Bitcoin payments processor Bitnet has attracted tens of millions in capital investments throughout the preceding year. The organization was founded by professionals with deep roots in the traditional
Bitcoin payments processor Bitnet has attracted tens of millions in capital investments throughout the preceding year. The organization was founded by professionals with deep roots in the traditional financial payments sector, with John McDonnell—formerly a Senior Vice President at Visa—serving as its chief executive.
McDonnell recently appeared on the Epicenter Bitcoin podcast to discuss fundamental problems with contemporary payment infrastructure. His analysis focused on how decades-old technological foundations continue to constrain global commerce.
Discussing why his company believes digital currency represents a superior path forward, McDonnell observed: "The founding team of Bitnet comes from the online payments industry, so we know a great deal about how broken, frankly, online payments has become. As the Internet has enabled merchants to market and sell their goods and services globally, payments has not kept pace. The infrastructure for transmitting funds and accepting payments continues to be based on 1950's era card swipe technology. We see Bitcoin as probably the biggest innovation in fintech since the introduction of electronic payments — going back to the magnetic stripe card and Visa."
McDonnell's colleagues at Bitnet include former staffers from both Visa and CyberSource, the payments-processing firm that Visa bought for roughly $2 billion during 2010. CyberSource had been operating in fraud prevention and payment services since 1994.
**What Merchants Actually Pay for Card Processing**
Financial comparisons between Bitcoin and credit cards often stress lower fees, yet the comprehensive cost structure reveals something more complicated. McDonnell provided detailed analysis of what companies genuinely spend when handling card transactions:
"Even if they're successful in defending a dispute (a so-called chargeback) that's initiated by the cardholder, it's still an expense. It still requires overhead. It requires resources. We've done some math to try to come up with the total cost of acceptance, which starts with the interchange and then other fees are layered on (the card network fees, the acquiring processor fees, sometimes there's an ISO or Independent Service Organization, there are PCI costs associated with accepting cards, the costs that are needed to pay outside consultants to audit retail systems for security and make sure that there aren't any unintended backdoors for breaches where card numbers can be stolen) . . . so when we add up the total cost of acceptance, it's not the sort of 200 or 400 basis points (2 to 4 percent). It's really 8 to 10 to 12 percent, depending on the industry . . . which is an incredibly corrosive cost to the margins."
Another drag on merchant profitability stems from fraud-screening systems that mistakenly flag genuine transactions. McDonnell referenced research showing that such false positives represent $40 billion in lost sales annually for retailers worldwide.
Bitnet's advantage lies in its management team's sophisticated understanding of these entrenched industry problems. Though the firm arrived later than established players like BitPay and Coinbase in the crypto-payments sector, their institutional experience with legacy systems provides a meaningful edge in building replacement infrastructure.
