...and they significantly reduce the incentive for online retailers to adopt bitcoin at all.
I strongly disagree with this. In what way can you justify this? I have a case for the opposite.
Retailers will always weigh risk vs. benefit. If they'd rather just pay the 3-5% and not 'bother' with bitcoin, many will unfortunately.
As bitcoin use and awareness grows, and the exchange rate stabilizes, the incentive (no fees, no chargebacks) will eventually tip the scales toward adoption. Paypal's strategy will just slow down the process IMHO.
who says that their fees will be 3-5% for bitcoin transactions? They know better to keep an increased margin in the face of rapid numbers of competitors. They may be able to get away with that margin as a first mover for awhile, but in a year from now there is no chance they will succeed at those levels. People will simply move to the new beautiful baby silicon valley spawns to suck from the teet of the dinosaur.
