For various reasons, the payments industry continues to live in the past. Decades-old technologies power today’s payment infrastructures. Changing this infrastructure requires time and effort of which the industry has shown no inclination. Then again, more and more companies continue to realize that something needs to change. Even consumers are challenging the industry to move forward. No clear-cut path exists, but Bitcoin’s rise could change the payments industry sooner rather than later.
Old Technologies With Major Shortcomings
Payment processing for consumer transactions and merchant accounts are working like decades ago. For credit card processing, consumers swipe their cards at the point of sale system. A payment network processes the transaction and then clears the sale. Merchants then receive their due, minus a fee, within a business day. Debit card processing works in a similar manner, and the entire system is complicated. However, the payments industry is quite resistant to change, and the system does work…for the most part.
Still, the complicated nature of the system results in various issues. Systems can go down temporarily, and errors can occur. A major flaw of today’s payment industry involves the security of consumer information. When it comes to hackings, thieves can steal consumer information and then actual money. In fact, thieves can strike merchant accounts and make off with money, too. Other complications include slow turnaround from transaction initiation to the settling of funds in a merchant’s bank account.
Where Bitcoin Steps In To Solve Some Problems
In many ways, Bitcoin could be the future for the payments industry. Bitcoin is a cryptocurrency held in various wallets by consumers and businesses. More companies continue to accept Bitcoin, and the digital currency’s value is always changing. Still, this currency and how transactions are handled couldn’t be more simple. Replacing traditional credit card processing and other infrastructure could be beneficial for the industry long-term. A more simple infrastructure could benefit everyone involved.
Will Bitcoin Upend The Payments Industry?
To be fair, Bitcoin does come with security concerns. Its simple transaction process and anonymity make it an appealing currency option, though. Businesses could cut out their credit card processing fees altogether, too. For now, merchants will have to settle with a slow rise to mainstream for Bitcoin. One day these merchants could be using Bitcoin, or a similarly structured currency, to process transactions. Merchants would benefit from non-existent fees, simplified transactions, and more.
It remains to be seen how the major players in the payments industry react to Bitcoin in the near future.