In this post I will be going through a little bit of the benefits for two of the major groups involved with any payment system or marketplace: buyers and sellers. It is important to think of these two communities independently because the motivations and benefits will be a little different for each one. What can help a consumer doesn't necessarily directly help a merchant or vice versa. What is important to understand that overall you need a healthy and robust system to support both. This is because the structure of payment card systems are that of a two-sided market. You need both sides to come together for anything to happen, so you need to figure out incentives for both to work out.
You can check out the beta of SmartCard here: https://beta.smartcash.cc/
The Current Payment Card System
The brief history lesson to understand is that the current system of payment cards is designed to create a lot of consumers using cards and getting benefits, while the merchants bear most of the costs. This isn't optimal at all because it hides the actual costs of usage. This is done through a system of fees (for merchants) and rewards (for consumers).
There are actually many different types of fees involved, it's surprising at first when you really dig into it. A good overview of credit card processing fees is here. You may now understand why you sometimes get a dirty look when you pull out a Visa or American Express card at your local frozen yogurt store. This is because they are actually paying a huge portion of the costs, typically between 3-6% of each transaction (Visa/Mastercard typically is lower than American Express and Discover). Some companies like Square may do a flat subscription system and then treat all cards the same.
Consumers are usually rewarded in points, cash back, or other kind of promotions for using credit cards. The kicker here to understand is while you will be able to get somewhere between 1-3% back in rewards, you may still also be paying a variety of other fees. These may include late payment fees, annual fees, paper statement fees, international currency conversion fees, cash advance fees, and then of course there is the actual financing charge if you carry a balance (anywhere from 9% to 35% APR is pretty common). So at the end of the day you may see why people refuse to use credit cards and then only use debit cards, or even cash entirely.
Still with me? That's only part of the situation. Here are some other things to understand from the perspective of a merchant.
Merchant and Seller Benefits to the SmartCash SmartCard Payment System
There are a few, so let me just bullet point these out:
No charge-back claims! When a purchase happens it cannot be reversed by the consumer. This helps because there are a lot of fraudulent returns or charge-backs that happen in the industry.
InstantPay really is instant. Credit card payments typically take 30-60 days to actually settle in a merchant account, depending on the processor. That's sixty days of not getting your cash, which actually matters because it's like giving a free loan to the payment processing bank. Instant money means you can pay your employees, buy more merchandise, and keep capital on hand to run your business.
Low fees! I mean, really low. SmartCash fees are 0.001 SMART and will stay low in the future. The main developer, Solarminer, has expressed commitment to low fees so SmartCash can be used for everyday purchases even if it rises in value. Fees are only in the system to prevent spam (lots of little transactions to overwhelm the network). Paying a fraction of a percent on a purchase is much better than 3-6%, and it adds up!
Easy to set up. Anyone can accept SmartCash by setting up an app on their phone, no need for a magnetic card dongle, chip reader, or lots of account paperwork.
Attract more customers by accept digital currency. There are people who prefer this payment method; I expect that within a few years it will become common place for purchases to use that rather than revealing a credit card number. CoinPayments makes it easy to use for lots of online stores like Woocommerce or in Wordpress.
Consumer Benefits to the SmartCash SmartCard Payment System
No crazy fees! I'm going to put this up as #1, because if you have ever had a late payment fee you will understand why this matters. $35 for a day late payment is ridiculous, so you don't have to worry about that at all. You're basically pre-paying like a loadable debit card.
You know the price you pay goes to the merchant. This is a bit of altruism, but when you are supporting small business it really matters. It helps build community when you know 100% of what you paid a merchant goes to them and their business and not only 95% of it. Why should there be a portion going to a payment card settlement system when it's possible to do things just as efficiently with better technology?
Security! Your credit card number won't be skimmed and sold on the black market. This will save you a lot of time if it ever happened.
Privacy. With transaction privacy from bip47 this will keep things a little more private. At least you're not using a credit card with many different companies having access to your purchasing history.
Easy access for traveling internationally without needing to call up a fraud alert system.
Create different cards for budgeting and money management. Being in control of your finances and not worrying if there are fees to keep up with makes it a lot simpler.
I've seen it mentioned that it may be easier to load a SmartCard and use that to make payments directly to merchants for tax reporting. This is compared to some debit systems like Coinbase has which lumps payments together. Hopefully the entire tax guidance will change in the future, but for now this is something that may make sense. Having a native payments system reduces the extra steps involved to making purchase.
Don't Forget About Cash
Right, let's think about this. A lot of benefits for transaction costs are there with cash already, low fees for actual use by merchant and consumer, etc. However, you don't get the extra security, online payments, or ease of international travelling like you would with SmartCash. And the actual cost of maintaining all the printed money is actually quite high. It's just externalized by treasuries, central banks, and an entire economic system to manage it. Next time you see an Armored Car transporting cash from a bank it may give you pause. There is a lot going on that makes the cash system possible, and it also has a lot of costs. Wouldn't you rather that armored car driver be doing something useful, like delivering meals to elderly, instead of moving paper money around between banks?
What are your perspectives on the benefits of SmartCard and SmartCash? Let me know in a comment.
Posted from my blog with SteemPress : https://smartcash.blockchainlibrary.org/2018/04/15-reasons-smartcash-smartcard-benefits-merchants-consumers/