I mean, technically no they don't. But that's just being pedantic. They charge the bank based on gross dollar volume, and the bank gets the money to pay for that from... interchange fees. The more volume the bank does, the more they pay and the more they get from interchange fees.
Interchange fee pricing is set based on how much mastercard charges the banks, so while technically true, the interchange fees are basically set by mastercard's pricing.
ComputerGuru 1394 days ago [-]
Interchange fee pricing is set based on how much MasterCard charges the bank
That’s not true though, or at least is a massive oversimplification. In the US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.
gruez 1394 days ago [-]
>In the US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.
And that's a bad thing, because it's essentially the poor subsidizing the rich. People who aren't able to get credit cards (or the "good" cash back credit cards) tend to be worse off financially than people who do.
neil_s 1394 days ago [-]
+100! In Europe, they've limited interchange fees to a reasonable maximum. Banks can still make money, but don't offer crazy credit card rewards to the rich. I was sad to not get the rewards I was used to in the US, but happy that it was the greater good for society.
dx034 1394 days ago [-]
Also, with interchange fees at 0.3% and total card fees <1% for many shops, it's actually cheaper for sellers to accept cards than cash.
Nursie 1393 days ago [-]
This is something people always miss in this discussion!
Cash is not free for the business. People always assume that businesses are losing out on revenue by accepting cards, and thar cards inflate the price for everyone.
But it's not free to accept cash - you have to manage your float, transport cash between the bank and your premises, and there can be bank charges to account for too. All of which can easily eclipse the cost of card fees, especially in markets like the EU where those are capped.
ipsum2 1394 days ago [-]
How do you figure? Is it from counterfeit money, or cost to transport the cash?
eloisant 1394 days ago [-]
There is risk of theft too, not just robbery but from employees.
Usually the main reason some shops prefer cash is because they can put the cash directly in their pocket and do tax fraud on a percentage of their revenue.
consp 1394 days ago [-]
Bringing cash to a bank either via deposit boxes or by collection is not free and coinage is even more expensive than paper. At least here in Europe
orthoxerox 1393 days ago [-]
Yes, the fee for processing coinage and old notes is 50% in the bank I work for.
pnutjam 1393 days ago [-]
Wow, I just pour my coins into a machine that sorts and counts them for free at my bank.. oh right.. Credit Union!
dx034 1383 days ago [-]
The easiest one is the time it takes to correctly count at the end of the day. That can easily take an hour even for small shops. If you go card only, you can just lock the door after the last customer and leave. Accounting for revenues and discrepancies (which always happen) correctly is a huge hidden cost.
easytiger 1393 days ago [-]
Banks charge to deposit cash in business accounts
granshaw 1394 days ago [-]
This has always struck me as one of the more blatant and out-in-the-open financial inequalities in this country.
vxNsr 1394 days ago [-]
It’s also a fake one. As the other commenter said, the credit card system came about bec cash was very expensive to use for stores. They were passing along those costs to consumers, the fact that that’s now inverted by some stores (cash discounts) is only doable bec of the prevalence of credit cards.
Stores need to accept cash regardless, so there’s still some minimal added costs to using cash, but even with the offered discount it’s less than the credit cards...
however if stores stopped accepting credit cards they would quickly find themselves drowning in the same costs that credit cards were invented to avoid.
ballenf 1394 days ago [-]
Germany is still way more cash-based and you see less consolidation of businesses into large chains than in the US.
I'm not sure I buy "drowning in the same costs". I think there's something more akin to a prisoner's dilemma here.
ivan_gammel 1394 days ago [-]
Germany is cash-based because of consumer behavior, not because costs are somehow lower. With corona, e-Commerce and services like SumUp more widespread Germany will inevitably catch up with other countries.
sdoering 1394 days ago [-]
@Symbiote:
Not sure were you were. I am from northern Germany, around Hamburg.
But every single store that does accept cards (not every little store can bear the fees, though) has theses signs.
So I would counter your n=1 anecdotal argument with an equally non representative n=1 argument. No one learns anything, except that some shops in Germany ask for the use of cash-alternatives, others don't.
Symbiote 1394 days ago [-]
In Denmark, the majority of shops have little signs "Due to Covid-19, please pay by card or phone" or sometime "Due to Covid-19, cash is not accepted".
On a recent trip to Germany, I didn't see a single such sign.
Germany is changing gradually, perhaps due to the EU's limits on the fees Visa and MasterCard can change, but Covid-19 doesn't seem to have much effect.
ivan_gammel 1394 days ago [-]
I live in Berlin and recommendations to pay by card can be seen in many places with preference for contactless payment. In fact, share of non-cash payments visibly increased here and surveys show that German attitude is already changing.
dorgo 1393 days ago [-]
Maybe this is temporarily? I pay with card now. But intend to go back to cash after covid19.
dx034 1394 days ago [-]
Germany has seen a huge shift over the past months. Before that, paying by card for small ticket items such as in bakerys was frowned upon (or just not possible), now it's used by the majority in some areas.
hanche 1393 days ago [-]
In Norway, it is still illegal for stores to refuse cash. I know of only one store that does get away with it; I believe they do because they are primarily an online shop. Their physical store is merely a convenience for customers who happen to live nearby. Many (most?) stores still ask customers to pay with a card, though. To help out, the banks have raised the maximum amount payable by contactless cards without PIN entry.
LeonidasXIV 1392 days ago [-]
It is technically illegal to not accept cash in Denmark with very few exceptions (I checked, since it seems to be legal in Sweden), but maybe due to COVID-19 this got relaxed or is just not enforced anymore. Not that anyone would notice, nobody pays with cash anyway except for German tourists who aren't coming this year.
Aeolun 1393 days ago [-]
I feel like this is probably a good thing. Cash payments are a very healthy thing to have in addition to digital payments.
tr352 1393 days ago [-]
I live in Germany at the moment and I do see this in many places. On the other hand there are also still shops where showing my card gets me a puzzling look as if I'm some kind of time traveller visiting from the future armed with my mysterious shiny plastic card.
bjelkeman-again 1393 days ago [-]
In Stockholm, Sweden, many stores have stopped accepting cash altogether. Even before Covid.
mnw21cam 1393 days ago [-]
In Gothenberg, Sweden, for instance, you can't buy public transport tickets with cash. Which meant that when a beggar approached me and asked for some cash so he could travel home, I knew he was lying. I hadn't even bothered getting any Swedish cash when I visited the country.
baxtr 1394 days ago [-]
Depends where you are I guess. I have seen them everywhere in Germany.
NicoJuicy 1393 days ago [-]
Well, I thought so too in the start.
But I asked someone in a popular local store ( Belgium) and consumer behaviour hasn't changed.
ivan_gammel 1393 days ago [-]
How is this relevant to Germany?
NicoJuicy 1393 days ago [-]
Because Belgium and Germany is very similar on cash payments.
Also, you mention Covid would be a stimulator for digital payments and that doesn't seem the case in Belgium. So I wouldn't know why it would be the case for Germany.
johnflan 1393 days ago [-]
The change in Ireland has been significant, it's made contactless be the default way to pay. I think it has removed the idea that something like a cup of coffee was too small to pay for via card/contactless. I don't think I have actually used cash in a number of months.
In the US you are a criminal if your business is dealing with large amount of cash everyday. That’s how credit card got the market share. Companies make the law so you will use their system. They dont profit if you use cash whywould they allow you to do that.
mandelbrotwurst 1394 days ago [-]
What are you referring to here? There are plenty of cash only businesses in my city and the owners aren't being thrown in jail for it.
philwelch 1394 days ago [-]
I’m sure it varies but the US has a bunch of annoying regulations meant to curb money laundering. For instance, if you deposit $10,000 or more at the bank, you are required to fill out annoying paperwork to prove you aren’t laundering money. If you don’t want to fill out annoying paperwork so you only deposit $9,000 at a time, that is literally a federal felony.
Maybe your city has a “safety of crowds” thing going on but when cash only businesses start going scarce, I bet the remaining holdouts start getting more and more scrutiny.
knorker 1393 days ago [-]
KYC (Know Your Customer) laws are not exactly unique to the US.
The money industry tends to be heavily regulated, and self-regulated (PCI DSS) for a reason. Crime happens there because that's literally where the money is.
I'm doing my part, though. I pay with cash whenever I can. In Germany that's easy (often the only option e.g. in restaurants). In Sweden, not so much. And then there are countries in between.
philwelch 1393 days ago [-]
Yeah, I don’t know how other countries differ from the US in this respect. Maybe the “war on drugs” made us paranoid about money laundering to the point where it eventually ground down the cash economy. Or maybe it really is our addiction to consumer debt.
8ytecoder 1394 days ago [-]
Yup, there are some that even accept checks.
zymhan 1394 days ago [-]
It's more like folks don't want to get robbed by keeping everything in cash, and so they use banks.
philwelch 1394 days ago [-]
That’s another factor for sure. I’m not sure if the timing lines up—I remember credit cards being more and more broadly accepted over time compared to cash even after crime rates in the US dropped—but the US still has pretty high crime rates for a developed country.
PickledJesus 1393 days ago [-]
Quite a few places in London are cashless now, typically non-essential stuff like lunch, where transaction time is important, contactless is much faster. Cash costs are not insignificant, processing time, insurance, it's not really worth it when so few people pay with cash.
It's been accelerated sharply by the pandemic. The few holdouts changed tack. There's accessibility concerns for the unbanked.
cryptonector 1394 days ago [-]
At least we don't have hyperinflation. That's even worse for the poor. Though to be sure I agree with you. We really need to fix this, but it's not going to happen. Right now we're paying an enormous -unprecedented?- political attention tax that is starving lots of important issues of oxygen.
arcticbull 1394 days ago [-]
Inflation doesn't affect the poor so long as wages keep up with inflation. If you don't have money, there's nothing to inflate.
samatman 1394 days ago [-]
They did say hyperinflation.
Characteristic of hyperinflation, is that nothing keeps up with it. Forget wages keeping up: your very paycheck is worth less at the end of two weeks than it was when you received it.
ivanche 1393 days ago [-]
Your comment makes me think you weren't even close to hyperinflation, ever.
Sincerely, a guy who survived 313 000 000 % inflation per month.
gruez 1394 days ago [-]
> Inflation doesn't affect the poor so long as wages keep up with inflation
Does it? In an inflationary environment the status quo is that your wages shrink. I guess it’s better than holding cash because you can renegotiate your wages back, but I don’t think rich people have most of their assets as cash.
arcticbull 1394 days ago [-]
> In an inflationary environment the status quo is that your wages shrink.
The US is a classical inflationary environment and wages have kept pace with inflation forever.
Indeed, inflation only, and intentionally, punishes those who hoard cash.
I would note that chart begins prior to ending the gold standard in 1971, and it has tracked very well since 1995.
I was off-base when I said "forever." I should have said in recent history.
1394 days ago [-]
arcticbull 1394 days ago [-]
I think that's an oversimplification, because credit transactions tend to be 20%+ higher ticket sizes than cash purchases. In a way, the credit card surcharge baked in is something of a volume purchasing incentive. Further, the networks do explicitly permit cash discounts on card transactions, and always have. Merchants tend not to offer them, though.
gruez 1394 days ago [-]
> credit transactions tend to be 20%+ higher ticket sizes than cash purchases. In a way, the credit card surcharge baked in is something of a volume purchasing incentive
Funny you mention that, because that’s yet another case where it’s expensive to be poor. If you’re living paycheck to paycheck, barely making ends meet, you likely don’t have the cash flow to stock up on a sale. So rather than buying 18 months worth of TP when there’s a sale + coupon on the 64 pack, you are buying the 4 pack at regular price that costs twice as much per unit.
SenoraRaton 1394 days ago [-]
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”
imtringued 1394 days ago [-]
I have read the book when I was a child but seeing it everywhere on HN is starting to get on my nerves. There is a shorter way to get the idea across. "If you buy cheap you buy twice."
Xylakant 1394 days ago [-]
I read the books as a child, too, and I appreciate when those quotes come up. They demonstrate something about the books that never became clear to child-me, something I only dimly started to grasp when I was older and only fully realized a lot later: Those books go far far beyond an entertaining story. They are a pointed critique of society and politics. They have an opinion. They're not mere books for children.
And the point Samuel Vimes is making goes far beyond a simple "If you buy cheap, you buy twice." It extends that basic knowledge by realizing that some people have no other option than to buy cheap, forcing them to spend resources over and over and over again and still get a worse result in the end, and how this is a fundamental and systemic social unfairness.
londons_explore 1394 days ago [-]
> "If you buy cheap you buy twice."
And for the kinds of goods I buy, in most cases it doesn't hold up. Cheap shoes might be only 25% of the price of good shoes, but in my experience last 50% as long, costing less overall. Compound that with other chances of loss (getting dusty in the back of a cupboard and eventually being thrown out in a declutter), and cheap works out far cheaper
1393 days ago [-]
FeepingCreature 1393 days ago [-]
Note: this is a market inefficiency. In an efficient well-operating system, if you can afford ten dollars a year for cheap boots, you should be able to get some agreement with your employee or a local bank to get a loan for $50 boots plus some interest that's still gonna be less than the cumulative $10 you pay for fresh boots every year. If you will reliably have the money for $10 boots and can prove/provide evidence that you will, you should be able to get the $50 boots now. The problem is twofold: first, proving you are reliable can be hard, and second, even given credit people still often make purchase decisions that don't last long, partially because they simply don't know what sort of purchases are prudent.
sukilot 1393 days ago [-]
Also there is a huge risk that the $50 boots aren't actually any better.
arcticbull 1394 days ago [-]
I don't disagree that this is regressive and unfortunate, although the bigger issue in my mind (and I get we can have two problems and solve both at once) is free parking. The poor tend to use transit but the cost of parking is baked into each purchase thereby subsidizing the wealthy, too. [1]
There’s a lot of transaction costs to charging for parking. Maybe with technology it can be completely automated but historically that’s been a huge reason for free parking.
g8oz 1392 days ago [-]
A recent development: "Tap to pay" enabled transit systems are driving large increases in transaction volume.
perl4ever 1394 days ago [-]
It's a way around the truth in lending laws,* to make interest rates appear lower than they are.
