[HN Gopher] Can the Visa-Mastercard duopoly be broken?
___________________________________________________________________
Can the Visa-Mastercard duopoly be broken?
Author : pseudolus
Score : 123 points
Date : 2022-08-17 21:40 UTC (1 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| mathiasgredal wrote:
| Well, in Denmark you can use
| Dankort(https://en.m.wikipedia.org/wiki/Dankort), which does
| exactly the same as Visa or Mastercard, but the transactions are
| handled by Nets instead.
| madrox wrote:
| I'm just grateful it's a duopoly and not a monopoly. Can you
| imagine how much worse the situation would be if one company
| soft-owned the entire space the way Facebook does with social
| media?
| jjcon wrote:
| I'm not sure how facebook is a monopoly on really any level
| (see tiktok, twitter, youtube, snapchat, etc etc). Visa
| Mastercard duopoly also has 10x the barriers of entry that
| social media has.
| withinboredom wrote:
| Haha. Ask American Express. They'd love to help.
| [deleted]
| toss1 wrote:
| HaHa, yup, but it seems they're fat & happy where they are,
| with high fees on both sides. Their services are so much better
| than V/Mc that they could rapidly swamp V/Mc, IFF they'd reduce
| their fees. But they are obviously not interested in any other
| than the market segments they've got.
| sgjohnson wrote:
| I doubt they care, as their business is built on quality, not
| quantity.
|
| Average Amex cardholder already charged to their card roughly
| 10x of what the average non-amex cardholder charges.
| 5555624 wrote:
| AMEX won't lower their surcharge. Until they do, they will
| always lose business to Visa and Mastercard.
| 10g1k wrote:
| 1.4 billion people in China use WeChat to pay for everything.
| They don't even bother with credit cards.
| joshxyz wrote:
| this. this is crazy.
|
| ewallets are taking over.
| spaetzleesser wrote:
| How much does WeChat charge in fees?
| reaperducer wrote:
| Fortunately, phones never get lost. Or broken. Or stolen. Or
| discharge. Or malfunction. Or lock people out for no good
| reason.
|
| I can put a $100 bill through the washing machine and it's
| still perfectly usable. When I can do that with a phone, maybe
| I'll switch.
|
| I ran a credit card through the washer and dryer last month,
| and even though it got bent, and the stripe doesn't work
| anymore, the chip does. And the numbers can be punched into a
| POS terminal if all else fails.
|
| E-wallets are putting your finances into a single point of
| failure. Tech people should know better.
| [deleted]
| saurik wrote:
| I mean, you can always log into that WeChat account from
| another device... your WeChat username and password are maybe
| a bit more secure than all those numbers printed
| ostentatiously on your card, but are they really that
| different?
| kelnos wrote:
| _What_ other device? If I 'm out and about and my phone
| gets stolen, broken, or even the battery just runs out, how
| do I pay for my transit ride home, where I -- maybe -- have
| a backup device?
|
| This is the -- pretty common -- failure case I worry about.
| And yes, I know it's also possible for physical wallets to
| be stolen. But cash doesn't "break" or run low on charge.
| Software bugs or internet access issues don't cause paying
| with cash to fail.
|
| Example of stupidity: I can pay for transit in my city with
| my phone. However, there are newer payment readers on a
| small percentage of trains here that just don't like my
| phone, and insist "Invalid Card". The company that manages
| support for the readers has been unable to help me. The
| older readers on older trains work fine. The older readers
| on all the buses work fine. But I have to carry a physical
| transit card with me all the time anyway, and -- amusingly
| enough -- it's more convenient to tap the card than to
| unlock my phone and hope it works.
| Jensson wrote:
| You borrow someone's phone? Have people forgotten how to
| talk and help each other? It is very rare for phones to
| get stolen or break down, and when they do it is a lot
| easier to borrow a phone to pay for a Taxi than it is to
| beg for the money for a Taxi ride, so the situation still
| seems better than what we had before.
|
| Main thing stopping this would be that most phone OS
| doesn't seem to support guest logins, but that is an easy
| technicality to fix as long as there is demand for it
| which there will be as phones becomes more important.
| gjs278 wrote:
| meowkit wrote:
| Tech people know how to back up their devices, passwords,
| photos, etc.
|
| Hell most apps are good enough that people are backing up
| these things without even realizing it.
| kelnos wrote:
| The majority of the world is not "tech people".
|
| And even with backups, you still need to buy a new (minimum
| $100?) device if yours gets lost, stolen, or broken. Should
| it really cost $100 to replace a _payment card_? For many
| of us here, $100 isn 't a big deal, but for a lot of
| people, that amount determines whether or not they eat this
| week, or manage to pay rent this month.
| pphysch wrote:
| Despite all this, the largest community on the planet is
| using it just fine.
| kelnos wrote:
| Do they use it because it's "just fine", or because there's
| no alternative? How many people have daily problems with it
| (problems they might not have if cash were an option), but
| we just don't hear about it.
| morepork wrote:
| And in India they have UPI which is similar in the use of QR
| codes, but facilitates interbank p2p payments
| echelon wrote:
| A single point of failure, leverage, unilateral negotiation,
| and control. Horrifying for all people and businesses
| (especially competitors).
|
| Real Standard Oil situation there.
|
| Not that our own duopolies aren't also problematic.
| stefan_ wrote:
| The grandparent is exaggerating somewhat, it's split between
| Alibaba and WeChat.
| echelon wrote:
| Much better, but five or so peer competitors is best for
| consumers and other businesses.
|
| Of course, as a business, you want to be a monopoly.
| gamegoblin wrote:
| Since this is China, a better mental model is probably more
| along the lines of a utility company that is technically
| private, but in practice under such government oversight that
| it is quasi-governmental. Any sufficiently large company in
| China is better thought of as a quasi-governmental entity.
| superasn wrote:
| For all the red-tape and corruption we have here, I still think
| India has done a phenomenal job with UPI payments. I mean I don't
| even remember the last time I used my credit card considering I
| have even forgotten the pin codes now.
|
| One or two other thing I love about these UPI payments is that it
| doesn't seem to incur any 2 or 3% commissions(1) which is both
| great for the consumer and the merchant (as these costs would
| eventually be passed to the customer anyway). Also almost every
| cc machine, website and panwala has a the QR codes now so no need
| to carry a wallet or plastic cards. I can make payments of Rs.5
| and that's fine.
