re: Flat fee payment processing with BitPay

quote:

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WikiTiger
If $5 equals .04 bitcoins and BitPay quotes a price of .042 bitcoins, well, people aren't stupid. They will pick up on these things, especially if it's a standard practice.

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I can envision a possible scenario where BitPay is the only payment link between the merchant's products and the consumer. In this situation the merchant could potentially lose sales if a consumer realizes that they will always be overcharged when making a purchase with BitPay. In order to recover sales the merchant would have to reduce their prices enough to bring the $0.042 BitPay price back down to $0.040.

Cross multiply and we see.
[x USD/0.04 BTC]=[5 USD/0.042]
x = 4.76 USD!

So if BitPay increases their spread from 0.04 to 0.042, then a merchant would have to reduce their $5 item to a $4.76 item to bring the bitcoin price back down to the real exchange rate of 5USD/0.04BTC!

That isn't necessarily a lot of money in this example, but now we are moving closer to a "fee" that rivals the 3% per transaction of traditional credit cards. 3% of $5 is $0.15. So it would actually be less expensive for the merchant to use a credit card with those example number you posted.

Assuming there are not many competitors offering the same service as BitPay they would be free to jack up their spread more and this would diminish the savings that the merchant would realize. If the spread increased enough then the overall loss in revenue to the merchant from having to set prices lower would equal what they would lose with higher prices on the same item and eating a transaction fee.