I'd suggest using a higher estimate for the value of rewards points. (You used a 1%.) You can explicitly get >1% cash back on many cards, so I'd argue that's really the lower bound.[1]
Most reward points can be redeemed for ~2%, with conscious consumers getting even more than that. [2]
Consumers are very aware of the value they're getting, too. If you read AMEX company filings, the redemption rate on MR points is >90%. I found that shockingly high. It's tough to get consumers to switch to bitcoin when it's worse value and more risk.
[1] https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/... [2] http://boardingarea.com/onemileatatime/2012/05/25/my-updated...
Very interesting.
"As you know, our current ultimate redemption rate is 93%, a very high assumption for any consumer loyalty program."
[1] http://seekingalpha.com/article/931161-american-express-mana...
- The user is a bitcoin evangelist - The user bought/mined bitcoins early and wants to cash in without selling them which would incur an exchange fee and tax hit. - The user would prefer anonymity for that txn. Assumes no physical delivery (e.g. online porn) - The merchant offers a steep discount for btc. But why would a merchant offer a fee more than the 0.35% referenced in the article?
I use my credit card all the time for 2 reasons: 1) fraud protection and 2) reward points.
Interchange fees paid by the merchant are essentially being passed to the consumer via reward points. Why would people switch from credit cards to bitcoin en masse?