What happens to transaction cost when (if) any of these irreversible decentralized crypto based payment methods hit the real world at any anything approaching mass adoption for things other than a darknet marketplace where the transactions are typically illegal in the first place and obviously don't have any concept of "fraud protection"?
What I'm getting at here is the reality of the real world - fraud. Visa, MC, etc have had zero liability for fraudulent transactions since forever at this point. I understand that chargebacks can be an issue for sellers but the fact remains that most of the fraud in the space is by sellers, stolen cards/credentials, etc. Consumer fraud liability was initially legislated by the US and capped at $50 (max) way back in 1978. Consumers (who have significantly more exposure, numbers, political capital, sway, etc) have benefited from these protections for decades and they simply won't accept going back to the days of "sorry the merchant ripped you off, sorry your card/credentials/etc were stolen, etc - you're SOL, your money is gone, and you have no recourse". On twitter, crypto forums, etc (the only place to go when these realities hit with crypto) these victims get a very helpful "hope you learned your lesson"!
These costs are baked in to the merchant fees, transaction fees, etc. For merchants, the occasional chargeback (valid or not) is also baked into the "cost of doing business" just like all other forms of shrinkage (employee theft/fraud, shoplifting at physical locations, etc). Many of them (like Amazon, I believe) have terms that essentially say "Ok we're bound by law/Visa/MC/etc and you can do a chargeback but we have an internal process for these kinds of things and if you bring the hammer of a chargeback we'll ban you from our marketplace". The (potential) issues surrounding that approach are left for another discussion...
I'm not advocating for Visa, MC, etc and there absolutely are very real problems with them. However, this goes back to an observed issue with crypto - that the crypto ecosystem is running towards replacing our current imperfect system with one (that appears) to be even worse right out of the gates.
Part of what all that infrastructure addresses is the inherent insecurity of credit cards online. After trying out crypto, it kinda boggles my mind that we mostly do online purchases by giving merchants all the information they need to take whatever amount of money they want. If that information gets loose, we have no choice but to cancel the card and start over. That's a sad state of affairs, given that's it's been half a century since public key crypto was invented.
There are of course other issues that would still need to be addressed, like merchants sending fraudulent goods, but if we could build stuff to handle that on top of a foundation that's actually secure, we might be better off.
I can see how you might layer that stuff on top (e.g. using smart contracts). It's not clear to me whether such a system still has some advantages though. Maybe the open nature of the platform?
What I'm getting at here is the reality of the real world - fraud. Visa, MC, etc have had zero liability for fraudulent transactions since forever at this point. I understand that chargebacks can be an issue for sellers but the fact remains that most of the fraud in the space is by sellers, stolen cards/credentials, etc. Consumer fraud liability was initially legislated by the US and capped at $50 (max) way back in 1978. Consumers (who have significantly more exposure, numbers, political capital, sway, etc) have benefited from these protections for decades and they simply won't accept going back to the days of "sorry the merchant ripped you off, sorry your card/credentials/etc were stolen, etc - you're SOL, your money is gone, and you have no recourse". On twitter, crypto forums, etc (the only place to go when these realities hit with crypto) these victims get a very helpful "hope you learned your lesson"!
These costs are baked in to the merchant fees, transaction fees, etc. For merchants, the occasional chargeback (valid or not) is also baked into the "cost of doing business" just like all other forms of shrinkage (employee theft/fraud, shoplifting at physical locations, etc). Many of them (like Amazon, I believe) have terms that essentially say "Ok we're bound by law/Visa/MC/etc and you can do a chargeback but we have an internal process for these kinds of things and if you bring the hammer of a chargeback we'll ban you from our marketplace". The (potential) issues surrounding that approach are left for another discussion...
I'm not advocating for Visa, MC, etc and there absolutely are very real problems with them. However, this goes back to an observed issue with crypto - that the crypto ecosystem is running towards replacing our current imperfect system with one (that appears) to be even worse right out of the gates.