Why is Bitcoin failing in the payments space?

Parag Patel Avatar
Parag Patel

As of September 9, 2018, Bitcoin was worth roughly $6,240 USD - and that’s not even it’s highest historical value. In December of 2017, Bitcoin was trading at a value of $19,783 (!). Clearly, Bitcoin and other cryptocurrencies are taking off in the investment arena.

With such a high value, it’s somewhat surprising that we haven’t seen higher adoption in the payments industry. Here at Invoiced, we supported Bitcoin transactions for several years. During that time, only a small handful of our customers used it to make payments.

So what’s keeping Bitcoin from taking off in the payments industry? Here’s our take:

Ease of use

Let’s face it: if you don’t have technical expertise, it’s not easy to use Bitcoin as anything other than an investment. Making purchases and sending money via Bitcoin are complex processes for non-coders, as evidenced by the growth in Bitcoin miners in recent years.

Though businesses are starting to accept Bitcoin, adoption is not nearly as high as traditional credit cards. If you want to spend it somewhere that doesn’t accept Bitcoin, you can use a cryptocurrency converting service. These services will provide you with gift cards in USD or Euros that you can use anywhere. And, there’s an app called Coinbase to use for buying and selling Bitcoin, but it’s not nearly as straightforward as platforms like PayPal or Venmo.

Slow transaction processing times

Whether it’s quick credit card authorizations or in-person cash payments, we are all totally spoiled by the speed of transactions today. If you’re not convinced, consider how much longer it takes to process a personal check. Maybe 2-3 minutes, right? It seems like a pretty long time when you get held up at checkout behind a check-writer.

With Bitcoin, the blockchain verification process can take a very, very long time. At a base level, each transfer requires a minimum of 6 confirmations before completion. Those 6 confirmations take around an hour (!). And, get this: the wait time increases based on how much transaction activity there is at that point in time. On the extremely high side, one Bitcoin user reported waiting 16 hours for a transaction to process.

High transaction fees and capital gains taxes

Like most payment processing platforms, users pay a per-transaction fee to spend Bitcoin. However, that per-transaction fee can vary widely.

Transaction fees are paid to Bitcoin miners, who take on the arduous task of adding each transaction to the blockchain. The more time it takes them to complete their work, the higher the fee. Fees have been reported as low as $3 per transaction to as high as $50 per transaction, regardless of the total amount paid.

And aside from transaction fees, users must also pay capital gains taxes on each transaction. The IRS classifies Bitcoin not as currency, but as an asset.


As we mentioned, the value of Bitcoin has massive swings similar to the stock market. Take the two values at the beginning, for example, and apply them to your bank account. One day, your checking account balance is $19,783. The next day, it drops to $6,240 - without any spending on your part. That type of fluctuation creates too much financial instability, for individuals and businesses alike.

To enter the payments space as a real contender, Bitcoin must transform.

With its technical complications, plodding payment processing, unpredictable transaction fees and fluctuations in value, Bitcoin is unlikely to take hold in the payments industry soon. Faster blockchain processing and retailer adoption may change that status in the future. But for now, we wait.

Parag Patel Avatar
Parag Patel

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