Picture this – you figure yourself a digital guru. You pay for food orders online, have clothing delivered to your doorstep and transfer funds between beneficiaries while at work. As far as online payments go, you’ve had some practice. So when a colleague mentions the concept of cryptocurrency, you instantly engage in conversation surrounding blockchains, exchanges and bitcoin mining, all the while wondering:
Do I really know the difference between cryptocurrency and my current online payment systems?
Currently, there are numerous incentives for buyers and sellers to use online payment systems as well as dominant cryptocurrencies like Bitcoin. Some may argue that cryptocurrencies are more beneficial. Similarly, there are many infrastructure gaps that hinder users from using cryptocurrencies over online payment systems.
Using Paypal and Bitcoin as examples, here are a few major differences:
Cryptocurrencies are decentralised
Paypal users run the risk of having their bank accounts frozen by the centralised structure. Cryptocurrencies offer users the security of knowing that no one has the ability to freeze their e-wallet or move their funds. Although there are benefits to having a centralised structure, such as buyer and seller protections and chargebacks, users are exposed to increased transaction fees and the risk of fraud by allowing Paypal to rewrite their balances.
Cryptocurrencies charge less
For every transaction, Paypal charges a three percent fee. If a user is selling an item on eBay and using Paypal, 9 percent of the final value is attributed to transaction fees. In addition, the system also charges additional fees if there is a currency conversion – which is the case with international transfers. Although cryptocurrencies like Bitcoin still charge a trading fee of less than one percent, the accumulated cost to a user is lower than Paypal.
Cryptocurrencies are global
Although most of the world has access to Paypal, there are certain countries excluded from using the global payment system. In a digital world, location should not be a defining factor. Which is why Bitcoin has open access to anyone with the necessary hardware and data connection.
When we consider the evolving needs of digital customers, it is evident that cryptocurrencies are superior to online payment systems. However, due to its overall market share and accepted use across the globe, online payment systems remain common practice. The rise of customer expectations and the growing dependency on digital solutions will continue to drive demand for cryptocurrencies – which might change the market share in the long run.