percent--from the consumer's point of view, bitcoin's incompatibility with chargebacks is a bug, not a feature.

[seiji]

In the US, only poor people spend cash. Everybody else spends credit and reconciles at the end of the month (or lets it roll over).

[natrius]

We only do this because card networks have used their network effects to force merchants to pay for a month of credit for their customers. When merchants have a viable alternative, they'll give customers discounts to use it.

[dangerlibrary]

The only place I get a discount for paying in cash is gas stations.

Merchants just charge everyone a little more, and nobody cares.