|
| I don't even carry a wallet anymore to a mall or any place since
| my driver's lic/reg is in the digilocker app(2) and the credit
| card is the gpay/phonepe app.
|
| (1) Not really sure if there is or will be later, since I'm not a
| fintech person, but from what I can tell I don't see any
| commission on UPI payments yet.
|
| (2) https://www.google.com/search?q=digilocker+license+valid
| ars wrote:
| I don't want to carry cash, but I don't need it to be a Credit
| Card.
|
| The new FedNow https://www.frbservices.org/financial-
| services/fednow/about.... system might take a significant part of
| Visa/Mastercard business.
| toss1 wrote:
| Could be very cool - I didn't know abt this, thx for posting!
| JoeAltmaier wrote:
| Huh. Apple-pay? In my college town, credit cards are on the way
| out.
| mekster wrote:
| How does your little college town effect the entirety of the
| market?
| drexlspivey wrote:
| Apple pay is just an easy way to use your card
| jonny_eh wrote:
| Or debit card
| rdtwo wrote:
| It's on the discover card network
| snazz wrote:
| You're thinking of Apple Cash, which is a Green Dot Bank
| debit card that used to use Discover and now uses Visa
| Debit. Apple Pay in general works with all four major
| networks and nearly any credit or debit card.
| pwinnski wrote:
| Apple Pay is using NFC to supply credit card info, but it's
| still most commonly Visa or Mastercard.
|
| Unless you mean the Apple Card, in which case it's a
| Mastercard.
| amelius wrote:
| Apple is just building a front for credit cards, so that they
| can take over the payment space once the customer has shifted
| their way of doing things.
| gz5 wrote:
| they also provide tremendous value. however, looked at from a
| disruptive innovation perspective, i think two questions are
| critical:
|
| + where can startups take the edges off the market, without
| taking them on front-on? certain segments, use cases, etc.
|
| + what tech innovations exist today (or are on the horizon) which
| a startup could leverage faster/better than visa/mastercard to
| better serve certain use cases better than v/m (e.g Dell (when
| they were a startup) was so much faster than IBM to incorporate
| Intel's new tech every cycle, which resulted in Dell customers
| getting more capable and less expensive pcs)
| immortaljoe wrote:
| Rupay in India seems to be doing it.
|
| Non affiliated video about it: https://youtu.be/B_AY4a3_-GQ
| db1234 wrote:
| Visa and Mastercard complained to US Govt about Indian Govt
| backing Rupay. I am sure they will lobby against any attempts
| to break their monopoly in US too.
| therealmarv wrote:
| European Union solved big part of the problem many years ago in
| 2015 with a new law. They capped the fees of Visa and Mastercard
| at max. 0.3% of the transaction volume on private consumer cards.
|
| It has many upsides (especially increased acceptance). The only
| downside: There are no real or good cashback programs (like
| getting 1-2% back) in Europe because of this.
| morepork wrote:
| I wouldn't say that's a huge downside as in theory prices
| should be that little bit lower
| alberth wrote:
| Let's compare against other consumer choices. Can the ...
|
| - Coke-Pepsi duopoly be broken?
|
| - Google-Baidu?
|
| - Nearly any professional sport is a monopoly (NFL, NBA, etc)
|
| And soooo many more.
| echelon wrote:
| > Coke-Pepsi duopoly be broken?
|
| Dr.Pepper, Monster Beverage, Redbull, Asahi, Arizona, and
| thousands of other smaller players exist.
|
| > Google-Baidu?
|
| Google is a search monopoly for English speakers. Steps should
| be taken to remove Google's ability to enforce via Chrome and
| Android, or prioritize adsense sites. Perhaps the DOJ can split
| their business units or force third party offerings to be
| required.
|
| > Nearly any professional sport is a monopoly (NFL, NBA, etc)
|
| If sports aren't fungible, XFL. If they are, there are
| thousands of leagues. Did you know Michael Jordan played golf?
| toast0 wrote:
| > Dr.Pepper
|
| Dr Pepper is often bottled and distributed by Pepsi or Coke,
| especially outside of the US. Coke has a competing "pepper"
| drink (Mr Pibb), but mostly markets it in areas where the
| Coke distributor doesn't have rights to Dr Pepper.
| echelon wrote:
| That's just business logistics, though, and the company is
| free to form relationships with other distributors if it so
| wishes. At the end of the day, the Dr. Pepper company is
| marketing and earning the lion's share of the margin for
| their product.
| lessname wrote:
| Baidu is not a competitor to Google. Even if there was an
| English version of it, with so much censorship it wouldn't be
| able to compete. Bing and (maybe) Brave Search are small
| competitors to Google.
| projektfu wrote:
| Mercado Pago, from the article, represents a merchant processor,
| and certain consumer services. However I think the big change in
| Brazil is Pix, offered by the central bank. It allows
| instantaneous bank transfers for most cash accounts. The fees are
| 0 or nearly 0.
|
| As far as I understand, Mercado Pago's big thing is installment
| plans. You can buy almost anything in Brazil "em ate 12x sem
| juros" or up to 12 installments without fees.
| munk-a wrote:
| The Interact network has done an extremely good job at breaking
| it in Canada. So yes, yes it can.
| sytelus wrote:
| I still haven't understood why credit cards companies need to go
| through this complex multi-hop "settlement" pipeline that takes
| almost a day for transactions to get "processed". Is it because
| some banks still depend on mainframes doing batch processing?
| toast0 wrote:
| Authentication and capture have different processing
| requirements and availability needs.
|
| You want to have 100% uptime for authorize, but correctness
| isn't strictly required; if you allow too much in charges,
| you'll probably end up collecting user fees, which is not a
| negative for the bank. On the other hand, you want exactly once
| processing for capture, and you don't really need that to have
| 100% uptime, since the financial industry is built around batch
| processing.
| hn_throwaway_99 wrote:
| > Is it because some banks still depend on mainframes doing
| batch processing?
|
| Pretty much _all_ banks use mainframes to do batch processing.
| "SFTP runs the world".
|
| I got heavy into fintech a couple years ago, and at first I
| thought "This is all insane." I was coming from a SaaS world
| where it's easy to think about transactional guarantees with
| API calls.