Instead of 2% cash back for some, they could just add 20 percentage points or so to the interest rates of everyone else. If you think this is unfair, you're really just saying that interest rates are applied unfairly. But it doesn't sound like that's your actual thought process. Is everyone who pays higher rates subsidizing those who pay lower? How do you know?
*This is not my original idea, but something I read somewhere.
philwelch 1394 days ago [-]
That’s not really how credit cards work though. You only ever pay credit card interest if you carry a balance from month to month. Cash back doesn’t just reduce your effective interest rate; your effective interest rate can already be zero simply by virtue of paying the full balance due every month. And the credit system does literally nothing to discourage this behavior; in fact, the credit scoring algorithms incentivize it.
The money for cash back comes from transaction fees. It would have to. People go out of their way to find ways of maximizing their return from these kinds of systems so any cash back scheme that could be too easily gamed would fall prey to these people.
That actually happened once, albeit to a “merchant”. The US mint used to let you buy $1 coins, online, with a credit card, for $1 each and free shipping. You could literally buy your entire credit limit’s worth of $1 coins, deposit those same exact coins at your local bank branch to pay your credit card bill before it came due, and straight up profit from the cash back.
perl4ever 1393 days ago [-]
It's just a shell game. You think it's really different, but to the corporate bean counters the money is fungible.
You pay 2% in transaction fees, you may or may not get almost all of it back as "cash back".
In a world without significant transaction fees, we wouldn't have the grace period either, and the people who get the most cash back would pay lower rates and others higher.
The reason the powers that be like the current system and would lobby against a crackdown on fees is because it feels like they're giving you something with the grace period, and giving you something if you get cash back.
But it's just a play on psychology. If there's an injustice, I think it has to boil down to evaluating credit risk incorrectly.
philwelch 1392 days ago [-]
> It's just a shell game. You think it's really different, but to the corporate bean counters the money is fungible.
Guaranteed per-transaction revenue is not fungible with interest revenue. Interest revenue is extremely discounted by both time value and default risk.
> In a world without significant transaction fees, we wouldn't have the grace period either...
At that point, most of the lower-risk customers who use credit cards would switch to debit cards, credit card interest would probably have to go up due to adverse selection and higher default risk, and credit cards would be a much smaller business overall.
prostoalex 1394 days ago [-]
There are costs associated with accepting and securing cash as well.
milkytron 1394 days ago [-]
Isn't that the fault of the credit system though? Those who have access to more credit (or have better credit) are able to take advantage of these offers.
chii 1394 days ago [-]
and that's why this is called systemic inequality - the inequality is built into the rules of the system.
esyir 1394 days ago [-]
I'll go one step further. This inequality is built into how humans work.
Most of us would not extend credit to somebody with low odds of returning it, so why do should we expect companies and organizations to behave differently? I feel like wrapping this up as in the pretty words "systemic inequality" is framing it as some constructed oppressive structure, which I'm loathe to do.
majormajor 1394 days ago [-]
Sometimes humans are selfish, sometimes they are generous.
You don't like the term "systemic inequality" yet you're framing the problem in terms of our current system: very impersonal, only-the-numbers-and-ROI matters.
If you phrased it as "most of us would choose to exploit the more desperate because they have very little alternatives instead of willingly helping out" you might trigger different instincts. Instincts that would favor restricting interest rates and favoring a stronger social safety net.
There are more generous and forgiving systems that have existed successfully elsewhere in human history, so they're not incompatible with human nature, so yes, I think it's fair to characterize the American system as iniquitous.
Why should someone else's desparation and need be solely viewed through the lens of economic opportunity for someone else?
esyir 1393 days ago [-]
You don't even need RoI here, and I never even had that baked in. Any sustainable system of credit even would result in the same phenomenon.
In it's simplest form, to make a loan, you have to have the resources to loan out to begin with. Furthermore, dereliction of debt is expected. There is no guarantee that people will repay in a timely manner, and missed payments/discharged debts are not uncommon. As such, interest rates can serve to create a sustainable system by helping to cover these debts.
Discount any consideration of their ability to repay, and what you give is no longer a loan, but a gift. A gift at the cost of others that you loan to.
jedmeyers 1394 days ago [-]
> very impersonal, only-the-numbers-and-ROI matters.
What would be a more personal approach when figuring out whether or not to loan the money to someone?
navaati 1394 days ago [-]
Deciding to lend to someone because you know them (they are "part of the community"), or they are a friend, or they are family. Of course it can be seen as more "humane" but it can also be seen as nepotism and/or a system excluding newcommers/strangers.
tosers4 1393 days ago [-]
The condition is still the same.
"Will he/she be able to pay me back/ return the favor"
And that condition will always benefit those who can return back. It's not about being newcomer or stranger, it's about being able to identify if it's a loan you can do.
Nasrudith 1392 days ago [-]
That sounds like the personal system of honor being used for credit worthiness. Which wound up leading to dueling while doing a worse job of the primary task than banker evaluations. Needless to say all around it was a worse system with worse outcomes and worse externalities.
gruez 1394 days ago [-]
Not extending credit to people who are likely to default: makes sense
Denying a 2% discount to people who are likely to default: ???
mandelbrotwurst 1394 days ago [-]
Could argue that it "makes sense" in exactly the same way - when you offer the discount, you increase overall spend / demand, i.e. you increase the size of the loan, which is something that as the lender you would prefer to do toward people with better credit.
1394 days ago [-]
lucaspm98 1394 days ago [-]
Do you think it’s not fair for credit card issuers to try to attract customers that have a higher value to them by offering rewards? Regardless, approvals are mostly based on credit history and not wealth. I was a low income earner for years but paid my bills and credit cards on time so I could get any card I wanted.
cheriot 1394 days ago [-]
Lots of CC bonuses have a minimum spend specifically to filter richer customers.
The problem is not that the company is trying to make money, it's that this market has become an oligopoly with too much pricing power. With the prevalence of credit card purchases this is a tax on every transaction in the economy. Even people that don't use a CC pay a price set for those that do.
1394 days ago [-]
Reason077 1394 days ago [-]
In the EU, interchange fees are capped at 0.2% of transaction value for debit cards, and 0.3% for credit cards.
This has indeed meant that rewards and cashback credit cards have largely disappeared (with the exception of Amex, which operates outside the interchange system?).
Rewards/cashback cards that do still exist are typically tied to specific retailers, with whom the issuing bank has cut their own deals.
Cu3PO42 1394 days ago [-]
AMEX is a three-party system, whereas Visa/MC are a four-party system. The difference is that AMEX themselves issue their cards, whereas for Visa/MC it's the customer's bank (on license by Visa/MC). Since the customer's bank sets the interchange fee, a merchant can't possibly know what it's going to be before the transaction.
With AMEX the merchant does know the exact fee structure and can therefore decide to accept or not to accept AMEX ahead of time. That's essentially the argument why the fees for AMEX were not capped.
vinniejames 1393 days ago [-]
Sounds like a Pyramid scam
paranoidrobot 1394 days ago [-]
> with the exception of Amex, which operates outside the interchange system?
Right, but try using Amex in Europe.
Outside of major international hotel chains, or where you can do your purchase online through Paypal, you may as well not bother asking if they accept it.
reaperducer 1394 days ago [-]
Outside of major international hotel chains, or where you can do your purchase online through Paypal, you may as well not bother asking if they accept it.
It's very interesting to hear that.
When I first started traveling to Europe, having an American Express card (or even better, AmEx travelers checks) was the best way for an American to pay for things. It's even written into some classic books and movies.
My how things have changed.
Galanwe 1394 days ago [-]
I don't think American Express card have ever been a practical way of paying for things in Europe.
I would guess 90% of Europeans have never even seen one of these cards, unless they work in international hotels or tourist places.
mcv 1394 days ago [-]
I'm Dutch, and my dad had both an American Express and a Diner's Club card from his work. I never really understood why those would be better than other credit cards.
thorin 1393 days ago [-]
I got assigned an American Express card to pay for expenses when I got a job with British Gas about 20 years ago. It was a bit of a pain because it often wasn't accepted. There was definitely some sweet deal for BG to use Amex as, as has been said above 90% of Europe were using Visa/Maestro
krzyk 1393 days ago [-]
In Poland AFAIK when you sign up for a card terminal the company that lends it to you usually gets a cut from the transactions (besides the bank and card companies).
And there is a lower % for normal/popular cards (Visa/Mastercard) and higher (even 4%) for Amex, so most stores just ignore it and remove the Amex symbol from their terminal.
And yet, my company provides Amex corporate card for bussiness travel, but we usually go to US, so Amex is more accepted there.
paranoidrobot 1394 days ago [-]
> It's even written into some classic books and movies.
That was one of the deciding factors when I was planning on getting a second credit card (so I'd have a backup while travelling).
I knew here in Australia they are not widely accepted, with only major retailers accepting it typically, but I thought that this was just Australia being backwards.
After spending the first two or three weeks trying to pay for things with it, I gave up except on checking into a new hotel.
mediascreen 1394 days ago [-]
I think it differs a great deal between countries in the EU. I'm Swedish and I have an Amex card and most of my friends and colleagues use Amex as well. I use it for about 85% of my spending each month. The only places in Stockholm that don't accept it are smaller coffee shops, restaurants that don't get that many tourists and mom and pop stores.
You could probably get by here with just an Amex card and cash, but I keep a backup card for the places that don't accept Amex.
paranoidrobot 1393 days ago [-]
Odd. I'd given up trying to use it by the time I got to Sweden.
Your neighbours (Norway and Denmark) were unwilling to accept it. I forget which supermarkets I tried it in in both of those countries, but three large chains all had their card terminals reject it and the staff looked at it like I'd tried to use a hotel keycard or something.
mediascreen 1393 days ago [-]
The big adoption driver in Sweden is the Amex SAS Eurobonus card which lets you collect air miles with the card. It's one of the few cards in Sweden that lets you "game" a points system slightly.
knorker 1393 days ago [-]
I wouldn't just have amex and cash in Sweden. My experience is that most places don't accept amex, and soon most places won't accept cash either.
twic 1393 days ago [-]
I think it used to be that way, but it's slightly better now. I live in London. I have a friend who has an Amex and a normal card, and will always try to pay with the Amex first to rack up reward points. The only time i see him pay is when we're in a bar or restaurant together, usually independent places rather than chains, and i would say Amex is accepted over 70% of the time.
jsumrall 1394 days ago [-]
It’s accepted in a lot of places here in NL. I have a Dutch amex. Aldi, Jumbo, Hema, all accept it.
That AmEx have a website listing where the card can be used shows it is far less-accepted than Visa or MasterCard.
I'm not surprised supermarkets accept it. Does your local pizza takeaway, kiosk or bar accept it?
vertex-four 1394 days ago [-]
In NL, your local pizza takeaway, kiosk or bar doesn't take anything but the local system ("Maestro", but a different Maestro than anywhere else in the world) anyway.
joshuaissac 1393 days ago [-]
There are still a few non-Amex cards that offer cashback with any retailer, although the amounts are small; e.g. Capital One (0.5%), Barclaycard (0.25%).
jariel 1394 days ago [-]
"The 2% cashback has to come from somewhere."
Yes, but in reality, the program comes from an upside down approach to overcoming the obviously anti-competitive practices that VISA/MC use to forbid retailers from offering discounts for not using VISA etc..
You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.
You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)
But you can possibly find ways to give points, or 'cash-back'.
Until now ... [1]
VISA is now saying that even such 'cash back' rewards programs are a violation of its rules.
Have a look at the press release - it's positively Orwellian:
"In order to maintain a level playing field" -> "In order to avoid all transparency and maintain our hidden monopoly" we require that nobody can take steps which highlight the how our transaction fees are embedded in the price.
These are pretty blatant anti-competitive practices and taking them on is tantamount to taking on the entire banking system. It's not going to happen.
There would need to be an 'outside disruptor' like the Word Processor to the Typewriter kind of thing.
The outside disrupter was supposed to be Apple Pay, but that didn't work and now Apple just issues credit cards (through Goldman Sachs). Visa/MC has such a monopoly stranglehold that getting kicked off their Network is tantamount to going broke. There are esoteric options aka Bitcoin, money order, check, but if being able to accept credit cards makes this drastically more difficult. (Ask the legal cannabis industry how it's going.) More modern attempts at disruption - Zelle/PayPal/Venmo are totally at the mercy of the banks. Who are quite happy with the status quo.
adrr 1394 days ago [-]
Apple Pay charges a fee as well. It also isn’t a payment system but a tokenization system similar to the chip on credit cards. Zelle was created by the big bank which is why you don’t see it at the small local banks. None of the competitor banks(fintech) have zelle support and I guess this isn’t their choice. They have to move money by ach with is much slower.
