Growing competition in the retail sector – and also the chance that the digital currency might help merchants lower transaction fees that cut into profit margins -- might induce them to exchange credit cards with Bitcoin.

“From a merchant perspective, Bitcoin has the advantage of not having massive fees from credit card companies that cut into profits,” writes Ian DeMartino, in the Bitcoin Guidebook: how to acquire, Invest, And spend The World’s first decentralized Cryptocurrency (New York: Skyhorse publishing, 2016). “Credit card companies generally charge between three to four percent for every transaction, a fee the merchants usually take on themselves. For merchants with little profit margins, that fee could be up half or more of their profits for each credit card transaction.”

Kris Marszalek, Co-Founder and chief executive officer of CRYPTO.com, agrees. “The banking and payment sector is ripe for disruption,” he says. “Everyday customers feel little loyalty to or satisfaction with several incumbent institutions - charges are unnecessarily high and therefore the customer experience is poor. The entire credit card business model is concentrated on wringing money out of individuals who can’t afford credit card debt: late fees, penalties and high interest rates.”


By contrast, blockchain and cryptocurrencies, he continues, “provide some way to shift the balance of power back towards consumers. Blockchain backed credit is fairer and cheaper than credit card debt. And when used as a means of payment, cryptocurrencies provide a number of benefits over existing methods. The digital nature means they're nearly free and quick to send globally; and travelers can use cryptocurrency cards to save up to eight percent on exchange charges once spending money abroad.”

Arran Stewart, Co-owner and CVO of Job.com, explains how Bitcoin might replace credit cards. Credit cards, he says, could be replaced with easy wallet verification that could be confirmed “with one thing as simple as a fingerprint. We are already accustomed doing the same and similar behavior with Apple Pay. This is far more secure and efficient as it would allow retailers to receive payment for product and services much quicker. The only roadblock to this becoming reality is the stability of the crypto market, which will come in time and as transaction volumes still increase.”

That’s bad news for companies like Visa and Master Card, which dominate the credit card payment industry -- and for the banks that issue these cards and take their own cut.

But it's excellent news for Bitcoin investors, as it will raise exponentially the adoption rates for day to day transactions, and boost its price.

Still, Bitcoin enthusiasts should temper their enthusiasm. Whereas merchants would be happy to replace credit cards with Bitcoin, shoppers are hardly possible to give up on their credit cards. For an obvious reason. Credit cards alter the trade-off between the pleasures of acquiring something versus the pain of paying for it; we get the pleasure currently and defer the pain until later.

“Paying with plastic fundamentally changes the method we spend money, altering the calculus of our financial decisions,” explains Jonah Lehrer, author of how we Decide (Houghton Mifflin, 2009). “When you buy something with cash, the purchase involves an actual loss — your wallet is literally lighter. Credit cards, however, make the transaction abstract, so that you don’t really feel the downside of spending money.”