|
| I finally "got it" when I realized that pretty much all of our
| financial system in the US is based on the digitization of
| _manual_ processes from the 50s and 60s. If you think of how
| banks worked before computers (e.g. large binders of ledgers
| that were manually reconciled), that 's basically how it still
| works today, those big binders have just been turned into
| digital files that are processed by machines.
|
| I'm no fan of crypto, but the _one_ place where I can see real
| utility for blockchain is as a backend settlement service for
| banks.
| Enginerrrd wrote:
| >I'm no fan of crypto, but the one place where I can see real
| utility for blockchain is as a backend settlement service for
| banks.
|
| So... what does the crypto provide there that a simple
| authenticated communication protocol with a few redundant
| centralized servers doesn't?
| csomar wrote:
| A blockchain will allow all these operators to transact
| safely. It's really just more secure because it's open
| (otherwise very quickly compromised). And blockchain tech
| has shown to be reliable when it comes to up-time and
| security (if you keep it simple).
| JumpCrisscross wrote:
| > _Pretty much all banks use mainframes to do batch
| processing. "SFTP runs the world"_
|
| This isn't an anachronism. Batched net settlement is
| inherently cheaper than real-time gross settlement.
|
| Canonical example: if I send you $10, then you send me $5 and
| I send you $2, in net settlement, there is a single $7
| transaction; with RTGS there are three transactions of $17.
| The first system not only has lower transaction costs, it
| also scales better on account of needing less capital. TL; DR
| If there is a real-time settlement system, it is _always_
| possible to build a net settlement system on top of it that
| 's cheaper (albeit slower).
| sytelus wrote:
| Why should transaction "cost" anything? It is just running
| arithmetic instruction on a number in a computer. I would
| argue batch processing makes no sense. If you send me me
| $10 and I send you $5 and bank wait for a month to run that
| batch, you might have already been bankrupt and have
| nothing to send so somehow you sent me money, I never
| received it and now everything is in big limbo.
| Transactions should be instant.
| jpollock wrote:
| I don't understand how this is possible:
|
| "Merchants hand over some $138bn in fees each year; according to
| the National Retail Federation, a lobby group, it is their
| second-biggest cost after wages."
|
| Unless they're talking about more than just credit card fees?
| From the same article:
|
| "But credit-card fees are unregulated and meatier, usually
| sitting at about 2% of the transaction and rising to 3.5% for
| some premium-reward cards."
|
| Are they saying that retailers pay less than 4% of the retail
| price to acquire their goods? They pay more for credit cards than
| rent?
| Areibman wrote:
| Does anyone sincerely believe FedNow will gain traction for
| consumer payments? The fees don't seem particularly cheap (at
| least compared to something like Solana Pay), and the FedNow
| website does not inspire confidence.
| aidenn0 wrote:
| If checking accounts get debit-only RTNs for cheap/free, this
| could potentially catch on. $0.06 per transaction with
| $25/month subscription fee is incredibly cheap, plus no
| chargebacks!
|
| Biggest issue I see is that the larger banks might not offer
| this to their customers so as to not cannibalize their credit
| card businesses and/or in-house payment system.
| kelnos wrote:
| > _$25 /month subscription fee is incredibly cheap_
|
| Cheap?! That's $300/yr, and is more expensive than most
| credit card annual fees (for cards that even have annual
| fees). And with FedNow you don't get any credit card
| benefits. I mean, I pay $550/yr for one of my credit cards,
| but I get like $2k of value out of it per year in benefits.
| Why would I want to pay $300/yr for something that lets me do
| something I can already do, for free or "cheaper than free"?
| peyton wrote:
| I don't see the value add from the sender side.
| Veliladon wrote:
| The only thing I don't want to happen is for the duopoly to be
| broken up into a billion different little fiefdoms each with
| their own unregulated space. One of the reasons credit cards are
| so good is because there's a fuckton of regulations built into
| the legislation behind them in order to give an individual
| consumer a fighting chance against the financial industry.
|
| All these fintech companies wanting ACH access to my bank
| account? If a transaction gets fucked up (i.e. someone puts the
| decimal in the wrong place) it's my immediate and hard to fix
| problem. I have to deal with my bank's bureaucracy and their
| goodwill. In the meantime I have no access to my money. If
| someone fucks up the same using my credit card number it's one
| call and the company takes care of it and because it's in arrears
| I still have all my cash.
|
| Nope. It'll be a cold day in hell before I give any fintech get
| direct access to my checking account for payments.
| andersonmvd wrote:
| In Brazil many stores are dropping credit card and allowing only
| PIX (instant debit transfer) cause it's cheaper for business
| (0,22% avg transaction fee vs 1%-2% of credit cards - src (pt-
| only) https://g1.globo.com/economia/pme/noticia/2022/03/23/pix-
| e-m...).
|
| The President of Brazilian Central Bank recently said that
| "credit cards will soon cease to exist" src (pt only)
| https://www.poder360.com.br/economia/campos-neto-diz-que-car...
| pkaye wrote:
| I presume instant payments don't have the chargeback feature of
| credit card? That is the main benefit I care about credit
| cards.
| andersonmvd wrote:
| PIX does have a chargeback-like mechanism. It was introduced
| a year later its release though. PIX is actually more than
| just instant payment, it includes other things like Pix Saque
| (withdraw) and Pix Troco (change).
|
| Src (pt only) https://www.poder360.com.br/economia/bc-libera-
| mecanismo-de-... and
| https://www.in.gov.br/web/dou/-/resolucao-
| bcb-n-103-de-8-de-...
| csomar wrote:
| My guess is charge backs are probably a US/Canada thing. Many
| countries have credit cards without the protections. It
| happens to work in the US because there is a credit score
| system, high volumes and most people play by the rules.
| Dannymetconan wrote:
| The EU also has charge backs as well. I would have assumed
| all credit cards would have this as a feature.
| metadat wrote:
| Un-paywalled: https://archive.ph/5HJal
| philip1209 wrote:
| Fraud protection of credit cards is the root of modern
| e-commerce. In some ways, Visa and Mastercard are the privatized
| court systems of the internet.
|
| If I end up on a random, self-hosted ecommerce site and decide to
| make a purchase - what guarantee do I have that the item will
| show up or be as-described? If I bought something through a bank
| transfer, reversing that purchase would be incredibly difficult.