Any payment/money movement system needs a license and you’re still bound by federal rules on AML and KYC. It makes it hard to support the cannabis industry. AML laws will force you to report large cash movements.
kalleboo 1394 days ago [-]
They may be referring to Apple Pay Cash, which is an iMessage-based venmo style service where you cash out via ACH or pay in stores using your Cash balance.
conductr 1394 days ago [-]
Small banks can integrate zelle, it’s their choice they’re not being locked out
adrr 1394 days ago [-]
0.75 per transaction locks out the small banks. It would be the most expensive way to transfer money.
conductr 1391 days ago [-]
I wasn’t aware of the cost TBH. I guess they can always develop their own zelle substitutes if they feel it’s worth it, not sure the economics of that are in their favor. Just saying you can’t ignore the upfront investment the builders put into creating and maintaining it while also pointing to the unit costs they charge the network partners. I’m sure it’s all negotiable with volume.
monadic2 1393 days ago [-]
Uhh my bank’s $30 to wire fee would beg to differ. Literally any fee less than that for a same-day transfer is worth it.
adrr 1393 days ago [-]
That’s what the banks pay to use zelle.
The $30 wire fee is what a bank charges you to make money and dependent on the bank. Underlying systems near free to use like ach for domestic wires.
monadic2 1392 days ago [-]
My point is the bank could easily pass the cost onto the customer.
kevin_thibedeau 1394 days ago [-]
Zelle is just a facade on top of ACH.
neop1x 1392 days ago [-]
The outside disrupter was supposed to be Facebook currency and I am glad it didn't happen as Facebook has enough power already and this would starting to go in WeChat direction.
badwolf 1394 days ago [-]
The vending machine in my Apartment bldg has a sticker saying that credit card price is $0.10 more than the stated price and to use cash/coin to get the stated price. The machine does not accept bills or coins.
jariel 1393 days ago [-]
I should add because I cannot edit my comment that some of these parameters have changed in the last few years, however, it various by jurisdiction. Also, the universal incumbency established by these players was deeply entrenched before such programs were relinquished.
reaperducer 1394 days ago [-]
You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.
I see this all the time. * At more than one bookstore, the dry cleaner, markets, my current and previous landlord, my accountant, and pretty much every gas station since the 1990's.
* Pre-quarantine. Now I don't see anything.
JAlexoid 1394 days ago [-]
There are cases, where the person you're interacting with isn't likely to be audited or doesn't have a direct contract with the payment processor.
Gas stations I find weird, in general. How did they get that exception?
rblatz 1394 days ago [-]
It’s really only one chain I see doing that, and I’ve never bought gas from them and never will. The first time I lied in and they told me they were charging more for card I left.
zorked 1393 days ago [-]
They should have told you that they were charging less for cash.
bluedino 1393 days ago [-]
Lots of gas stations have the 'cash' price listed on the sign
1394 days ago [-]
acomjean 1394 days ago [-]
>Get 2% if you use cash instead of VISA"
Some gas stations where I live have a "credit" price and a lower "cash" price.
wtn 1394 days ago [-]
That's because US federal law no longer allows credit card companies to forbid cash discounts.
The above poster was incorrect.
arcticbull 1394 days ago [-]
(1) Cash discounts were always permitted ("2% off for paying with cash")
(2) Credit surcharges and minimums used to be forbidden, but they are not anymore ("2% surcharge for paying with credit, minimum $10 for card payments")
(3) It wasn't federal law, it was the merchant agreements that precluded credit card minimums and surcharges as a condition of signing up to accept credit card payments from each of the major issuers.
tomklein 1394 days ago [-]
In Germany lots of places just don’t accept any cards besides Visa and MasterCard just because of the seller fees.
eru 1394 days ago [-]
And even Visa and MasterCard took a while to get hold. I remember Aldi holding out for ages.
JAlexoid 1394 days ago [-]
There are many places in Europe that have weird rules... Like some dutch places not accepting EU debit cards. Aldi in Ireland doesn't accept out of country debit cards.
protomyth 1394 days ago [-]
I've also seen a number of gas stations in ND that have a $10 minimum for cards. This also carried over to some grocery stores.
conductr 1394 days ago [-]
Small dollar transactions really need a better solution. Idk swipe rates, but something like 2.9% + $0.30 being a total transaction cost of 5.9% is just insane. Especially if you’re business is majority small transactions such as could be the case in a bodega or gas station.
monadic2 1393 days ago [-]
Yes that was a very odd thing about moving to SF: people using credit cards on <$5 transactions and merchants actually allowing it.
cynix 1394 days ago [-]
> You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.
> You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)
We see these a lot in Australia. I wish they'd enforce the same pricing here for cash and card — I don't like to carry cash around, and I hate it that I have to pay a surcharge when paying by card.
9nGQluzmnq3M 1394 days ago [-]
We see a lot of those in Australia because the ACCC took on Visa/MC and won.
In Australia, there are two environments, the Visa/MC networks, and EFTPOS. EFTPOS is owned by the AU banks and is AU only.
A Visa or MC credit or debit card txn go via the Visa or MC networks.
An EFTPOS txn goes via the EFTPOS network, it's much cheaper.
In AU, the fees are regulated and must be disclosed to the user as an extra charge. Most businesses much prefer the EFTPOS network because it's much cheaper.
Until recently, the contactless environment didn't support EFTPOS, so it always used the Visa or MC networks. Same applies to Google and Apple Pay.
carlhjerpe 1394 days ago [-]
I remember being charged 5aud for paying by card at a hostel, being Swedish this was a very weird experience. While I do like the anonymity of cash, cards are very convenient.
eru 1394 days ago [-]
I think it's fair to pay for convenience.
carlhjerpe 1394 days ago [-]
Definitely, but 5aud for a single low value transaction is a bit steep.
josinalvo 1394 days ago [-]
Well, there is a cost when you use your card.
If there is no price differentiation, this just means everyone has to share the cost, rather than the people who choose to use it
shkkmo 1394 days ago [-]
> I don't like to carry cash around, and I hate it that I have to pay a surcharge when paying by card.
So you think your use of a credit card should be subsidized by people who pay in cash?
chongli 1394 days ago [-]
People who pay in cash are subsidizing the store’s costs to handle cash. Paying employees to count the cash (usually after closing), putting it in the safe, distributing the cash to cash registers, refilling when they run out of change, paying for the security service (Brinks etc) to deliver cash to/from the bank, insurance against robbery...
Cash is not free for a store to handle. Stores pay transaction fees on credit cards, sure, but they save on all the costs of cash. A hypothetical store that takes credit cards only would not have any of these costs and their vulnerability to robbery/theft would be limited to merchandise and capital only, saving the cost of insurance against theft of cash. For some types of businesses (services rather than retailers), this makes their office a pretty unattractive target for burglars and eliminates employee theft of cash.
stale2002 1394 days ago [-]
This is an interesting argument, but it is not backed up by actual store behavior.
Stores generally try to give extra charges for using credit cards, not the other way around.
It seems like the fair thing to do, should be to allow a store to do whatever it wants, and make these credit card requirements illegal.
So, it would be allowed for stored to charge extra for either cash or credit, whatever they choose, and the credit card companies would be forbidden from stopping this.
vanviegen 1394 days ago [-]
That seems to be what we have in The Netherlands.
It's common for online stores to charge a few percent extra for credit card payment (the base price usually applies for the most common form of online payment, iDEAL, which is cheaper, I guess because the banks cut out Visa/MC).
On the other end of the spectrum, there are some physical stores and restaurants (usually chains) that don't accept cash. They're allowed to do that, given that they state so very clearly upfront.
clairity 1394 days ago [-]
> "Cash is not free for a store to handle."
that's like saying opening the doors everyday to customers is not free. it's true, but misses the point. handling cash, like paying for utilities, is a fundamental cost of doing business, and so it should be, because the right to anonymity and privacy is woven into cash. not so much with electronic transactions, which are optional, alternative costs.
Nursie 1393 days ago [-]
No, it's not a fundamental cost of doing business, and many businesses no longer so that.
eru 1394 days ago [-]
Your argument is one for considering exposing the cost of any payment mechanism to the customers.
(Especially when the cost between different payment mechanisms differ a lot.)
josinalvo 1394 days ago [-]
Indeed. And if stores make their accounting and realize that cash handling costs more than credit card handling, they should be able to add a cash surcharge as well.
It just happens that they dont want to do that, because dealing with cash is cheaper
labawi 1394 days ago [-]
In many places, paying cash is faster than paying by card. Before contactless, with optimized (rounded) pricing, you would often get 3x the throughput (nowdays less) and for small transactions the fees were ridiculous (smaller with contactless).
Rebelgecko 1394 days ago [-]
I wonder how much more expensive credit cards actually are? Cash costs money/time to handle and deposit, it's easily stolen, and easy to commit fraud with (like the classic move where a drive thru employee pockets the cash from a sale without ringing it up)
paranoidrobot 1394 days ago [-]
One issue I know smaller retailers sometimes have is that it can take a long time to get cleared funds into their account.
One small cafe near a place I used to work said it usually took 30-60 days for funds to clear into their account after a card transaction. That, for them, was a major problem as it meant that they couldn't then pay their suppliers in a timely manner when cashflow was highly variable.
Then again, a bakery I visited that was in a small town said they'd stopped taking cash, as they got robbed some huge number of times.
toast0 1394 days ago [-]
The computerization of order taking and kitchen tickets would seem to make it harder to charge a customer without ringing it up? I know you could cancel it in the system, but that's gotta be counted somewhere where a manager is going to see it eventually?
eru 1394 days ago [-]
Depends on how much you can trust your employees.
cynix 1394 days ago [-]
> So you think your use of a credit card should be subsidized by people who pay in cash?
I don't think it should be so clear cut like that. The credit card processing fees charged by the processor is a cost of doing business and should just be factored into the pricing without being explicitly passed on to a subset of customers. For example, a shopping centre or convenience store may have toilets that only a subset of customers would use. Should the customers who bought something without using the toilet be "subsidising the cleaning costs"? If a store offers online ordering, should customers who ordered online be "subsidising the rent of the physical store"?
andrewmutz 1394 days ago [-]
If the toilets cost 3% of revenue, then yes they should charge separately for using the toilets.
eru 1394 days ago [-]
Or rather, they should have the option to do so.
It's a valid business decision to NOT charge extra for the toilets, too. Just like shops usually don't charge people who are a bit slower in the checkout line more for taking up cashier time.
Plus, plenty of gas stations show a cash/credit price on their signs.
The merchants are no longer allowed to block this behavior.
JAlexoid 1394 days ago [-]
That's applicable to legislation, private contracts can still require no surcharge.
eloisant 1394 days ago [-]
Interestingly, in Japan most electronic shops (like Bic Camera or Yodobashi Camera) have a point card where you get 5% not directly as cash back but as "points" that you can use any time for a further purchase.
But that's only if you pay by cash, you don't get any point by paying by card.
ulzeraj 1393 days ago [-]
Yodobashi offers a 5% discount if you pay with visa card. Combine that with the 8% tax free deduction if you hold a temporary tourist visa.
Thorrez 1394 days ago [-]
> You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)
The place I went to yesterday for lunch did this. This is in Silicon Valley. I believe it was a 3.9% credit card fee.
petre 1394 days ago [-]
You never see that in Europe. What you see is shop owners claiming their POS is broken.
1394 days ago [-]
arcticbull 1394 days ago [-]
You were always allowed to offer cash discounts. What you weren't allowed to do was impose credit card surcharges. That was recently eliminated.
monadic2 1393 days ago [-]
I find it pretty nuts that the person who chooses the payment method doesn’t pay the charge. I always try to pay with cash if I can help it.
arrty88 1394 days ago [-]
You’re correct in 99% of cases. Somehow gas stations can advertise different prices for cash.
jedberg 1394 days ago [-]
Since Jan. 27, 2013, all retailers have been allowed to charge a fee for using credit. However, there are a lot of rules which are hard for regular retailers to follow, but easy for gas stations to follow, which is why you mostly only see it at gas stations.
1394 days ago [-]
wolco 1394 days ago [-]
Like some kind of virtual coin.
zaxu 1394 days ago [-]
The ability to purely make transactions is trivial - you can just use a debit card. The value of credit cards comes from other factors like fraud protection, SCI compliance, actual credit, etc.
eru 1394 days ago [-]
Debit cards also charge some fees, but typically lower.
The fraud protection of credit cards mostly comes out of the pockets of the merchant, I think? So the merchant could give people a discount for using means of payment without a chargeback, like cash.
You are right about the actual credit. Though eg in Germany people usually use their overdraft in a same way that American seem to be using their credit cards for short term credit.
(For either convenience is the main selling point. The fees and interest rates for overdraft and credit card debt are usually quite high, I think?)
jedberg 1394 days ago [-]
Sure, but the base rate comes from MC/Visa. Precessing credit cards is a low margin business. It's basically a race to see who can charge as close to the MC/Visa rates as possible.
an_opabinia 1394 days ago [-]
This isn't really about Visa-MasterCard, it's about a darling like Stripe charging 2.95% because 3% is customary.
People will freak about their customary rent/take being threatened. They gotta come out of the woodwork and justify the charge... somehow. A HN proxy battle!
GoblinSlayer 1393 days ago [-]
They want to eat too.
hef19898 1393 days ago [-]
And these technicalities matter a lot. They make, in some cases, the difference between legal an illegal. Not understanding them leads to wrong conclusions.
Nasrudith 1394 days ago [-]
So formula wise it would be something like this?
d = dollars
t = transactions count
I(d,t) = Interchange total profit/cost to a bank from fees in and out
F(d) = scaling function for interchange returns based on cash pushed through as an arbitrary function
G(t) = transaction cost function based upon arbitrary scaling.
I(d,t) =F(d) - G(t)
netcan 1393 days ago [-]
I agree with the OP that we need to be informed in order to have the conversation.
But..... You have the main point here. The whole premise of monopolies is that monopolies dominate bottlenecks, and use them to generate outsize revenue and protection from competition.
Facebook doesn't make money directly from whatsapp. It can be used to generate data for FB's main advertising business. Most importantly, it helps maintain facebook's dominant position in social media. That position is revenue generating.
