Blockchain Can Save Americans Billions on Credit Card Fees

Credit card fees are one of the biggest pain points for consumers and merchants in the US. According to a recent report by Coinbase, a leading cryptocurrency exchange, blockchain technology could have saved Americans at least $74 billion in credit card transaction fees in 2022. This is equivalent to $600 per household, or about 1.5% of the median household income.

What is Blockchain and How Does It Work?

Blockchain is a system of storing and transferring data in a decentralized and distributed way, without the need for intermediaries or central authorities. Each block of data is linked to the previous one, forming a chain of records that is immutable and transparent. Blockchain can be used to create digital currencies, such as bitcoin, or to facilitate other types of transactions, such as smart contracts, identity verification, supply chain management, and more.

Blockchain transactions are verified by a network of nodes, or computers, that run the same protocol and follow the same rules. Each node has a copy of the entire blockchain, and can validate new blocks and transactions. This makes the system more secure, as no single entity can tamper with or control the data. It also makes the system more efficient, as transactions can be processed faster and cheaper, without the need for intermediaries that charge fees and commissions.

How Blockchain Can Reduce Credit Card Fees

Credit card fees are the charges that consumers and merchants pay for using credit cards as a payment method. They include interest rates, annual fees, late fees, foreign transaction fees, and processing fees. Processing fees are the fees that merchants pay to the card networks, such as Visa and Mastercard, and the card issuers, such as banks, for accepting credit card payments. They typically range from 1.5% to 3.5% of the transaction value, depending on the type of card, the industry, and the volume of sales.

According to the Coinbase report, merchants spent more than $126 billion on processing fees for credit card transactions in 2022, making it their second-largest expense after labor. By using blockchain technology, they could have paid next to nothing, as blockchain transactions have negligible or zero fees. For example, the average transaction fee for bitcoin in 2022 was $0.31, and for ethereum, it was $0.15. These fees are paid by the sender, not the receiver, and are independent of the transaction value.

Blockchain technology could also benefit consumers, as they could save on interest rates, annual fees, late fees, and foreign transaction fees, by using digital currencies instead of credit cards. Digital currencies are not subject to inflation, interest rates, or exchange rates, and can be transferred across borders without intermediaries or restrictions. Consumers could also have more control and ownership of their money, as they do not need to rely on banks or other institutions to store, manage, or access their funds.

Why Americans Want an Updated Financial System

The Coinbase report also revealed that Americans are dissatisfied with the current financial system, and want updates that make it cheaper, faster, and more accessible. The report surveyed 2,000 US adults, and found that:

• 62% of Americans want updates to the financial system that make transactions cheaper
• 61% of Americans want updates to the financial system that make transactions faster
• 71% of Americans want updates to the financial system that make it more accessible to everyone
• 54% of Americans are interested in learning more about blockchain and cryptocurrencies
• 41% of Americans are open to using blockchain and cryptocurrencies in the future

The report also highlighted Coinbase’s efforts to engage with the US government, regulators, and policymakers, to advocate for clearer and more supportive regulations for the blockchain and cryptocurrency industry. Coinbase serves as a custodian for several spot bitcoin exchange-traded funds (ETFs) that were launched by traditional financial institutions, such as BlackRock, Franklin Templeton, and Grayscale Investments, in the past month. The spot bitcoin ETFs allow investors to gain exposure to the price of bitcoin, without having to buy or store the digital currency themselves.

Blockchain technology has the potential to save Americans billions of dollars on credit card fees, and to offer a more efficient, secure, and inclusive financial system. Coinbase, as a leading cryptocurrency exchange and custodian, is at the forefront of promoting and facilitating the adoption of blockchain and cryptocurrencies in the US and beyond.