| And, suing a merchant is prohibitively slow, expensive, and
| arduous.
|
| Also, modern B2C SaaS is built on credit card subscriptions. The
| ability for a merchant to pull payments on a recurring basis from
| a credit card requires an incredible amount of trust. If
| consumers had to push payment every month or year to continue
| subscriptions (instead of having it automatically debited), then
| churn rates would skyrocket and modern SaaS multiples would crash
| - taking company valuations with it.
|
| So, I'm sure online merchants are happy to keep paying their ~3%
| fees as long as sales continue. Nobody wants to go back to "Cash
| on Delivery", and nobody wants to hire workers to knock on doors
| asking for bills to be paid.
| JumpCrisscross wrote:
| > _I 'm sure online merchants are happy to keep paying their
| ~3% fees as long as sales continue_
|
| There might be an opening in subscriptions. Those merchants
| know their customers, and may be willing to take on fraud risk
| for material bump in revenue.
| philip1209 wrote:
| I think the opportunity is for platforms that can manage
| risk. Consumers are more likely to give direct bank account
| access to platforms that they trust. For example, Apple's App
| Store is well-positioned to run subscriptions over ACH, and
| they have the consumer trust to get some adoptoin.
|
| But, then you're trading one evil for another - because Apple
| will want their cut, too.
|
| At the end of the day - it's a battle between value centers
| and cost centers. Businesses would generally rather make more
| money than save money.
| JumpCrisscross wrote:
| > _Apple 's App Store is well-positioned to run
| subscriptions over ACH, and they have the consumer trust to
| get some adoptoin_
|
| You have to get one side to trust it. Visa and MasterCard
| succeeded by making it easy for consumers. The counterpunch
| is likely in winning over merchants. If Netflix or Spotify
| gave me a small discount for running over alternate payment
| rails, I don't need to trust the intermediary, I trust
| Netflix or Spotify to not screw a decade-long customer over
| pennies.
| arcticbull wrote:
| The fees are 3% only in the US and the bulk of that is returned
| to buyers as cash back or loyalty points, and to offset the
| cost of loan origination and warranties.
|
| The EU has capped debit interchange at .2% and credit at .3%,
| Australia in the low 1s if I recall correctly. They just don't
| really have rewards.
| jasonwatkinspdx wrote:
| It's worth noting there's some real economic disparity in
| just who can get rewards cards with significant incentives in
| the US.
| arcticbull wrote:
| Yep, but also, those vanilla no-rewards Visa cards only
| cost merchants like 1.5% whereas those high-end cards like
| an Amex Platinum can cost as much as 3.5%. [1]
|
| [1] https://www.bankrate.com/finance/credit-cards/why-
| american-e...
| jen729w wrote:
| Yeah typically around 1.5% in Australia. Which is often
| passed on to the consumer at the point of sale.
|
| We do have a non-Visa/MC payment system here in 'eftpos',
| which is ubiquitous. AFAIK this is exclusively debit not
| credit, but this isn't my area, I'm just a consumer.
|
| https://www.eftposaustralia.com.au
| holistio wrote:
| Nobody really has rewards.
|
| We don't have them in Europe, and some people in the USA
| think they have them.
|
| What they have is crazy high credit card fees and the need to
| juggle a bunch around to get a few things credit card
| companies decided to buy for you en masse.
|
| When I buy a $5 latte, I give Visa $0.01. When you do the
| same, you pay $0.15.
|
| Come the hell on. "REWARDS". Smh.
| lotsofpulp wrote:
| I get a minimum 2.6% cash back on everything I purchase,
| but most things I get 3.5% to 5.25% cash back.
|
| There are a bunch of free 2% cash back credit cards, so
| people would at least break even if they wanted to.
| dcolkitt wrote:
| Generally those types of deals require either parking six
| figures out liquid assets at the issuing bank and/or
| paying high annual fees (which of course favor the
| biggest spenders who amortize the cost over lots of
| volume). Either way the current system definitely favors
| the rich over the middle class.
| JumpCrisscross wrote:
| > _system definitely favors the rich over the middle
| class_
|
| This is correct. But it's a far cry from "nobody really
| has rewards." Framed a bit differently, our credit card
| system is a regressive tax on consumption.
| lotsofpulp wrote:
| In my case, it does not have to be liquid. Any
| investments count, including IRA/529 and other accounts.
| The 2% cash back cards generally have no requirements.
|
| I am going to have those same investments anyway in VOO
| at one brokerage or another, so there is no opportunity
| cost.
|
| You are correct that it is sort of a wealth transfer from
| poorer to richer. But merchants are free to offer
| discounts for non credit card purchases, and they do many
| times.
| PaulDavisThe1st wrote:
| The Amazon/Chase credit card gets you a 5% Amazon credit
| for everything you spend at Whole Foods. That pretty much
| destroys their profit margin on a lot of what they sell.
| Given that I do all my grocery shopping there (for now),
| and I spend a lot on food, that's $840/year plus or minus.
|
| My regular Chase card gives me 1.5% of everything I spend
| back as cash. That's typically about $1k/year.
|
| I pay nothing in (direct) card fees at all.
| TrueGeek wrote:
| Interesting. How much money is lost by banks giving out cash
| back rewards to Americans using credit cards in Europe?
| dcolkitt wrote:
| The Achilles heel of this setup is that not all transactions
| are equal risk. Very low risk transactions are paying near
| identical fees to very high risk transactions, despite orders
| of magnitude differences in fraud rates.
|
| How long will Apple selling in-store products to 800 FICO score
| consumers be willing to subsidize eBay vendors and gift card
| resellers?
| arcticbull wrote:
| They're not. The 3% is a blended average. The rate varies by
| the specific card kind, the card brand, the specific vendor
| in Apples case when they have leverage - or the merchant
| category code when they don't have leverage. Even chargeback
| history matters.
|
| Apple likely has a deal that borderline costs merchant
| acquirers money and that gift card vendor is probably paying
| 10%.
| jrvarela56 wrote:
| This. My company does payment processing for small merchants
| and all the complexity of credit cards is rooted in this
| dynamic.
|
| - Consumers can pay stuff on credit
|
| - Consumers can 'chargeback' if they feel something went wrong
|
| These two mechanisms are the lubricant that provides a +% in
| online commerce greater than the % charged for processing
| payments.