I agree that understanding the mechanics are important. But, we can't keep treating monopolies as innocent of monopolistic practice until proven guilty. The reason we have antitrust in the first place is that monopoly positions lead to monopolistic practices. We need to assume monopolistic practices exist in the case of a monopoly. When one monopolistic practice (eg amazon marketplace or adwords) has been proven in court, this should be treated as proof of monopoly, not a standalone violation.
Same with the CCs.
dathinab 1394 days ago [-]
True, also in many EU countries credit cards do matter much less. For example in Germany card payment is normally done with EC cards (girocard,vpay,etc), including NFC based payment. For long term recurring payments SEPA is common, for one time payments simple bank transactions over online banking. This includes online payment for services like Amazon. Oh an not to large local payments (e.g. restaurant) are also very often done in cash. Credit cards are only needed for a German person in two cases: Travel and non EU online shops (but which often have pay pal through which you can use your EC card!!).
EDIT: Warning in some German cities (e.g. Berlin) you will find a lot of cash only restaurants, mostly due to high costs of payment terminals not being worth it due to most people paying with cash anyway. Like the a local restaurant from where I live they bought a payment terminal it broke in some stupid accident no insurance want's to cover so now it's back to cash only.
Cu3PO42 1394 days ago [-]
Hi, fellow German here. I know that "EC card" means "girocard" in the common vernacular, but if we're talking about payment systems, I think it's important to be correct.
These cards used to be called EC card, however MasterCard now has all the rights to the EC brand. In fact debit MasterCards with EC branding are starting to pop up now.
You either want to speak of "girocard" which is our own payment network or "debit cards", which includes the likes of Maestro V-Pay, but also some Visa and MasterCards. In the same sense, you don't need a credit card for most online shops, you just need a Visa/MC (some will only take credit, but most will take debit).
And as for PayPal: they don't use your "EC card" either. PayPal offers to process the charge by way of direct debit, which is (now) a SEPA process and totally unrelated to any debit or credit card you may have. It just so happens that girocards list your SEPA account info.
/rant. Sorry, this is just one of those things that gets me.
arachnid92 1394 days ago [-]
I just want to present a counterpoint to your claim that in the EU, CCs matter less: there are countries in the EU like Sweden where cash is virtually non-existent. Basically everything is card-based here, I've even seen panhandlers who accept electronic payments in Stockholm.
simias 1394 days ago [-]
Paying by card is common, paying using a Credit Card not necessarily. I'm French and I'm semi-ashamed to admit that when at a store abroad the clerk asked me "debit or credit?" for payment I had to ask him to explain to me what this quaint exotic incantation meant.
When I finally understood how that system worked I also finally understood this weird trope in American movies where a character has a half a dozen credit cards in their wallet, and they burn through those as if it were free money for some reason. That never made any sense to me up until that point.
xnyan 1394 days ago [-]
Counterpoint, my partner got very sick and I burned my savings then borrowed money from every source I could, including credit cards. I knew I was accepting awful terms, but they gave me money and that’s what I needed at that moment and it was the only way I could get it.
I’m not asking for pity, I knew what I agreed to and I’ll pay it but sometimes high interest revolving credit (credit cards ) only choice you have.
kungato 1393 days ago [-]
That's not really a counterpoint. You had a rare situation and would have taken money from anywhere I guess
imtringued 1394 days ago [-]
As long as it's not a pay day loan everything is fine. If you need liquidity then credit cards are a perfectly sane option. What I never understood though is why you would use a credit card when you don't need to borrow money, which is how most people use them.
mrep 1393 days ago [-]
I get like a $1000 a year in cash back using credit cards and they all charge no annual fees and I pay everything off in full automatically so I never pay any interest. Add in the consumer protection and the fact that it builds your credit giving you better mortgage/auto loan interest rates, why on earth wouldn't I use credit cards?
ilammy 1393 days ago [-]
> why you would use a credit card when you don't need to borrow money
To build a credit score. When everybody lives in debt, it is expected for you to do the same.
timwaagh 1393 days ago [-]
my bank just tops it up after each month. no interest gets charged. i mostly use it abroad and for online purchases.
closeparen 1394 days ago [-]
How the customer settles with the card issuer is not really relevant here. Many US card transactions draw from a checking account instead of a line of credit, but from the merchant's perspective it is just like any other Visa or Mastercard.
hamandcheese 1394 days ago [-]
The fees for debit transactions are much lower, though.
closeparen 1394 days ago [-]
I know this is the case when actually doing a PIN debit transaction (e.g. not Visa or Mastercard), but do you have a source on Visa/MC debit transactions costing less? Neither Stripe [0] nor Paypal [1] mention that.
Stripe and PayPal aren't charging you on behalf of the credit card companies--they're making money off the transactions themselves. They're not going to charge you less for processing a debit card payment any more than they'll charge less for cheaper credit cards (using Visa instead of AmEx). Besides debit and credit transactions, there's also atm/direct transactions that cost even less (and likely have no fraud protection from your bank; the links I have posted below don't say much about this as it's not used often). Credit cards are also allowed to charge extra (though merchants rarely do around here, except at gas stations), but my understanding is that that's illegal with debit cards.
> I know this is the case when actually doing a PIN debit transaction (e.g. not Visa or Mastercard), but do you have a source on Visa/MC debit transactions costing less?
PIN/contactless debit transactions go through VISA/MC here and they definitely cost less, see below.
However, not 100% sure about remote online/web transactions - most of those providers here are "contact for pricing", but e.g. BlueCommerce and Checkout.fi seem to have a single rate for card payments - though it could be the difference is just "averaged out" (like e.g. iZettle does for card-present EMV transactions: 1.95% for all cards).
Debit card (bank card) transactions in the US require a PIN. Credit cards require a signature but most gas stations require a zip code.
It would be nice if the US had PINs like Europe does for credit cards.
I make around $1500-$2000 a year in cash back from my credit cards and $195 in fees. 6% back for groceries, 3% for gas, 3% on online shopping, and 3% for restaurants. All my household utilities and bills are run through my Delta card to collect miles and a $200 yearly voucher.
techsupporter 1394 days ago [-]
> It would be nice if the US had PINs like Europe does for credit cards.
Some cards do offer this feature, all issued by credit unions as I recall. Spokane Teachers Credit Union, First Technology Federal Credit Union, and State Department Federal Credit Union are the three I know off the top of my head. Target's MasterCard version of its REDcard also has a PIN but you cannot apply for that card directly.
(I have cards from each of them, except SDFCU, and have considered getting that one simply because it would be a chip-and-PIN Visa card and I don't have that particular combination.)
wil421 1393 days ago [-]
Chip and PIN is exactly what I want. I’ll see if my credit union offers one, Delta Community Credit Union.
1394 days ago [-]
ss7pro 1394 days ago [-]
I have six CC , my total AF for them is $2500. Every year I got at least $6500 back from using those cards. Not to mention travel insurance, car rental insurance and purchase insurance which comes with those cards and it's worth at least $600 a year.
vxNsr 1394 days ago [-]
> Paying by card is common, paying using a Credit Card not necessarily.
Care to expand on that?
Symbiote 1394 days ago [-]
Here are the statistics for Denmark.
"International Credit Card" are a small fraction of the total -- under 5%. The vast majority of transactions by number and value are by debit card.
(The national/international distinction is between Dankort, the Danish card payment system only used on most debit cards here, and the foreign companies like Visa and MasterCard.)
Dankort is dying though and some banks don't bother issuing it, some of my coworkers just have a Visa but not a Visa/Dankort. It works just as well. I doubt my Fitbit even supports the Dankort bit of the card, but I have never had any difficulty paying anywhere.
(For international readers, in Denmark, unlike Germany, the national debit card can be combined with a credit card on one card and then the terminal just chooses automatically)
PeterisP 1394 days ago [-]
Card != CC. The point is that in EU there's less motivation to use credit cards than in USA because the situation is better for payment cards that are not credit cards. If you refer to Sweden, I believe that the split there is that something like 40% of the cards are credit cards, and the majority are not.
incompatible 1394 days ago [-]
Likewise in Australia. The only difficulty I've found using a debit card in recent years is when renting a car: with a debit card, they generally want to put a "hold" on the account for a few hundred dollars.
I can't get a credit card anyway since my income isn't high enough, and I wouldn't want one because they charge annual fees in Australia.
Banks in Australia run their own payments system, so it's possible to pay by card without going through Visa / Mastercard. Some cards issued by banks don't even have the Visa / Mastercard affiliation, but I think the Visa / Mastercard debit feature is needed it you want to make card-not-present transactions online.
mcbain 1394 days ago [-]
There are a number of credit cards in Australia that do not charge annual fees. Many require being linked to an active transaction account, but not all.
They generally don't have any kind of linked reward points structure, but that's not a huge loss as most of those got nerfed after the ACCC changes a while back (see elsewhere in these comments).
incompatible 1394 days ago [-]
I see there are some of these around these days, perhaps it wasn't so common last time I was looking which was at least 5 years ago. But at this point, there doesn't seem to be much benefit in having a credit card. I'd also be unlikely to qualify for one, either due to not having a stable income of $20k plus per year, or because I'm not a permanent visa holder in Australia, despite living here for over a decade.
carlhjerpe 1394 days ago [-]
As a Swede, I thought the CC number would be lower. Most people my age never had a credit card.
I do have a Visa DC and a MC CC for redundancy if my bank is down, most people I know doesn't even get why.
Symbiote 1394 days ago [-]
You are correct, credit card transactions are about 18% by number and 25% by value.
(Seriously, people, these kind of statistics are extremely easy to find. No need to make them up!)
kzrdude 1394 days ago [-]
I have a DC and cc from the same bank.. not sure if it gives much of any redundancy, but it was the best deal on a cc I could find.
zmk_ 1393 days ago [-]
In Sweden, the best CC deals are the petrol station branded CCs (Shell/Circle K) as they both give you cash backs, have some insurance, have the standard grace period, and are "free".
fragmede 1394 days ago [-]
It's a bit balkanized, with Swish taking the place of Venmo in Sweden, and other local variations elsewhere.
tosers4 1393 days ago [-]
Here in Portugal its "Multibanco" network that is used. That's why "MB way" got that "send money thorugh phone numbers" in 2014, and worked with every bank without commissions.
Very few people even have credit cards.
Places like restaurants and groceries still usual demand something like "minimum 5/10€ to use card", but those signs are disappearing.
vmception 1394 days ago [-]
> It’s hard to have a healthy dialogue on this topic if folks don’t understand the basics of how the card networks generate revenue.
same for so many finance and legal topics
you should see the stuff people say in cryptocurrency land, you can even agree with their technology but still be surrounded by the weakest arguments
FridgeSeal 1394 days ago [-]
This is one of the reasons I generally stopped paying attention to the cryptocurrency world.
The number of voices with an accurate understanding is far outweighed by the number of people with some kind of personal and ideological axe to grind about (insert some combination of one or more of: government/regulation/inflation/economics/etc) and from my perspective the whole scene got increasingly wild.
eru 1394 days ago [-]
George Selgin sometimes writes on cryptocurrencies. He knows what he's doing.
I wonder if this could be done intentionally. It's cheaper to make a view popular with a niche, disliked group than to make the opposite view popular with a large voting bloc
vmception 1393 days ago [-]
I wouldn't say intentionally, there is solidarity around frustration with domestic and global banking systems, but they've just evolved from a limited view within the community.
random3 1394 days ago [-]
Well they "do not" in the same sense inflation is "not" a tax on anyone holding cash, right?
One way or another every fee must be absorbed by someone that pays.
PeterisP 1394 days ago [-]
No, it's that the wrong "they" is used.
Interchange goes to issuing banks, not Visa/Mastercard, and that's a big part of why the system is so stable as any competing scheme with a lower interchange will not be offered to customers because it won't be as profitable for the issuers. And, if needed, they can use the whole interchange amount for marketing and cashbacks to make any new scheme uncompetitive, because if it has lower interchange, then it can't match that without losing money.
Mirioron 1394 days ago [-]
And the someone that pays is ultimately the consumer. They are the ones all of this is for and produced by.
jariel 1394 days ago [-]
The article does not indicate that VISA/MC makes their money directly from the 'interchange' but it's perfectly valid to indicate that VISA/MS are in fact the lynch-pin of the credit card 'system oligarchy'.
In particular, it is they that are able to set rates for transactions, and do anti-competitive things like ban e-retailers from offering relative discounts like 'save 2.5% if you use cash' etc..
It's absolutely an ancient cabal banking network, that would be disrupted in any normal, competitive system.
2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.
Edit: monopoly->oligarchy
ian0 1394 days ago [-]
>> It's absolutely an ancient cabal banking network, that would be disrupted in any normal, competitive system.
The fact that banking wasn't a cabal led to the creation of Visa & MC, they provide the function of operating a deliberately independent interchange so competitive banks can work together without having to talk. The fact they havent been replaced isnt due to a lack of "normal competition", its just a system that has built in network effects (but is sticky unlike most social networks).
Dont get me wrong - banks love cabals! Thats why domestic switches (led by central banks) are replacing the scheme networks in most countries for domestic transactions with the domestic switches being linked for international transactions, pushing Visa & MC out.
>> 2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.
I think your wrath is misdirected - that 2.5% may be stated in a Visa/MC press release, but it doesn't actually come from Visa or MC! The banks set interchange through the schemes. You add in 5000 different schemes thats not gonna change the fact that your bank is going to try to get the best bang for their buck if they "acquire" merchants or "issue" cards.
