Hi David, the article has definitely provoked some thought from the foray of comments. Some other facts that you can bake into consideration:
- PSP kind of providers like coinbase say 'merchant acceptance is free' 0% cost to merchant; it is true. However, what is not mentioned is that it is the holder of the Bitcoin (XBT) that pays for the transaction
- The PSP provider earns money by purchasing XBT from consumer at a discount to the value it is sold on the exchange. In essence the XBT holder purchasing goods from likes of Overstock pays for the transaction
- In case we wish for PSP's to reflect transparency, it will be good to see at what rate the XBT were purchased from customer and what rate were they sold to the exchange for converting to local fiat currency
- My brief review of some providers shows that that PSP offer rates ~2 to 4% worse than the current exchange rate. It is easy to check on the Blockchain on rate offered to customer and rate at which XBT sold at exchange during that exact moment.
- Thus merchant gets the transaction for free, however it is the customer that pays for the transaction.
- XBT PSP's pay between 0.1% to 0.5% for exchange sale of XBT. Most PSP's have bank accounts outside of US, thus requiring wiring the money or holding funds for ACH payment to merchant account. Adding all these costs, PSP's using XBT can be profitable only by charging customer to cover costs plus revenues.

From my research so far as an independent consultant have found out that cost of transaction - irrespective if the merchant pays for it or customer pays for it (hidden in exchange cost) is no different than traditional card payments.

Having said that XBT is a new currency that has been in existence for just about 3 years, it is imperative to note that the onset of merchants and businesses is not significantly increasing the number of XBT transactions(~65,000 per day). Most XBT today still continue to be used as an investment vehicle with the holder looking forward to undertake the risk for a higher upside.
Merchant transactions have not reached a significant mass as yet and it will take time for XBT to even come closer to mainstream e-Commerce transactions by traditional players.

What XBT brings to the fore is a technology protocol and Blockchain, if used effectively by traditional payment providers it can streamline some of the pain points. I foresee XBT protocol i.e. Blockchain to help provide a underlying technology to help traditional players. That is where the convergence of the new world and old players will create a more efficient, secure and trusting network using existing payment forms / new virtual currencies.