| PaulDavisThe1st wrote:
| > provides a +% in online commerce greater than the % charged
| for processing payments.
|
| While possible, this is a claim made without evidence.
| geph2021 wrote:
| Yep. Also one of the reasons crypto will never work (as-is)
| for online, digital currency/payments. Customers don't want
| irreversible transactions.
| konschubert wrote:
| But I am sure they would prefer paying 1% fees for exactly the
| same service.
|
| Or a 0.1% fee.
| einpoklum wrote:
| > Also, modern B2C SaaS is built on credit card subscriptions.
|
| That seems like circular logic. If there were alternatives to
| credit card and CC companies, SaaS would use that. In fact, in
| some countries, there are and it does.
|
| > The ability for a merchant to pull payments on a recurring
| basis from a credit card requires an incredible amount of
| trust.
|
| Why? If the merchant can't pull this month's payment, then
| services stop. Perhaps you mean making a large payment in
| arrears?
| mc32 wrote:
| CoD. How did that even work? I mean how was fraud prevented?
| Did money get counted and balanced every night? How did they
| prevent drivers from getting robbed or inadvertently losing
| money (miscounting etc?$
| Domenic_S wrote:
| I bought things CoD in the days when eBay still did that
| (90s). The postman would come to your door with the CoD bill
| and you'd hand over a cashier's check to them, then they'd
| give you the package.
| O__________O wrote:
| Yes, payment for "cash/collect on delivery" is made on
| delivery rather than in advance. If the goods are not paid
| for, they are returned to the retailer.
|
| American page:
|
| https://faq.usps.com/s/article/Collect-on-Delivery
|
| Canadian page:
|
| https://www.canadapost-
| postescanada.ca/cpc/en/support/kb/sen...
| jon-wood wrote:
| Most of this isn't that mysterious in practice. Apply
| whatever you know about how supermarkets, bars, and other
| cash accepting businesses operate. Then add in the fact that
| yes, drivers would occasionally get robbed, it was a risk of
| the business and priced in much like shoplifting is for a
| supermarket.
| makeitdouble wrote:
| To note, all of these work on PayPal, with a bank account.
|
| PayPal are a dick on fraudulent merchant account detection and
| it's well know assets can be frozen on a whim, but at this
| point it's the one of the few other options.
| philip1209 wrote:
| Lower fees matter most for low-margin businesses. If your
| business has 5% margins, then taking your payment processing
| fees from 3% to 1% is transformative for your profits.
|
| The reality is that most low-margin B2C businesses are brick
| and mortar service-based businesses, such as restaurants.
| And, therein lies the problem for Paypal and for crypto
| payments: The low-margin businesses that care about CC fees
| are not early-adopters of payment networks. Restaurants can't
| conceivably introduce a non-traditional payment network as
| their exclusive provider.
| Zircom wrote:
| PayPal is a joke when it comes to addressing fraud, it's
| completely hit or miss on both sides. My younger brother got
| scammed out of like $100 trying to order a chair from a
| furniture website that turned out to be some guy in China
| scamming people. The "online store" only accepts Paypal and
| when checking out, instead of the usual PayPal process is
| directs you to a page that's already completely filled out to
| send the correct amount as a personal friends and family
| transaction. He realized something was up literally minutes
| after completing the transaction when he saw that the email
| confirmation listed a random Chinese email address and saw it
| sent as a friends and family transaction and immediately
| called PayPal support and they basically told him to get bent
| and refused to reverse the transaction, because they don't
| offer any guarantees or protection on personal transactions,
| completely refusing to address the fact that this guy is
| scamming people using their platform.
|
| He had to do a chargeback with his credit card company and
| got his money back that way, but of course PayPal banned his
| account in response.
| cycomanic wrote:
| As your post illustrates credit cards are really a solution
| developped for the deficiencies in the US banking system which
| have been exported to the rest of the world due to the
| dominance of the US market. 20 years when I was still living in
| Germany, hardly anyone had a credit card, while everyone was
| using automatic payments and electronic wiretransfers. I was
| very surprised when later (about 13 years ago) a US friend told
| me that they were still using cheques for most things. I had
| only touched a cheque maybe 2 or 3 times in my life.
|
| Even today many people in Germany still don't have a credit
| card or if they have one largely use it for travel. Of the
| people (in Germany) I know, they also never use charge backs on
| the cards (I suspect many don't even know that you can do it)
| and instead rely on the court system to get refunds etc..
| julienb_sea wrote:
| The benefit of credit cards is no one can literally drain
| your bank account via fraudulent access to a payment card
| directly tied to your bank (i.e. debit card in US
| nomenclature). This is a clear benefit regardless of
| location. Courts are slow and not scalable, and you don't
| want to be in a scenario where your bank has been drained
| right before you need to make important payments.
| PaulDavisThe1st wrote:
| This does not negate the parent post at all. You're just
| describing another deficiency of the US banking system.
| kube-system wrote:
| There are always scams and exploits. Legal consumer
| protections are necessary regardless.
| PaulDavisThe1st wrote:
| This, absolutely. It is totally embarrassing to watch my UK
| family or EU friends interact with their banking systems and
| compare it with the US.
|
| To be fair, things are improving a little bit. But we're
| still so very far behind the EU banking system. Instant,
| cost-free transfers between any two accounts, completed
| faster than you can lift your finger off your smartphone.
| lotsofpulp wrote:
| > Instant, cost-free transfers between any two accounts,
| completed faster than you can lift your finger off your
| smartphone.
|
| This is available to most people in the US via Zelle.
| nixass wrote:
| Why would I use credit card at all? Sure it does help when
| traveling but not much use for it otherwise
| philip1209 wrote:
| For consumers in the USA, there's a negative take rate. You
| get cash back if you pay with a card.
| PaulDavisThe1st wrote:
| Don't think of it as a credit card. Think of it as payment
| mechanism. It comes with certains costs (to _some_ users,
| and to _all_ merchants) and also with certain benefits. It
| also comes with a certain aggregate cost to the whole of
| society, since essentially prices are increased to cover
| fees, and then some fraction of the fees are refunded to
| the wealthiest users (redistribution, just more subtle than
| taxes).