The porn thing is linked too, banking is a heavily regulated space, easy to put pressure on. Acquiring banks get in trouble easily, they rely on schemes to blacklist anything which could land them in hot water. Even if there was no MC/VISA banks would still be paying random service providers to operate blacklists. The only difference would be that it would be cheaper. And typically thats not a good thing.
jariel 1394 days ago [-]
Banks are a cabal, that they needed VISA/MC was merely a need to 'standardise' a transactional network.
The evidence that they are an oligarchy lies in their power to set prices. Which points right to the definition of what a monopoly is.
If such systems were truly competitive, and we had say, 5 completely different systems that were truly competitive, the price would not be a total of 2.5%. The price would be set by the market, not the providers of the service and it would be much, much lower than 2.5%.
morninglight 1394 days ago [-]
(
MASTER Card Ha!
They are both making a SLAVE out of you.
1394 days ago [-]
crazygringo 1394 days ago [-]
I don't get it -- Amex and Discover are still providing healthy competition, so the "duopoly" the author complains about seems to be largely irrelevant. Competition between cards is thriving and consumers benefit -- witness the miniscule transaction fee the credit card companies keep after paying your rewards back of 2% to 5%, when you pay your bill on time.
The article's main point is that such large companies are a cybersecurity risk, and that the government should regulate/nationalize/globalize payment infrastructure.
Unfortunately, experience tends to show that governments would be far worse at providing secure, low-cost payment services. Also, credit cards already are highly regulated when it comes to consumer protections.
So, this article is just not making a lot of sense to me.
analyte123 1394 days ago [-]
The article (particularly the linked tweet) somewhat addresses your point: Amex and Discover may offer a superficial degree of competition for consumers, but banks have to obey Mastercard and Visa's rules even when it comes to offering bank accounts to merchants, otherwise they (and therefore all their other account holders) can't participate in the 80% of card transactions that are on the Mastercard and Visa networks.
If you're a bank who wants their business customers to receive payment via Mastercard, you are not allowed to give a bank account to or otherwise handle payments for anyone on the MATCH list, otherwise Mastercard will shut off your bank's access to their network completely, probably putting you out of business. There is little transparency about how entities end up on this MATCH list. The article does not propose an exact regulation, but the end goal would be that a single company can't arbitrarily shut people out of most of the financial system.
Polylactic_acid 1394 days ago [-]
I have seen many stories of legal and legitimate businesses for things like weed (legal in the stores location) and legal porn sites getting their merchant accounts shut down because the payment processors just don't want them to deal with it leaving cash as the only option.
bagacrap 1393 days ago [-]
Weed is still federally illegal in all locations in the US.
unethical_ban 1393 days ago [-]
Good point that perhaps "regulation" is not a good thing, and that the most free, common payment method is the decentralized one: cash.
People laugh about bitcoin, and the implementation surely has its drawbacks, but the idea of a decentralized digital payment system is alluring.
ElCapitanMarkla 1392 days ago [-]
The hard reality is there’s a high rate of fraud and chargebacks in a lot of these types of businesses. It’s a tricky one for the merchants to manage but things like 3DS2 should help, maybe, if they ever sort it out properly...
abi 1392 days ago [-]
I see your point from a merchant perspective. A thought: Why don't merchants in high-risk categories such as porn, gambling, etc. use debit transactions instead? Where they wait for funds to be transferred into their account and settled before providing goods and services.
pradn 1394 days ago [-]
CC rewards seem like a indirect regressive tax. Wealthier consumers who can afford to pay on time and have better credit ratings are subsidized by poor consumers who actually use the "credit" part of "credit card".
pmiller2 1394 days ago [-]
And, you would be correct, in a sense. Wealthier consumers benefit disproportionately from CC rewards compared to less wealthy consumers:
tldr:
>> ...the lowest-income household ($20,000 or less annually) pays $21 and the highest-income household ($150,000 or more annually) receives $750 every year.
notyourwork 1394 days ago [-]
If people didn't spend money they don't have the problem you describe dissolves. No one has to use credit cards and being financially literate is an individual responsibility.
kneel 1394 days ago [-]
If companies weren't allowed to offer predatory lending towards financially illiterate the problem you describe dissolves, this is actually much easier to implement than individual responsibility.
vasco 1394 days ago [-]
Ah yes, the old "let's block stupid (poor) people from accessing financial instruments for their own good" argument while at the same time having legal gambling.
jackson1442 1394 days ago [-]
predatory lending != lending.
Predatory lending generally refers to companies like payday loan companies and cash advance companies which feed off of forcing people to continuously borrow until they can't borrow any more.
Lending should absolutely be accessible to everyone in some way or another, especially in a world where a transmission failure can lead to a lost job if you can't afford to fix it right away.
throwaway98797 1393 days ago [-]
It’s predatory the moment it feels too high to you.
stale2002 1394 days ago [-]
Hey, if you want to argue that gambling should be more restricted, then go ahead.
It is highly restricted in many places.
TylerE 1394 days ago [-]
The actually financially literate know how much more buyer protection you get with a CC than with any other form of payment.
dingaling 1394 days ago [-]
And why is that? It's a beautiful example of regulatory capture that led to credit cards gaining advantage over other payment methods.
Such protections should either be scrapped or extended to cover all methods.
perryizgr8 1394 days ago [-]
> Such protections should either be scrapped or extended to cover all methods.
You are free to invent a payment method and provide all these protections to your customers. Why would you want to remove protections that CC companies are providing to their users?
komali2 1394 days ago [-]
> financially literate is an individual responsibility.
Is being able to read and write an "individual responsibility?" How about the ability to communicate in a language at all? What about any other basic core skill that would make a person capable of learning more things to make them "productive?"
"Individual responsibility" as it pertains to these topics is at best a misnomer, if it even names an existent thing at all.
Surely you don't think it's ok for, say, a Company Town to exist? Can you extrapolate from there why it's not ok for credit card companies to bamboozle less educated Americans for money?
notyourwork 1394 days ago [-]
I would encourage you to frame your disagreement with statements and facts. Asking questions expecting the reader to draw the same conclusion as you isn't a useful discussion mechanism. Especially when the reader doesn't agree with you.
komali2 1394 days ago [-]
I'm not sure what the relevant facts would be around an extremely value based argument of who is responsible for educating a society.
I guess we could look at the general fact that education is one of the better investments to increase a nation's GDP, bit I'm more concerned with the ethics than the money.
Yes, I realize you’re not being genuine, but those are all your responsibility to do/learn. Although everything you mentioned is what you should learn as a child, so we have a moral/social code for parents and the community along with some help from schools to teach these basic principles.
I could follow your argument if the card issuers weren’t transparent in their pricing and terms like payday loan companies. However, the interest rates are laid out very clearly several times as you apply and are approved as regulations demand. I’m all for education but at some point you have to let people do what they want with their money.
komali2 1394 days ago [-]
I am being genuine.
I'm not sure the country has taken the necessary step up in early education to even have the population have a baseline understanding of what interest rate is. I didn't learn that anywhere in elementary, middle, or high school. I had to figure it out on my own.
I don't think that's acceptable. I think that leaves our population vulnerable to predatory companies, who have a disproportionate ability to lobby the government to allow them to stay predatory.
I envision a capitalist hellscape where the population is kept purposefully reapable.
dimitrios1 1394 days ago [-]
You mean to tell me all my woes in life aren't some form or another someone else's fault?
cpsempek 1394 days ago [-]
I'm ignorant to CC companies' financials. But I would have thought their revenues are driven by transaction fees, which end up ultimately getting passed down to the buyer through higher prices. Would be interested to learn more though about CC economics. It would indeed be sad if CC rewards operated like a regressive tax, as you say.
sdenton4 1394 days ago [-]
If you have poor credit, you get a crappy credit card: low limit, high interest rates, no rewards.
If you've got great credit, you get a high limit, slightly-less-astronomical rates, and all the rewards.
The cost of the rewards is (as I understand it) mainly carried by the transaction fees, spread out over all purchases everywhere. So you have pointless price increases for people who /don't/ use credit cards (like me) or have poor credit, and the benefits of that 'tax' going to users with good credit (ie, rich people). So, yeah, it's a wealth transfer to people with better credit.
DevKoala 1394 days ago [-]
I had poor credit at a point in time. I "bought" a credit card to build my credit by putting a deposit. After 1 year of on-time payments I was able to graduate to a credit card with cash back. The system didn't feel punitive to me, and honestly, I had poor credit in the first place because I was irresponsible while in college.
matthewdgreen 1394 days ago [-]
You just described a scenario in which you were systematically bilked for at least a year —- paying full retail prices, which presumably paid for full transaction fees, which in turn did not pay you any rewards —- so you could graduate to the privilege of being allowed to purchase a consumer line of credit that reduced the level of punishment to something merely appropriate.
There are relatively few businesses in the world that can rip someone off for a year, then allow them to pay a more reasonable fee in exchange for guaranteed business, and still have the consumer claim that the system “doesn’t feel punitive.” The whole thing is kind of brilliant.
DevKoala 1394 days ago [-]
It was a painful year that taught me a lesson. Looking at how fiscally responsible I have become, I really have no complains.
dingaling 1394 days ago [-]
It's not financial responsibility or learning lessons, it's the fact that you consider earning cashback to be a reward for the ordeal you endured.
By participating in the cashback scheme you're putting more people through that ordeal by means of higher fees.
The only way to win is not to play.
DevKoala 1394 days ago [-]
I don't consider earning cash back to be a reward, but I see the credit card as a product that lends money based on a risk evaluation.
At that moment in my life, the risk on lending me money was high and therefore the product I could access was limited. There was little incentive for the bank to risk lending me money, so I needed to purchase my way into rebuilding my credit. As the risk in lending me money decreased, banks became incentivized to offer me lines of credit so the cash backs kicked in.
Rebuilding my credit has allowed me to access lower rates on my mortgage , investments loans and other financial tools that have greatly contributed to my quality of life. I would consider that to be the reward.
matthewdgreen 1393 days ago [-]
The problem is that the credit card "lending money" function is not what transaction fees pay for, and these fees are paid by all market participants -- including cash customers. People should be able to separate the payment function of a credit card (which is what merchants pay transaction fees for) from the "line of credit" function that banks make money on. However, this scenario would be less profitable for the industry, and so a small cartel of payment card networks and operators have worked hard to jam the two functions together. As a result, everyone (including cash customers) is heavily penalized for merely participating in the economy, unless they also purchase a profitable and risky line of credit.
It's frankly a brilliant scam, and the fact that people don't think it's a scam is its most brilliant aspect.
ceejayoz 1394 days ago [-]
Discover has a secured card that earns cash back.
Gaelan 1394 days ago [-]
Of course, the system is designed to encourage you to be irresponsible in college.
PascLeRasc 1394 days ago [-]
It can get way worse than revenues being driven by interchange fees. Banks like Wells Fargo and Capital One operate like a classy pay-day loan company, targeting sub-prime customers who are more likely to not pay on time. I'd recommend reading this for more info: https://newrepublic.com/article/155212/worked-capital-one-fi...
chrischen 1394 days ago [-]
Wealthier consumers also have more to gain on the luxury perks offered by cards. If you value 5 star hotel stays and airport first class tickets then you get more of the "value" back from the card fees. But actually with chase you can get a lot of those fees back on non-luxury redemptions too, but you'd still have to be rich enough to travel.
hawkice 1394 days ago [-]
It's not government. The same incentive structure for businesses matches better to loyalty cards.
digsy 1394 days ago [-]
Are they?
Visa/Mastercard charge merchants 1-2% interchange fees for each transaction.
I'd guess that people putting $20k a month on their Visa (I know a few that do) are paying for themselves with the interchange fees.
ryanwatkins 1394 days ago [-]
The vast majority of that fee that merchants pay goes to the bank, not Visa or Mastercard. And a vast majority of what the bank gets in that fee goes back out to the card owner in the form of rewards. You see merchant fees of 1-2% because that is pretty close to typical rewards paid out on credit cards.
thalesmello 1394 days ago [-]
There's a bit of misunderstanding in your statement. Most of the money made by companies in payments systems comes from transaction fees, not from interest. When companies offer you better rewards, that's them competing to have you use their credit card rather than the competition's.
crazygringo 1394 days ago [-]
Sorry to tell you but that's not true. Literally the top Google result says the contrary:
> "Out of the various fees, interest charges are the primary source of revenue." [1]
Yes, credit cards charge a large transaction fee, but wind up refunding a large portion of that back to the consumer in the form of rewards, so these days that's not the main source of profit.
It's not though. No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation.
sdenton4 1394 days ago [-]
It's not optional, though.
I still have to pay the higher transaction costs even without a credit card, because the credit card companies require that vendors have the same prices for card or cash, resulting in higher prices for everyone.
apta 1394 days ago [-]
I've seen stores (e.g. electronic stores) offer reduced prices when paying in cash vs. credit card. Is this law only in the US?
ceejayoz 1394 days ago [-]
Reduced prices for cash used to be against the Visa/MC merchant terms. They lost a lawsuit over it, but it's fairly ingrained by now.
You'll see cash discounts at some gas stations, and the occasional small coffee shop or takeout place will have a $10 minimum, but otherwise it's gonna be the same price most places.
apta 1393 days ago [-]
Seems like an opportunity to raise awareness for this information then.
alt_f4 1393 days ago [-]
Will you go to jail or pay a fine if you don't use a credit card? No?
Then it's nothing like taxation and it is optional.
sdenton4 1393 days ago [-]
Think of sales tax. You have the option of paying it or not buying things; it's not optional.
alt_f4 1393 days ago [-]
are you retarded? you can literally can pay with cash, or you know, a DEBIT card.
dang 1393 days ago [-]
We've warned you before about personal attacks, so I've banned this account. If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.
