[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. ___________________________________________________________________ (page generated 2022-08-17 23:00 UTC)