| JumpCrisscross wrote:
| > _Why would I use credit card at all?_
|
| Float. If I charge $10k to a card, I get an interest-free
| loan until the balance has to be paid off. In a zero-rate
| environment that's meaningless. But even at the 30-day's
| 2.22% [1], that's almost twenty bucks. I'm probably paying
| about 1% more for the CC fees, but I can use my card that
| gives me 1.5% back on everything.
|
| [1] https://home.treasury.gov/resource-center/data-chart-
| center/...
| xboxnolifes wrote:
| Why would I not use a credit card? It's essentially a
| better debit card in every scenario, except for when paying
| with a credit card has an additional fee.
| insane_dreamer wrote:
| that's the thing; businesses don't want to have to rely on
| the court system to get refunds.
|
| the x% CC processing fee is essentially fraud/non-payment
| insurance
| hn_throwaway_99 wrote:
| I don't think anyone disagrees with you in terms of the value
| of credit cards, the issue is whether their fees are worth it.
| Their huge profit margins, as well as how they previously
| fought tooth and nail against, for example, allowing merchants
| to levy a credit card surcharge, suggest that their duopoly
| position is allowing them to charge exorbitant amounts for
| their services.
| sudden_dystopia wrote:
| This is the best, and in my opinion, only use case for Ethereum
| kelnos wrote:
| Can we get through even one finance-related HN post without a
| content-free comment claiming cryptocurrencies will solve this
| problem? (Spoiler: they won't.)
| bnchrch wrote:
| This is something I hope a blockchain solution breaks through.
|
| A thought on how to do it.
|
| 1. Create a stable coin
|
| 2. Create a credit card that uses this token
|
| 3. Tie using it to some reward, supercharge it with VC if you
| have to
|
| 4. Release a QR payment component where vendors don't have to
| pay to receive payment, get rewards and payees earn double
| rewards
|
| 5. Integrate that bad boy far and wide
|
| Worth noting that Stripe, Shopify and Square are also well
| placed to use a similar strategy
| Swizec wrote:
| > This is something I hope a blockchain solution breaks
| through.
|
| Don't worry, Visa and probably Mastercard already have a
| crypto department. They've been digging into blockchain (and
| buying startups) for a while now.
| k__ wrote:
| I read, at one of those companies hundreds of people are
| working on crypto/blockchain.
| karamanolev wrote:
| So far I think the first step has failed spectacularly a few
| times, let alone any follow up. I'm not saying the above is
| necessarily impossible, but at this point I've acquired an
| instant gag reflex when I hear blockchain. I'm not sure if
| that's a healthy approach for me, but it's true.
|
| Why does it have to be a blockchain instead of a government-
| mandated nonprofit (e.g. FedNow) to operate it? Wouldn't that
| have more oversight and less chances of massive fraud?
| peyton wrote:
| The Fed is absurdly profitable.
| Areibman wrote:
| I used to feel the exact same way until I saw what Circle
| did with USDC.
|
| I'm highly doubtful that FedNow will be able to compete in
| terms of innovative new features. Say what you will about
| blockchain, there's a lot of builders out there
| aggressively churning out new tech without anyone's
| permission.
| tossl568 wrote:
| That system where your money disappears if you don't get "gas"
| fees right? The Bitcoin/lightning stack is the best option
| here.
| odrekf wrote:
| You mean Bitcoin Cash.
| tossl568 wrote:
| I absolutely, positively do not.
| odrekf wrote:
| It has much, much better scalability and uptime. The
| other day the entire LN went down due to 1 bad node. That
| has never happened, and will never happen in the original
| Bitcoin design (ticker: BCH).
| tossl568 wrote:
| It has better scalability if you don't care about
| decentralisation whatsoever and that it's possible that
| everyone can store a copy of everyone's else's coffee
| transactions in perpetuity. It's not possible without
| huge, expensive to run servers, which is why nobody runs
| a BCH node. Uptime? By what metric? Bitcoin, the real
| one, has 100% uptime since the fork. The entire LN did
| not "go down the other day due to one bad node", that is
| not how it works at the most fundamental level. It simply
| did not happen. If you're a sockpuppet then nobody is
| buying it sorry, your coin is dead. And if you've
| actually fell for this narrative and actually hold BCH,
| then I am truly sorry and hope you realise you've fell
| for a scam before you lose any more money.
| odrekf wrote:
| What you call "Bitcoin", is not Bitcoin by its own
| whitepaper. And it certainly DOESN'T have 100% uptime.
|
| Keeping blocks artificially limited at 1mb doesn't make
| it more decentralized, it actually makes it more
| centralized, since barely anyone in the world can use the
| network or pay the fees when a bunch of people are using
| it at the same time.
| tossl568 wrote:
| It's Bitcoin by every metric you can name: users, trust,
| fees, hashrate, price, market cap, security, exchange
| support, merchant acceptance, codebase quality, developer
| talent. Regardless of your subjective opinion of whether
| it's the same as it's own whitepaper based on whatever
| nonsense you've read from Roger Ver or whoever. BCH still
| has transaction mallebility because it was born out of
| greed of miners who did't want to activate segwit.
|
| Can you point me to any evidence of it not having 100%
| uptime since the fork? Or have you fell for another lie
| just like "one node taking down the lightning network"
|
| Blockspace is scarce and valuable, and that's the way it
| has to be to be decentralised. And yes they can use it,
| on the layer 2 lightning network. It works great, I use
| it all the time, for pennies in fees even when there's a
| mempool queue.
| odrekf wrote:
| Can you show me where in the whitepaper it mentions your
| metrics? I didn't see anything about say, price in there.
| I did see a lot of mentions about it being cash though.
| Also SPV wallets (point 8). Nothing about LN.
|
| In any case, BCH simply works 100% of the time, it's
| instant, extremely reliable and cheap to use, and it's
| actually being used as cash in the real world (unlike
| BTC). That's the most important thing in my opinion.
| rvz wrote:
| None of the mentioned coins / solutions: Bitcoin, Bitcoin
| Cash, Lightning Network, Ethereum, Layer 2 solutions are
| even close to being a credible alternative to the Visa-
| Mastercard duopoly. (Also, Lightning is not Bitcoin)
|
| No business wants to use a volatile asset that loses its
| value when a person or institution refunds and
| immediately sells hundreds of thousands of Bitcoin(s) and
| takes the whole market down with it for payments at scale
| in the long term.