The card companies charge merchants for transactions. The merchants raise their prices to cover those transaction costs: For a very long time (and still, in a few places) it was against the card company's terms of service to have a card usage surcharge. A very few places now have 'cash discounts' or don't accept cards at all, but these are by far the exception. As a result, /everyone/ ends up paying for credit card rewards, even those who don't use credit cards.
omosubi 1394 days ago [-]
How would you pay for things online, many of which are not available in person? Or stores/airplanes/services that don't accept cash?
systemvoltage 1394 days ago [-]
Debit cards? The other option is to use a Credit Card but pay off at the end of the month. Why is that so difficult? That’s literally like a Debit card except for the additional “buffer” of safety and security from your bank account.
komali2 1394 days ago [-]
Every debit card I've had has still involved a credit card company in some way - they've all had the visa logo on them.
systemvoltage 1394 days ago [-]
That's true, I am not too familiar with the finance system, how come a debit card needs a middle man such as VISA? They help with the transaction between two banks?
kazinator 1393 days ago [-]
The situation is that there is a network called Visa Debit that some banks use for their network for debit transactions. It may seem new, but it evidently dates back as far as 1982.
I'm in Canada. With one exception, no bank client card I have had (which were all usable for debit) had any Visa logo on it. That includes current ones.
TD is one of the banks that offer Visa Debit. This TD client card is also Interac-branded, so I'm guessing that the card will use the Interac network for domestic transactions, and in that case its Visa Debit personality does not come into play.
Those are not the only two networks for debit/ATM in Canada. There is also "The Exchange":
(used by a lot of smaller banks and credit unions).
The Canadian Credit Union Association also runs an ATM network called AccuLink.
It's important to know which network your card uses if you want "ding free" transactions. E.g a "The Exchange" card can be used at an "Interac" ATM, but there will be a fee.
alt_f4 1393 days ago [-]
For fuck's sake, do some basic research. Literally at the top of the wikipedia article:
> Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers.
omosubi 1393 days ago [-]
That doesn't make it any less of a duopoly. The whole point of the article is that visa/mc have too much power and there is a lot of systemic risk by having only two competitors in this industry in particular.
Even if they aren't extending credit they're still facilitating the transaction - it's not like the visa sticker is on there for marketing purposes
alt_f4 1393 days ago [-]
Not what we're talking about in the OP comment.
komali2 1393 days ago [-]
That's what I was talking about - even if they aren't charging fees, they're involved.
There's plenty of cases in technology where "but we don't do anything with your data!" is not a good enough excuse. Many of us still argue for decentralization or federation or user controlled data, etc. Similar concerns I have for visa.
komali2 1393 days ago [-]
I get the impression you don't think much of me. That's ok, but why did you feel the need to tell me?
omosubi 1393 days ago [-]
alt_f4 is a troll. I don't think they understand what we're arguing about lol
alt_f4 1393 days ago [-]
your mum is a troll
UnpossibleJim 1394 days ago [-]
I can't think of a bank that doesn't use a card that works as a credit card when it comes to online transactions.
omosubi 1394 days ago [-]
They're still visa or MasterCards though...
alt_f4 1393 days ago [-]
> Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers.
alt_f4 1393 days ago [-]
Everyone in Europe uses debit cards. You don't have debit cards in the US?
It's a plastic card, it is issued by your bank, it's still using the visa/mastercard network, but instead of credit, it is tied to actual funds in your bank account.
ThrowawayR2 1394 days ago [-]
> "No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation."
Tell that to the increasing number of shops that no longer accept cash.
kube-system 1394 days ago [-]
Is this really a thing outside of SF? I haven't seen any cashless stores in my city yet. In fact, 3 of my favorite restaurants are still cash-only.
neop1x 1392 days ago [-]
Strange, about 2y ago, on our visit, there were lots of places in SanFrancisco who didn't accept cards.
e9 1394 days ago [-]
you can't rent a car without credit card, they won't accept debit card or even debit VISA/MASTERCARD, it has to be full on credit card
jobigoud 1394 days ago [-]
I don't know anyone personally that owns a "credit" card. Virtually nobody uses them here in France and I think in the rest of Europe, it's always debit card. Never had an issue with renting cars.
namdnay 1394 days ago [-]
It is a common issue for French people renting cars outside of France - search on Google, there are hundreds of angry people who ended up with no car because agencies in other countries refuse debit cards (debit immediat)
hadrien01 1393 days ago [-]
Why would renting agencies refuse debit cards? You get your money, just like credit cards...
lmz 1393 days ago [-]
My guess would be single message (debit) vs dual message systems. They probably want to hold / authorize a large amount first as insurance.
namdnay 1393 days ago [-]
What's strange is that you can authorise on debit cards (at least french ones)...
jobigoud 1393 days ago [-]
I should have been more specific, In the past few years I have rented cars in Europe, in the US, in South Africa and in Australia. Never had an issue. I generally use Avis or Budget, sometimes a local company.
alt_f4 1393 days ago [-]
That's not true at all. It's certainly not common to require credit cards for car rentals in Europe. Must be an American thing.
Nursie 1393 days ago [-]
>Virtually nobody uses them here in France and I think in the rest of Europe,
Definitely not the case here in the UK, credit cards are very common.
apta 1394 days ago [-]
Other than renting a car or a hotel room, it seems you can conduct most if not all of your affairs without a credit card. Credit cards can be relegated to those limited transactions.
kube-system 1394 days ago [-]
Most of the large car rental companies in the US will let you rent with a deposit on a debit card.
apta 1394 days ago [-]
The governments must step in and ban interest altogether. This is only fair, and will force banks and businesses to transact morally with customers.
matthewdgreen 1394 days ago [-]
Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card companies, by dint of their crushing market power over small retailers, can force stores to charge identical cash and credit prices. I suppose a well-functioning competitive market would fix this problem, but weirdly enough Amex and Discover don’t seem interested on competing to offer a better deal to retailers.
Credit card fees and rebates are such an amazing example of how systems can fool human beings. The entire system clearly could not exist in a frictionless, well-functioning marketplace —- but people seem hard pressed to actually figure out how the whole thing works. It’s kind of brilliant.
akira2501 1394 days ago [-]
> I’m paying for those 2-5% rewards
Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor.
> I suppose a well-functioning competitive market
You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is why.
jhloa2 1394 days ago [-]
Anecdotally, I have never once seen those discounts limited to cash transactions in the United States
matthewdgreen 1394 days ago [-]
In a properly competitive market the merchant doesn’t really get to keep it. Presumably they set their prices to a value that is X% higher than where they would normally set their prices without the need to pay transaction fees. If exactly half their business is paid in cash/debit and half in credit, then X might be set to something like half of the excess CC transaction fee. Then the credit card customers get to split up all of those rewards amongst themselves, and the cash/debit customers get nothing.
briandear 1394 days ago [-]
So get a rewards card. Some percentage of the sales taxes go to support programs I don’t agree with or use. And I can’t escape that. However, one could start a cash-only store if one wanted.
You are also ignoring the cost of cash. Theft and cash handling isn’t a zero cost. Why should I, as a credit card user, be forced to subsidize losses due to cash handling? We could also talk shoplifting as well; policies that don’t punish shoplifters means I get to subsidize that as well. We could go on and on and ultimately it gets absurd. If you don’t like the price, go somewhere else and the market can sort it out.
stale2002 1394 days ago [-]
> Why should I, as a credit card user, be forced to subsidize losses due to cash handling
How about the store gets to decide what to charge?
Most stores seem to believe that credit cards are more expensive, which is why they try to offer discounts for cash.
So the facts do not back you up.
matthewdgreen 1393 days ago [-]
You shouldn't be forced to subsidize anything. That's the whole point. At a minimum: the government should recognize the market power imbalance between card processors and small businesses, and ensure that the stores can set their own prices appropriately. If cash or debit is genuinely more expensive, let stores reflect that fact in their prices offered to consumers -- rather than prohibiting it via a contract they can't say "no" to.
wolf550e 1393 days ago [-]
The government can make a law that says credit card merchant agreements cannot prevent a shop from making cash prices lower than credit card prices.
Then shops will have two prices cash price and credit card price. Then people will use cash more, and the government will lose some of the information they get from reading everyone's credit card transactions.
Do you think this affects the government's decision? Or are politicians simply bribed by visa/mastercard?
briffle 1394 days ago [-]
Imagine if companies charged 2-5% less because they didn't have to fund CC company marketing tools like cashbacks.
crazygringo 1394 days ago [-]
That is common. My grocery store, my bodega, my doctor's office, my dentist -- they all offer a 5% discount for paying in cash.
Obviously not everyone does it, but it's certainly not uncommon.
On the other hand, there are also a lot of costs associated with handling cash. The expense of tracking bills and coins and going to the bank every day is not insignificant. So it's pretty easy to argue that there's no reason for cash discounts either, because handling cash can actually be more expensive than handling cards, particularly when you're doing it for only 5 or 10 percent of customers.
koheripbal 1394 days ago [-]
That's a little different. They offer discounts of 5% because they then don't report the income and don't pay taxes.
The CC companies are only taking 2.5%-3.2%. If they're offering a 5% discount for cash - it's almost certainly tax evasion.
crazygringo 1394 days ago [-]
You're forgetting the percentages are on top of a ~$0.30 flat fee (though obviously this varies).
So if you buy a $2 Coke, it's not a $0.054 fee (2.7%), it's $0.354 (or a whopping 17.7%).
Maybe my dentist evades a few taxes, I dunno. But people buy cheap things at the bodega, so it probably is closer to the actual fees.
lotsofpulp 1394 days ago [-]
If the merchant doesn't offer the same cash discount for debit cards, then it's tax evasion. Debit card fees are a few cents, and the only reason to offer a big discount for cash, but not debit cards, is to not have the transaction on paper and hence evade taxes.
blacklion 1393 days ago [-]
How could I know are my card credit or debit from system's point of view?
I have two cards in my bank, both are exactly same MC cards, embossed, and all (not some Maestro variation). One card is linked with my current account — I have real money at this account, my employer pays my salary by transfer to this account and such. I can not pay if thus account is depleted.
Second card is linked with credit account, where I have some limit, and I need to pay off in 28 days after end of each month or I'll pay draconian interest.
But cards are exactly the same, with very similar numbers.
And I never had any problems with any if these cards, like one works and other doesn't.
Is one of my cards debit and other is credit or they are credit both?
lotsofpulp 1393 days ago [-]
Based on your description, you have one debit card and one credit card.
If it says debit on the front of the card, it is debit.
I’ve never seen this work in person, but some people claim their debit card worked as a credit card and whatnot. Even if that is true, all merchant systems I’ve worked with allow the merchant/cardholder to select debit or restrict transactions to only debit.
blacklion 1393 days ago [-]
Both cards don't have words "debit" neither "credit" on them. I need to be really careful to use right one, as they are virtually indistinguishable.
Yes, from my point if view one is debit and one is credit, but I wonder is it possible to know what does payment system think about them?
I dream about bank for geeks, where all technical information about each transaction could be seen in web interface :-)
lotsofpulp 1393 days ago [-]
That's interesting. I've never seen a debit card not say debit on it somewhere.
rleigh 1392 days ago [-]
I don't think that "tax evasion" is a fair assessment.
This isn't the full picture. Debit card transactions might only be a few cents. But you still have to pay a fixed cost for the machine and related bits. For some businesses, that cost might be too high to justify.
lotsofpulp 1392 days ago [-]
I have hundreds of experiences with small merchants, and it’s definitely a fair assessment. With chip and pin (at least in the US), there is no risk of chargebacks and the money gets transferred in at most 2 days. Total cost of accepting debit cards is minuscule, unless your a kid running a lemonade stand.
mmcconnell1618 1393 days ago [-]
Also, chargebacks are a cost to merchants. In many cases, merchants will have money clawed back until they prove that the charge was not fraudulent. This requires keeping copies of receipts, signatures, etc. So, the true cost is far higher than just the transaction processing fees. Remember, the credit card companies make the rules and decide who gets to keep the money in a dispute. The merchants have to decide if they will accept credit cards because customers demand it or if they will go with cash only and lose out on potential sales.
manquer 1394 days ago [-]
There are payment standards like UPI in India and mobile number based banking , which offer transactions for very less or no cost ( mostly debit driven )
smart_jackal 1393 days ago [-]
UPI is great and so is NEFT, many other Asian countries are in talks to replicate these successful models in their own countries.
Also, India came up with RUPAY which is a great answer to VISA/MasterCard monopoly. But somehow it didn't catch up in usage I think.
newacct583 1394 days ago [-]
Indeed, let's imagine. I'm guessing that the increase in seller revenue and decrease in consumer price would sum to... somewhere between two and five percent.
No one cares about numbers like that. That's way, way below the convenience threshold for a typical consumer. Most of us, me included, would rather pay an extra 3.5% than fiddle with deciding on which card to use.
Which is to say: the market has spoken. We've settled on the duopoly not because it's a trap but because it actually maximizes utility. The uniform convenience of "credit cards just work" has quantifiable economic value. And it turns out to be somewhere around 2-5% of the transaction.
briandear 1394 days ago [-]
Businesses aren’t required to accept credit cards.
quacker 1394 days ago [-]
But it obviously hinders their business if they don't, in the US at least. Even most food trucks typically have Square terminals (or similar) for card transactions.
Which leads me to believe that it's generally worth it for businesses, despite the "fees".
deadbunny 1394 days ago [-]
So, Europe?
argonaut 1394 days ago [-]
I don't get it -- bringing up Amex and Discover is like bringing up Bing and DuckDuckGo when people talk about the Google monopoly.
danhak 1394 days ago [-]
I was curious if this was true so I looked it up. AmEx + Discover have 20% - 25% market share depending on the metric you care about. Bing + DDG have 8%
"Visa holds a 60% share of the credit and debit card market, followed by Mastercard with 30%, according to Ellis, with American Express far behind at 8.5%."
