Money

Can Bitcoin Disrupt The Payment Processing Industry?

Is Bitcoin an existential threat to Stripe, PayPal’s existing business model?  originally appeared on Quorathe place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Peter Berg, Payments, investing, startups & entrepreneurship, on Quora:

Is Bitcoin an existential threat to Stripe, PayPal’s existing business model? Almost certainly not.

Maybe in the very long term, if Bitcoin were to get near ubiquitous adoption and people regularly used it to transact, instead of preferring fiat (government issued) currencies, then Bitcoin might become disruptive to existing payment providers. But even in that case, merchants would still need to be technically savvy enough to accept Bitcoin without any help (e.g. the processing services that Stripe and PayPal provide today). A merchant would need to create and manage their own Bitcoin wallet to receive funds. And once received, the merchant would then need to be able to use Bitcoin to pay for their inventory/labour costs in Bitcoin or would have to handle the conversion to fiat currency (e.g. USD) themselves to be able to pay for things where Bitcoin is not accepted.

Far more likely is that Stripe, PayPal and others will continue to provide payment processing services for Bitcoin in the same way they provide services for processing other forms of fiat-based payment (e.g. credit cards). And until/unless Bitcoin becomes so popular that everyone uses it in place of fiat (note: that will probably never happen), someone will still need to help merchants settle transactions in the merchant’s primary currency (e.g. USD, EUR).

Most merchants who accept Bitcoin today do it for the publicity or to serve a very specific demographic of customer. The overwhelming majority of transactions are not completed using Bitcoin. In those few transactions that do use Bitcoin, the merchant almost always uses someone like Stripe to provide spot conversion from Bitcoin to fiat in order to limit currency exchange volatility. For example, if 1 BTC is worth $2500 USD at the time of a transaction, but it’s only worth $2000 when the merchant goes to pay their bills, that’s a 20% loss in value for the merchant. To prevent this kind of volatility, Stripe or others (e.g. Coinbase) provide merchants instant conversion to fiat at the point of transaction, so that 1 BTC gets locked in at $2500 USD and the merchant later settle in USD.

Yet another thing to consider is returns, refunds and dispute resolution. Much of the value from payment methods like Visa and MasterCard comes in the form of well-defined rules and requirements for merchants and consumers. If you buy an iPad using your Visa card, and the merchant instead ships you a brick, you (the consumer) are not liable for that fraud. If, however, you had sent that fraudulent merchant Bitcoin, you’d be out of luck. Bitcoin transactions are irreversible (at least for now), so the consumer protections and dispute resolution procedures guaranteed by more traditional payment methods (e.g. cards) don’t exist today. Stripe and PayPal (as well as Visa and the issuing banks) play an important role in protecting both merchants and consumers. Even if protections were put in place for bitcoin-based transactions, someone would have to administer them (e.g. Stripe or PayPal) for the merchant; otherwise, the merchant and consumer are entirely on their own.

So, in summary, currency exchange, purchase protections, and traditional gateway or payment processing aggregation services will continue to be of value to merchants for the foreseeable future. Stripe, PayPal and others don’t have much to fear from Bitcoin any time soon.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on TwitterFacebook, and Google+

This article was originally published at Forbes. Image courtesy of Roslan Rahman/AFP/Getty Images.

Join The Discussion

Injured people are treated in Barcelona Spain
Van Plows Into Crowd In Barcelona; Police View It As Terror
Zimbabwean first lady Grace Mugabe
Mugabe Flies To South Africa To Aid Wife Accused Of Assault
It’s not just a gross Fourth Amendment privacy violation but free speech rights as well
Did you Visit This Anti-Trump Site? The US Government Wants Your IP Address
Pope Francis made the comments in a foreword to a book by Daniel Pittet, who was abused by a priest.
Pope Francis Says Sexual Abuse By Priests Is An ‘Absolute Monstrosity’ In New Book
Acupuncture
Modern Acupuncture Showing Signs Of Huge Growth
Marijuana plants
Canada Tries Trading Marijuana In New ETF
For a lot of brands, selling on Amazon holds a ton of opportunity.
A Small Business Guide To Selling On Amazon: Be Ready To Compete On Price
Bitcoin rose above $4,000 today
Bitcoin Surpasses $4,000, Reaches Another Milestone
Mark Fidelman and Noah Kagan
Why Email Marketing Is Better Than Social Media Marketing
Emily Richett
4 Surefire Ways To Increase Sales Using Video
Product Images Enrapture
6 Ways Irresistible Product Images Enrapture Customers And Boost Conversions
Digital Marketing Trends
5 Digital Marketing Trends Your Business Needs To Try
Pinterest
Pinterest Users Can Now Pinch-To-Zoom On Photos In The App
Facebook redesign
Facebook And Instagram Get Redesigns For Readability
Facebook
5 New Facebook Updates And Tests Spotted This Week
Facebook is expanding its mobile e-commerce Marketplace tab to 17 additional European countries.
Facebook Invests In E-Commerce With ‘Marketplace’ Expansion
Bonnie Tyler
Bonnie Tyler To Sing ‘Total Eclipse’ Hit During Eclipse
US airlines expect to carry more than 16 million passengers this Labor Day travel period.
Airlines Anticipate Record Travel For Labor Day
Daniel Craig will play James Bond for the fifth time
Daniel Craig Confirms He Will Play James Bond Again
Rule Taproom pub in Moscow, Russia
Pint By Pint, A Hoppy Revolution Is Brewing In Russia
Zimbabwean first lady Grace Mugabe
Mugabe Flies To South Africa To Aid Wife Accused Of Assault
Bonnie Tyler
Bonnie Tyler To Sing ‘Total Eclipse’ Hit During Eclipse
It’s not just a gross Fourth Amendment privacy violation but free speech rights as well
Did you Visit This Anti-Trump Site? The US Government Wants Your IP Address
Mark Fidelman and Noah Kagan
Why Email Marketing Is Better Than Social Media Marketing