|
| We have given it years for them to mature and none of
| them have the safety / security or standardisation
| compliance required to be credible enough for regular
| businesses to being using it and I'm sorry it is not
| early days.
|
| I would say a cryptocurrency / blockchain project that
| aids or is faster than the current system, complies with
| regulations, has a trusted and centralized stablecoin on
| the network like (USDC) and is able to scale whilst
| allowing cheap payments will also be able to compete with
| the Visa-Mastercard duopoly.
|
| That is, the ISO 20020 standard and compliant
| cryptocurrencies which are highly likely to be used for
| payments (with USDC) in the long term.
| k__ wrote:
| I had the impression, only centralized stablecoins had
| issues in the last crash.
|
| DAI is doing pretty well.
| tossl568 wrote:
| Every lightning channel update is a valid Bitcoin
| transaction that can be broadcast at any time by either
| party for final settlement. Lightning is absolutely
| Bitcoin. You can use the lightning network as very cheap
| fiat rails if you don't want to deal with Bitcoin or it's
| volatility. Look at LN/Taro.
| rvz wrote:
| No. Not even remotely close.
|
| Both Bitcoin, and Ethereum have both proven that they are
| unsuitable for payments. Both with their demonstrably slow,
| expensive and unscalable layer 1 and their ducktaped
| contraptions of their non standard layer 2 solutions.
|
| I can only see a few cryptocurrencies that are suitable for the
| payments use-case which the ones considered for this are part
| of the ISO 20020 standard.
| drexlspivey wrote:
| Micropayments will be the killer app for crypto imo, once the
| $0.30 minimum transaction fee by the gatekeepers goes away a
| whole new universe of business models and revenue streams opens
| up. You can literally stream money if you want to. Lightning
| Network is one way to do that right now and the UX is getting
| pretty good too.
| legitster wrote:
| I'm pretty confident Visa's dominance is a completely natural
| monopoly. There are plenty of 3rd party payment options (Amex and
| Diners' are still both fairly widely accepted) and nothing is
| stopping consumers from having multiple cards.
|
| But I think the network effects are too strong and we are seeing
| a pretty normal Pareto distribution. Even if you added 20 new
| market entrants with good coverage, consumers and businesses
| would _still_ prefer to have Visa as the lingua franca of
| payments.
|
| I think it will also be pretty hard to get away from that 3.5%
| processing fee. That covers a _lot_ of fraud prevention work that
| credit card companies take on for consumers and businesses. Will
| consumers be happy to give up those protections and reap back a
| percent or two on prices? And emerging payment technologies seem
| to create _more_ opportunity for fraud.
| cardosof wrote:
| Can the duopoly be broken? Yes, you can have Pix, the system
| created by the Brazilian Central Bank for instant, verified
| payments and some credit/installments features. It's cheaper for
| business but then a central bank will know all your transactions.
| There are some talks of sharing the system with Canada and other
| countries.
| bastardoperator wrote:
| Can we get banks to adopt new banking platforms? Probably not...
| ojagodzinski wrote:
| No problem in Poland, we have Blik
| https://en.wikipedia.org/wiki/Blik
| toomuchtodo wrote:
| https://www.moderntreasury.com/learn/what-is-fednow
|
| > FedNow is an instant payment service for both individuals and
| businesses. Once launched, the initial transaction limit will be
| $25,000. This means that FedNow be more useful for small
| businesses and retail payment needs until it is widely adopted
| and the transaction limit grows.
|
| > In early 2022, the Federal Reserve released pricing and fee
| details for their real-time settlement network. Because FedNow is
| government-operated, it's mandated to break even and not turn a
| profit. A possible advantage of this is that FedNow may offer
| more competitive pricing than other payment systems, which
| encourages widespread adoption at a faster rate.
|
| Merchants can pass the CC surcharge through; I'd expect them to
| do so when a very low cost immediate settlement option is
| available. This will allow consumers to self select if they want
| the benefits of paying with a credit card (but paying for the
| privilege). Credit can be extended if needed by a financial
| institution, without using CC rails. Net 30? BNPL? Special
| financing arrangement? Pick your poison either prior to or after
| value transfer has occurred. The innovation is utility priced
| financial infrastructure, cutting out the rentseekers mentioned.
|
| (my note: it's about five cents per FedNow value transfer
| transaction)
| nikitaga wrote:
| > Merchants can pass the CC surcharge through; I'd expect them
| to do so when a very low cost immediate settlement option is
| available.
|
| Canada has had low-cost Interac debit cards for a long time,
| and although they've been very popular, merchants _generally_
| don 't impose any credit card fees.
|
| Also, even _Canadian_ online businesses generally don 't bother
| implementing payments with Interac online, so for online
| shopping it's not even an option.
|
| Perhaps some of this will be better at US scale.
| karamanolev wrote:
| > Merchants can pass the CC surcharge through
|
| Can they? I was under the impression (unverified) that they are
| under contract to provide the same prices for CC customers as
| they do for cash or debit card.
| pkaye wrote:
| I don't know if its state specific but there were some
| lawsuits in the past that removed this restriction and a cash
| discount is okay or a surcharge for credit card should be
| disclosed before you pay.
| kelnos wrote:
| That used to be the case, but changed in 2013 when a lawsuit
| settlement was reached that more or less did away with these
| sorts of contract terms[0]. That's why (at least where I
| live) gas stations that charge different prices for CCs and
| cash/debit are everywhere, some restaurants will offer some
| percentage off if you pay in cash, and some online services,
| even, pass credit card fees on to customers.
|
| I believe there are a few states in the US left where
| merchants can still be required to charge the same, but in
| most places in the US that's not the case.
|
| [0] https://smartpay.gsa.gov/content/surcharges
| tveita wrote:
| This seems like a good overview - sounds like there are
| still some big caveats:
| https://constantinecannon.com/antitrust-
| group/payments/devel...
|
| The no-surcharge terms are plainly anticompetive and should
| have been reigned in a long time ago. But customers get
| really mad about extra fees and think it's the merchant
| that is ripping them off and not Visa/Mastercard.
| iancarroll wrote:
| It's complex, but I believe Visa and MC voluntarily gave up
| their anti-steering requirements, while Amex fought the legal
| challenge against them and won[0].