Except Amex is the highest end card used predominantly by financially secure individuals. Bing is... not that.
argonaut 1393 days ago [-]
Except in practice, the vast majority of Amex users also have Visa/Mastercard just in case (e.g. Visa/Mastercard users are close to a superset of Amex users).
numpad0 1394 days ago [-]
Also it’s like bringing up search alone when talking about web.
In reality an intermediary called “payment processor” handle all CC brands in single system and they are the ones enforcing ideological punishments to merchants.
Like there’s web search and web browser, card networks and payment processors both should be brought up.
webmaven 1393 days ago [-]
> In reality an intermediary called “payment processor” handle all CC brands in single system and they are the ones enforcing ideological punishments to merchants.
Yes, payment processors enforce the rules, but don't typically make the rules.
As I am sure you can imagine, this can result in plausible-deniability-type finger pointing ("we don't make the rules" / "we're not responsible for the rules being misapplied") when an organization is cut off.
dpacmittal 1394 days ago [-]
Amex and discover maybe popular in the US, but rest of the world still has a duopoly. I'd say 90%+ cards in India are visa/mastercard.
smart_jackal 1393 days ago [-]
India also recently introduced RUPAY which is an alternative to VISA/MasterCard duopoly. Don't know about the success and usage of that though.
ravar 1394 days ago [-]
As someone who has never used visa or mastercard and only discover for credit cards (I do have a visa debit card) I second this sentiment. There is no duopoly from my vantage point.
biaachmonkie 1394 days ago [-]
But since the retailers can't offer discounts for cash transactions, people who pay with cash are being over charged and subsidizing those fees.
hn_throwaway_99 1394 days ago [-]
That really depends on where you live. It seems pretty confusing because (a) federal law made surcharges for using a card legal under a 2013 settlement with Visa and MC, and (b) there have been a bunch of federal court cases, including a 2017 Supreme Court case, that invalidated some state laws that prohibited surcharges.
Interestingly, even now that many merchants are allowed to offer a discount for using cash, most don't because they've likely figured out (a) if they lose just 1 sale in 30 it's likely a net negative for them, plus (b) people are likely to spend more, especially on impulse purchases, when using a card, and (c) there is just a sense that it can be annoying to customers to have to pay more for using a card, taking away from customer goodwill.
anamexis 1394 days ago [-]
Retailers can offer discounts for cash transactions, per the Durbin Amendment to the Dodd-Frank bill of 2010.
It depends on where you live. 10 states have laws that prohibit or restrict discounts for cash transactions: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Some of those restrictions have been invalidated by federal courts, but I was somewhat confused about which states were affected.
BenjiWiebe 1394 days ago [-]
Perhaps this is explicitly allowed (you did say restrictions) but in Kansas it isn't uncommon to see gas station signs displaying a cash price and a card price.
just-ok 1394 days ago [-]
I have definitely personally seen many instances in which you get a discount paying in cash in California. Maybe they get away with it because they technically frame it as charging extra for paying with a card?
komali2 1394 days ago [-]
Weird, because in three of those states (New York, Texas, and California) I have used cash to get a cash discount in the last year.
I imagine it's because of lack of enforcement?
hn_throwaway_99 1394 days ago [-]
All three of those states I believe had their surcharge bans invalidated by federal courts. Texas' law was declared unconstitutional in summer 2018: https://faq.sll.texas.gov/questions/9631
StillBored 1394 days ago [-]
Well, after trying to negotiate cash discounts ~25 years ago on a couple fairly significant purchases for me (furniture) I gave up and joined them... By carrying a discover card, which at the time was just about the only cash back card in existence (the only one I knew about).
So, I still favor the discover (despite now being part of Morgan Stanly?) for most purchases, but when its rejected I fall back on a MC with a cashback program.
That program pays for my computer hardware...
briandear 1394 days ago [-]
> But since the retailers can't offer discounts for cash transactions
Citation needed.
giancarlostoro 1393 days ago [-]
Sure Amex and Discover provide alternatives but if you want to start a credit card company you dont get to tag team with those two at all as far as I can tell. Which I think is a bigger problem. If you as a bank want to start your own credit card you have to go for the most supported provider to even attract potential credit card holders.
ummonk 1394 days ago [-]
The competition between credit card issuers is healthy. It's the payment processor side that isn't (though micropayments seem poised to disrupt the space).
adultSwim 1394 days ago [-]
No one uses or takes those.
dayaz36 1394 days ago [-]
Did you even read the article? Visa and Master Card own 90% of the market. Discover has ~1%. I wouldn't call that competition let alone THRIVING competition...
taurath 1394 days ago [-]
Having worked in fintech, they're essentially the gatekeepers of any new technology. Have a great idea for a value add in the payment processing gateway? They will not let you on any platform for 4 years while they launch a (poor) competitor at scale.
rbrtl 1393 days ago [-]
Sometimes the turn around is quicker, because rather than building their poor competitor they just buy one.
cactus2093 1393 days ago [-]
You can’t talk about credit cards in isolation without considering the rest of the consumer finance sector in the US.
A big part of the reasons credit cards rose to such prominence is that the banking and payment rails are so incredibly stupidly designed. The check system and ACH which is the highest volume way that money is sent between people with different banks requires you to give out the secret key every time you make a payment. Plus it takes at least 1-2 days to clear which makes fraud more difficult to deal with.
Interestingly the credit card system also suffers from the first part, your number is printed right there on your card. But they’ve managed to find and/or strong arm ways to reduce fraud on their network, and as a consumer I’m not liable for paying it which is a huge benefit.
The author really lost me at the end though, I don’t see how regulation magically solves everything and they didn’t explain it at all. There is already a ton of regulation in the payment industry. And this comically flimsy underlying system could easily be improved by existing regulators, how about starting with small steps and seeing how that goes? Instead of advocating for throwing out the entire payment system all at once under the very flimsy assumption that the government will do it better.
puszczyk 1393 days ago [-]
In Poland there’s really nice pay-by-link (you’re being redirected to your bank website, log-in, they display the merchants data and amount and you confirm it) and basically all the merchants support it. There’s also BLIK, which is a payment app started by a few banks which is gaining traction. This all is super convenient and easy to use.
However, I still prefer to use a credit card, because of the chargeback — the legal protections with credit cards are still higher.
—-
Edit: about “you’re paying the fees” — maybe, but most of the merchants don’t show different price or don’t charge extra for credit card payment. So why not use the IMHO better option if it costs me the same.
vinniejames 1393 days ago [-]
"not liable for paying it," but you're still paying it at the end of the day via fees and increased merchant prices
ferzul 1393 days ago [-]
if the merchant doesn't charge a creditcard surcharge, and using a credit card is worth 1€ to me, and costs 1.01€/transaction to the merchant. but only 90% of transactions are by credit card. well, then i am better off paying by credit card, since 10% of transactions are subsidising my 1€.
(strangely, in australia, card surcharges became normalised just before cash payments fell off a cliff. credit card transactions have also declined; it's visa/mc debit that have skyrocketed.)
sukilot 1393 days ago [-]
A credit card costs about 3% not 1%. A credit card is a prisoner's dilemma problem where once anyone uses it, the others are pressured to use it also to cut their losses.
logicalmonster 1394 days ago [-]
I’d love to see some action here but I’m skeptical. It seems like attacking payment processors is the main avenue that the thought-crime-police use to attack alt-tech sites that don’t play ball with censoring.
If there was any mass protest movement to push change here, the media would absolutely flood the public with scare stories about (insert evil monsters here) using payment networks to finance (evil activity here) and undermine the protest movement.
It doesn’t help that so many politicians are old lawyers and activists who generally don’t have the technical knowledge to wade through the BS.
derefr 1394 days ago [-]
I feel like it'd be fine if every single payment processor were individually part of the surveillance-industrial complex, as long as there were enough players in the space that one could get running a service by hopping around between them. For grey-market businesses to succeed, they don't really need air-tight legal protection; they just need their actions to be illegible.
This is basically the situation VPN service providers are in. Yes, in theory, any given provider could be beholden to the state. However, when a new VPN provider can spring up so easily (spin up some DigitalOcean instances, stand up a WordPress/Shopify e-commerce frontend), it's unlikely that any given new player in the space has been gotten to yet by the state (unless, of course, it's a new marque of an existing company, set up specifically to serve as a honeypot for switchers.)
tappio 1394 days ago [-]
This is a very us centric view. Most of the europe is so much ahead of US in payments that it is funny. There are dozens of alternative payment methods in the Europe. Especially in the Nordics card payments are on a big decline. There are basically two "tracks" to move money - card networks and bank to bank. Most new payment methods use bank transfer as the method of moving money. In the Nordics, every country has a mobile payments system where your bank account is attached to your phone number, any anyone can issue a payment to your phone number and you receive it to your bank account. You can use this also in brick and mortar stores etc. Not to talk about all the bill-payment based companies like Klarna... And how about China? They don't use cards either, just look at Alipay.
mrweasel 1393 days ago [-]
Just to clarify, the Danish mobile payment system (cleverly named: MobilePay) is based on debit cards, not bank to bank transfer.
The system that was designed to do bank to bank, without the card systems being involved failed horribly. It was late to market and the launch has horrible mismanaged and covered in unnecessary secrecy. MobilePay had already launched and crabbed a large share of the market, the secrecy was completely pointless and I believe it was partly to blame for the massive failure of the solution.
runeks 1393 days ago [-]
> Just to clarify, the Danish mobile payment system (cleverly named: MobilePay) is based on debit cards, not bank to bank transfer.
This is incorrect. MobilePay started out as a layer on top of Dankort (Danish debit card), but after gaining sufficient volume they made a deal with all Danish banks to enable direct bank-to-bank transfers (without using the Dankort infrastructure).
The only difference between Swipp and MobilePay is that Swipp started out only supporting bank-to-bank transfers (thus only supporting a few banks) while MobilePay started out using Dankort (thus supporting all banks). And, as soon as MobilePay had sufficient volume, all banks were interested in circumventing the Dankort network.
tappio 1393 days ago [-]
Yes this is a good point! Same story with Finland.
It's interesting that it uses card tracks to move the money, but the identification and recipient is not based on card numbers, so the card stays anynomous for the recipient.
Mastercard and visa have recently been very open to this kind of methods, and also issuing virtual one-time-use cards. These new use cases for their network are quite healthy to the payments ecosystem.
Ninn 1394 days ago [-]
While it is true that we have more options, I do not agree that non credit card mobile payment options are a primary payment. These still lack a lot of usability improvement in comparison to the now widespread mobile credit cards supported by almost all banks too. So I still recognise visa and their support for Apple Pay helps maintain this power.
Heres to hoping that Apple Pay (and Android) will open up directly to banks or solutions such as Mobile Pay, which bridges to direct bank transfers for member banks and then utilise credit cards as a backup for unsupported banks.
tappio 1394 days ago [-]
Of course Visa and Mastercard still have a big role, especially in the brick & mortar. But when looking at e-commerce, the share of card payments is 40%. I don't think it is very relevant to discuss "duopoly" and say that they have the power to censor user content - because they don't. If they ban you, you still have many other options. AFAIK the point in the article was that we should break the credit card duopoly because they have too much power. I don't think that is the case here.
Do you think that the credit card companies having too much power is a big problem in the Nordics?
mrweasel 1393 days ago [-]
I'm not sure about the other Nordics countries, but Denmark still have its own card solution "Dankort". It's not nearly as popular as it once was, and I would say that most cards are now dual-branded as VISA/Dankort, where the card will work as a VISA card, if Dankort isn't supported.
Our politicians and banks probably don't see it this way, but having a local alternative can help keep MasterCard and VISA in check. If they become to expensive or unreasonable most people already have a competitor in their wallet, one for whom fees are strictly controlled.
petters 1394 days ago [-]
In Sweden, you can pay in most online stores (that I visit) with Klarna. They use direct back transfers.
h91wka 1393 days ago [-]
Klarna is a bank that is connected to the Visa network. So, inherently, it is bound by the same rules as any other bank. So, in the context of this thread, they are not a competitor to Visa/MasterCard.
tappio 1393 days ago [-]
That's correct only in NA, where Klarna issues virtual credit cards and transactions happen via card tracks. In EU, or at least the Nordics, the transactions are bank-to-bank and there is no virtual card. That means they are a direct competitor.
h91wka 1393 days ago [-]
In Sweden they issue regular credit cards (my friend has one).
Also, AFAIK, in Nordics they offer virtual card payments to merchants who don't integrate with them directly.
tappio 1393 days ago [-]
Sure, they have plenty of collaboration with both major card schemas. AFAIK, they do both acquiring and issuing. I don't think collaboration means that you can't compete with each other? Their most successful products in the EU are not using card tracks.
h91wka 1393 days ago [-]
> I don't think collaboration means that you can't compete with each other?
I just don't think there's much room for competition when one party gently keeps another in a chokehold. Klarna depends on Visa, but not vice versa.
tappio 1394 days ago [-]
There is also a huge difference in b2b payments. Cards account a very small percentage of B2B payments in Europe. I don't know how it is in the US, but I've understood that a much higher share of B2B payments go the card-track?
eloisant 1394 days ago [-]
In some European countries maybe, but in France it's all Visa and Mastercard.
Even Amex has an even lower market share than in the rest of the world.
BiteCode_dev 1394 days ago [-]
Yes but concentrating that many things on your phone is not the solution. It causes different problems.
tappio 1394 days ago [-]
These are not concentrated to phone.
