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The financial barrier to bitcoin processing just got obliterated. Today, BitPay plans to announce it is dropping the one percent transaction fee on its starter plan. That means merchants who sign up for the starter plan get access to the BitPay API, app and plugins for free, with no transaction costs and no limit on how many (or the amount) of transactions on the plan.
“That was the plan most of our merchants started with and then they migrated up to something else,” said BitPay’s co-founder and executive chairman Tony Gallippi. “So it would only make sense to make the barrier to entry even lower.”
A lot of BitPay’s customers are already on the starter plan, Gallippi said, but they are typically the ones doing less than $100 a day in bitcoin sales. While the paid plans used to have daily transaction caps, BitPay’s spokeswoman Jan Jahosky confirmed that those caps would be removed as part of the new plan pricing.
The new pricing plan shifts BitPay to a “freemium” business model. While the starter plan includes email support, the Atlanta-based payment processor offers more expensive plans that include things like 24/7 phone support, personal account managers and Quickbooks integration.
Its rival Coinbase, who processes payments for companies like Expedia and Dell, has a different pricing plan. It charges a one percent fee to cash out bitcoin to a bank account, but only after the first $1,000,000 in sales.
“There are lots of software companies out there that operate on a freemium model, so it’s not new in the software world. But it’s really new in the payments world,” Gallippi said. “There’s no other payment company that can do this.”
What BitPay is doing is a clear departure from traditional finance and taking advantage of the underlying technology that is bitcoin. Because of its decentralized nature, bitcoin payments are verified on the blockchain instead of by third parties, eliminating the need for credit card-like fees.
“If you’re a merchant payment processor, like Braintree, you can only go so low because everything is determined upstream from you by Visa and the issuing bank,” Gallippi said. “The beauty of bitcoin is that it’s a decentralized payments network, and it doesn’t have interchange so there’s a lot of efficiencies you can get out of the system. We’re able to leverage that and have the decentralized network do all of the transaction validating for us. All we really have to do is build the software tools for our merchants.”