|
| [0] https://en.m.wikipedia.org/wiki/Ohio_v._American_Express_
| Co%...
| WesternWind wrote:
| Gas stations in California certainly have different prices
| for CC vs cash, but they have to show both prices I believe.
| If you just charge extra for credit cards, that's a surcharge
| and falls under different rules.
|
| I think you can also advertise the credit card price and
| offer a cash discount.
|
| Debit cards still have transaction fees, though lower ones I
| believe, so they usually get the same price as credit cards,
| but none of the benefits like points.
| tryptophan wrote:
| Visa/Mastercard are looking very overvalued to me. When fednow
| comes out, I see very little reason for people to use those
| legacy options anymore. Its like the market is completely
| oblivious to the impending doom coming for these rent seekers.
|
| Every single app/store/site is gonna be begging you to enroll
| in fednow and will be offering 2-3% discounts/bonus points for
| any purchases made through it.
| adrr wrote:
| Debit card interchange for big bank debt cards is 0.05%.
| Sites/stores/apps don't offer debit cards discounts except
| gas stations. Big merchants offer their own payments/credit
| cards for up to 5% cash back, they aren't going to switch.
|
| FedNow will get adoption as a replacement for ACH / Check
| writing. Paying bills and getting paid. Instant deposits of
| paychecks will a big benefit to a lot people living paycheck
| to paycheck. It will displace a bunch of Zelle market share.
| veilrap wrote:
| I don't like the ability for arbitrary app/store/sites to be
| able to pull/push money directly from my bank account. The
| credit card companies provide a nice buffer between my wallet
| and the payee.
|
| I could see it being useful for interbank transfers and for
| bank to billing (e.g. credit cards, etc.)
| kelnos wrote:
| Perhaps this is an irrational fear, but one of the reasons I
| like credit cards is because when a charge happens, no money
| leaves my personal accounts. If a charge is fraudulent, it gets
| cleared up without me being out some amount of money until it
| gets cleared up.
|
| I assume with FedNow (same as if I were to transact using debit
| cards), money leaves my bank account more or less immediately
| when a charge happens. That means if someone manages to
| fraudulently charge something, I am out that money (up to
| $25,000!) until the dispute process is resolved.
|
| Also, do I really want the central bank to have a record of all
| my transactions? Not sure I do.
| randomdata wrote:
| Doesn't FedNow just provide transit? Whether the payment
| comes out of a deposit account or a credit account seems
| beyond the purview of FedNow and up to your arrangement with
| your bank, similar to how VISA is used to provide transit for
| credit cards as well as debit cards, depending on your
| arrangement with the card issuer.
| bcrescimanno wrote:
| That fear isn't irrational at all (at least, it wasn't).
| About 20 years ago, I had a debit card number stolen and my
| account was cleared out. It took about a month to get
| resolved an, in that time, I had some very unpleasant
| conversations with quite a few people including my landlord
| about my inability to pay my bills. In the grand scheme, I
| suppose it didn't harm me--but it was an extremely unpleasant
| situation to deal with.
|
| Since then, I've only used a debit card very sparingly and
| usually more as an ATM card in the event I need cash.
| njarboe wrote:
| If you want only an ATM card and not a debit card, you
| might be able to get one. Banks don't advertise it, but I
| got an ATM only card from Bank of America.
| dhosek wrote:
| >Merchants can pass the CC surcharge through
|
| Unless things have changed in the last 20ish years, if you
| accept credit cards you're not allowed to charge different
| prices for CC vs non-CC payments (although there are apparently
| some carve-outs for gas stations).
| [deleted]
| mbreese wrote:
| It's now allowed almost universally. I believe there are a
| couple of states that still don't allow it, but for the most
| part, you can add a credit surcharge now. This was part of a
| massive lawsuit by retailers against the CC processors that
| was eventually settled.
|
| Here are the Visa rules for it.
| https://usa.visa.com/support/small-business/regulations-
| fees...
|
| Basically you can charge a small amount, but nothing more
| than the actual cost of the transaction.
| aidenn0 wrote:
| IIRC it's only for non-cash payments that you can't charge a
| different amount for; cash discounts are allowed across the
| board.
| frant-hartm wrote:
| In the EU (whole EEA actually) the merchants are not
| allowed to charge a different amount for cash and personal
| cards (debit or credit cards). They can charge the
| transaction fee they pay for business (company) cards and
| they need to inform the consumer in advance.
| aidenn0 wrote:
| In the US, there are legally few limitations as long as
| you inform the customer. However all of the major credit
| cards have "most favored nation" clauses in their service
| agreements that prohibit charging any less for competing
| payment systems.
|
| As a side note, many government services aren't allowed
| to eat the transaction cost, so they actually do pass the
| cost to the consumer (e.g. when I pay my annual car
| registration, an ACH (electronic check) payment is the
| same as paying cash in person, but a credit card has an
| additional fee tacked on.
| kelnos wrote:
| Things indeed changed, in most US states, in 2013[0].
|
| [0] https://smartpay.gsa.gov/content/surcharges
| reidjs wrote:
| This is not enforced, though. Almost every store near me
| charges a surcharge on small purchases (<$10) made with CC.
| squeaky-clean wrote:
| You're not allowed to charge more for using a CC, but you are
| allowed to offer a 5% "cash discount". Extremely common in
| New York City.
| softveda wrote:
| That is just a merchant contract isn't it? In Australia
| government passed law that disallows such clause in contract
| and it is very common here to pay a credit card fee (the fee
| can only recoup the extra cost for CC transactions and not be
| a profit in in itself).
| __derek__ wrote:
| That changed with Dodd-Frank.[1]
|
| [1]: https://www.ftc.gov/business-guidance/resources/new-
| rules-el...
| Levitz wrote:
| I wonder if this would prevent sites like tumblr or pornhub to
| be forced to take actions at the whims of their payment
| processor provider
| alberth wrote:
| Debit card?
|
| Consumers already have a choice that has lower interchange fees
| to merchants (but also has way less chargeback protections) and
| that's a debit card.
| autoexec wrote:
| > This will allow consumers to self select if they want the
| benefits of paying with a credit card (but paying for the
| privilege).
|
| My guess is that they'll just raise their prices to include the
| fee no matter how the customer offers to pay for something.
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