-Direct bank payments use your bank id. You can have bank id stored in the phone, but you can also use a personal keychain authenticator
-Klarna, Collector, etc use your social security number as the primary identification method
-Mobile payments like Swish and mobile pay use your mobile number, so it is linked to your phone
subscription, not your phone.
Of course you still need to have a bank account, but there are a lot of banks out there.
BiteCode_dev 1394 days ago [-]
Yes but you need your phone on you to pay at the shop right ?
So no batterie, money ? No network, no money ? Phone stolen, no money ? Phone broken, no money ?
What if I don't want to have a spying hardware on me at all time ?
tappio 1394 days ago [-]
Hmm well, fair point. The society is moving also away from cash and many places don't accept it anymore. You are left with credit card... Which is also a spying device. So no payments without data collection for you!
I don't think that is essentially a bad thing. Forcing a digital signature for every transaction makes criminal activity difficult. Modern AML works much better because there is always a digital fingerprint for every transaction.
But I think that these are two distinct issues? Some crypto -things could somewhere in the future solve the privacy issue... But no society wants that, because real privacy makes criminal activity and money laundering possible. But that has nothing to do with credit card duopoly?
BiteCode_dev 1392 days ago [-]
A cashless society is another debate entirely. I do think it's a dictator dream and the best way to kill diversity and innovative social behavior.
But the matter here is card vs phone. Your card do spy on you, but it doesn't have your contact, a microphone, the history of where you have been, etc.
You can easily give your card away to a friend for the day. Your card doesn't need an update. It's not connected to internet all the time. It won't die if it falls, if it rains or of it's too hot. You can have a replacement easily as well.
It's also way more accessible. My grandma can use it. A blind man can. They all work the same way.
A phone is only a good card alternative when every thing goes right. But I value resilience in my paiement system.
badrabbit 1394 days ago [-]
Would be happy to buy a usable cryptocoin card. I was thinking about interest-free crypto-loans where the debtor would speculate on the value of the currency at the time it will paid off (like options trading). If you loan 100btc you would loan with the speculation that for example it would be 10% more valuable in a year. If in a year your speculation is correct, you break even, if the price is 10% lower, the debtee still has to pay using your speculated valuation, if the price is 10% higher you lost potential money you coulf have gained had you hold onto it. Either way, you have insurance against loss the debtee takes on risk but they don't get endlessly canibalized by interest payment. Escrow or credit rating is something I have not figured out.
Regardless, an acual card and a payment processing network would cost billions to deploy.
milkytron 1394 days ago [-]
That seems extremely risky.
badrabbit 1394 days ago [-]
You will still have credit checks and collaterals as usual. The person taking on the loan absorbs all risk in exchange for not having a interest accumulate. Think of it this way, with APR loan, how much you pay at the end depends on how the interrst rate is adjusted and how long it takes you to pay off. With my approach you might end up owing a lot of money but it will never depend on how fast you can pay it off. It will not canibalize your cash flow like an interest debt. The debtor gets free loss insurance and debtee gets freedom from interest and the total cost depends on the currency value at the time of first payment. Also,the total cost will not be a surprise to anyone, the person taking on the loan knows how much they have to pay back. Ideally if you don't have credit, you will need to place in escrow some amount of the base loan and take on more risk in terms of paying at a higher valuation should the currency value be higher at the time of payment(which all goes away with collateral or good credit score)
Anyway, I was just thinking out loud my idea. I hate interest and mandatory insurance alike.
bluesign 1394 days ago [-]
You have 1 btc lets say 10k usd.
So in one year i have to pay you 11k.
It is basically 10% interest.
badrabbit 1393 days ago [-]
Intetest accumulates, if it takes you 2 years to pay, you owe 12k normally. Regardless of how long your payment plan is, how much you owe depends on the speculation date (the sooner it is, the more predictable and less risky). Bigger loans would be issued for less trustworthy customers if the speculation/first payment date is very soon. But let's say the first payment is a year away and the debtor speculates too high of an increase in currency value,then they would come off as bad debtors no one wants a loan from. But the more conservative their speculation on long term currency value, the more reasonable and appealing of a debtor they appear to be. So if you will start paying me back a year from now,I might speculate a 2% increase in value but if you will pay back in a few weeks I can more accurately predict and say a 5-10% increase. Since the worst outcome for the debtor if payment is made is "my cash is insured against loss" they have the incentive to make conservative speculations that lure debtees. If a well known and reputed person uses their valuable site/business for a $1M loan that will be paid in 5 years and you loan them with a 3% increase speculation you will get 30k for the risk you took on and guarantee that not only will you not lose money but will gain at least 3%,regardless of economic crashes or market volatility.
ajb 1394 days ago [-]
Coincidentally I just read a post from a business that's finding ordinary bank transfers getting more traction from customers than they expected:
The traditional problem with bank-to-bank transfers in a retail, or point-of-sale, setting has been speed. Cheque was about the fastest that could be mustered.
But with developments like UK Faster Payments (which is mentioned in your link) bank-to-bank transfers are getting faster, in some cases instant. And so usability at the point-of-sale is now on par with cards.
In Holland, iDEAL is used a lot for retail purchases. It's an instant bank-to-bank payment option that competes with the card networks.
The equivalent in Sweden is Swish. It too is moving into point-of-sale payments.
As for the US, I suspect that at some point Zelle will pivot into retail point-of-sale payments. At which point the card networks will have a big competitor.
All of this is good news if you are worried about the card oligopolies!
kalleboo 1394 days ago [-]
One good piece of news I saw was that a lot of these new bank-to-bank mobile payment services like Swish are finally looking into cross-compatibility between countries, something that has really been missing until now
Yes we're really lacking a Europe-wide system for this. People travel (and move) a lot between countries, national systems are too limited.
daveoc64 1394 days ago [-]
I can't really see bank transfers taking of at the point of sale in the UK. Making a payment with most banking apps is very clunky - especially for the first time with 2FA.
As a consumer, a credit or debit card gives me a lot of protection. I wouldn't give that up for anything (oh, and the cashback I get too).
Symbiote 1394 days ago [-]
It works like this in Denmark [1].
You open the MobilePay app, and touch the NFC thing. The amount and payee is shown, and you swipe to confirm the payment. The retailer's POS gets a message.
In a small shop without a fancy POS system, they just print a paper QR code. You can scan that, but you need to type the amount yourself.
I have some competitors in the UK who told me that if a single customer pays you from a frauded bank account, your entire bank account is closed permanently, and they investigate with the police.
They also assume you are involved in the illegal activity and you have to interview at the bank. All this for what can amount to a 20-50 GBP payment, and even if it represents <1% of your transfer volume.
If bank payments are going to become prevalent in e-commerce, this type of primitive reaction to fraud will need to improve drastically.
tappio 1394 days ago [-]
That's what most people said 10 years ago about the mobile payments (mobile bank to bank transfers, not related apple or Google pay) in the Nordics, but no one is doubting it anymore.
daveoc64 1389 days ago [-]
I don't see what the advantage would be.
Apple Pay/Google Pay already offers near-instantaneous, highly-secure transactions in most stores - and with good consumer protection. Contactless cards offer the same up to £45.
I can get cashback/miles/reward points too.
What does a bank to bank transfer offer me as a consumer?
The difference between the Nordic countries and elsewhere may be that 10 years ago, these contactless payment methods weren't widespread.
jiggunjer 1394 days ago [-]
But I thought debit card = bank transfer? There is no protection?
daveoc64 1389 days ago [-]
You can still do a chargeback with a debit card in the UK.
If you have a basic consumer dispute about something (such as a retailer not giving a repair/refund for a faulty item), you should be able to file a chargeback with the card issuer and get a refund.
In the UK, a credit card is much better though, as for any purchase over £100, the card issuer is joinly liable with the retailer for any issues.
In the US, most PIN debit card transfers occur via either MasterCard's Maestro or Visa's Interlink debit networks. Signature debit payments go through MasterCard/Visa's credit card networks. So you've still got the duopoly problem.
peteretep 1394 days ago [-]
This is very common in Thailand, in person and online. Shops often have QR codes than encode their bank details. Also, cash on delivery, and also you can finish some online purchases by taking money into 7-Eleven.
ur-whale 1394 days ago [-]
There is something that I've never managed to put my finger on: most companies as huge as Google / Apple / FB etc... or even more traditional ones (banks, oil, etc ...) are sort of "well known" in the sense that they do PR, they have well known figureheads, etc ...
VISA has always struck me as a very nebulous entity, whose structure, governance, is not very well know by the general public.
I wonder how they managed to grow so large while managing to keep such a conspicuously low profile.
Their leaders may not be well known, but they spend an absolutely massive amount of money promoting their brands. They are extremely recognizable.
Mastercard so much so that the recently removed their name from their logo as its nolonger needed.
redis_mlc 1394 days ago [-]
If you don't work in the payments space, then there's a lot of entities that you're not aware of since their members/associates front them.
One fintech startup recently sold for $5 billion to VISA. They issused a PR statement that was completely false, but if you didn't work in payments you'd never know they didn't have 11,000+ clients (hint: that's the number of institutions in NACHA.)
While I agree with the sentiment, things have certainly opened up lately quite a bit with the mainstream-ization of the crypto currencies. One could conceivably avoid Visa / MC in a way that just wouldn't have been possible before.
Visa / MC remind me a bit of Ticketmaster in that they've got parties on both sides defending them because of kickbacks. You charge the merchant the "interchange fee" plus some amount and that fee goes back to the "card issuing" bank, so they like the system.
The merchant passes on the cost (generally) to the consumer, so they don't really notice, and the ease of moving the money in 99% of cases means everyone is happy.
PeterisP 1394 days ago [-]
I'm not seeing a "mainstream-ization of the crypto currencies". A few years ago, quite a few local businesses were experimenting with accepting cryptocurrency payments, and I could buy all kinds of stuff and services using bitcoin. I could order a pizza with bitcoin, I could buy electronics at a major retailer, I could buy plane tickets, I could pay for lunch in a local cafe.
That's not the case any more, by now all these local companies have stopped accepting bitcoin, because after the first hype, the volume simply was not there to make it worth their while. Some people (often the same people!) bought some stuff initially to try it out, but that was it, there was no sustainable mainstream business. It's still usable for some online services targeting the tech crowd, especially where anonymity might be a feature, but for everyday use of paying for physical goods and in-person services there has been the opposite of "mainstream-ization" in my experience; by now the mainstream businesses have tried crypto and found it not useful. There's enough well developed infrastructure and service providers so that mainstream businesses could easily accept cryptocurrencies if they wanted, but they don't, because there's no significant customer demand outside specific niche markets.
rtpg 1394 days ago [-]
Crpyto isn't mainstreaming but you are having a mainstream-ization of non-CC digital payments.
Venmo is the thing in the US, but China has Alipay/Wepay, SE asia has various digital payment apps, Japan has had a huge "cashless" push in the past 12 months....
If I were running a retail shop in the US I definitely would accept payment by Venmo if I could.
bitreality 1393 days ago [-]
Yes, apps like Venmo/CashApp/Zelle have grown massively in the US over the past 2 years. However, there's still limited options for merchants to integrate these payments into ecommerce systems in a way which allows the customer to make payments through a website.
It's hard to say whether these apps are actually focused on B2C transactions, so far it's almost entirely C2C (P2P).
briandear 1394 days ago [-]
Apple Pay is the thing. And it makes peer to peer money moving simple while not violating privacy like Venmo. You can use Apple Cash or a payment card. It’s all pretty easy — and private. Venmo is a privacy nightmare. You can use Apple Pay without even having a debit or credit card.
mc10 1394 days ago [-]
Apple Pay doesn't solve anything on the merchant's side. There's just nothing in the US with the simplicity and affordability as the various payment apps in Asian countries.
For instance, in China WeChat Pay only charges 0.1% above 10,000 RMB (from what various articles say). Square is not even in the same category, charging 2.6% + 10¢. And you don't need to buy any equipment to use WeChat Pay; you just need to pull up a QR code on your phone.
bitreality 1393 days ago [-]
This is all possible because China has standardized bank to bank transactions across all banks in the country. It sets the tone for secure P2P transactions at fractions of the cost of a regular Credit Card payment.
This allows people to on-board to WeChat Pay easily through online banking. They also have way less KYC hurdles, so people can go from signing up to sending money in minutes.
US online banking is eons behind China, and almost any other country. So many online banking systems in the US are prone to unauthorized access, which makes on-boarding and security highly inefficient.
PeterisP 1391 days ago [-]
It's my impression that pretty much all functional countries (e.g. perhaps not Somalia or during a civil war, but including most less developed countries) have "standardized bank to bank transactions across all banks in the country".
The big difference is how fast and cheap these standardized bank-to-bank transactions are; with USA lagging behind in this area somewhat. In USA a wire transfer is more expensive than a credit card payment, in China, EU, Russia, etc it's cheaper than a credit card payment.
lima 1394 days ago [-]
> mainstream-ization of the crypto currencies
And modern Tendermint[1]/Cosmos SDK-based chains or Solana are basically distributed databases, using consensus models similar to Raft, except with byzantine fault tolerance and Proof of Stake for leader selection.
No mining, no forks, finality within seconds, large throughput. Pretty boring, actually, with little hype surrounding it - it just works, like a regular database, except there's no single entity controlling it.
One of the top five payment gateways in Korea - CHAI - uses the decentralized Terra[2] blockchain as their backend.
Does raft work when people are trying to attack it? My understanding of it in its normal application is fuzzy enough.
lima 1392 days ago [-]
Raft is not safe against byzantine nodes, but these new consensus algorithms like Tendermint are.
ryanwatkins 1394 days ago [-]
Merchants certainly "notice" and take any opportunity to use an alternative to the card networks. They only accept it because they must to avoid losing a purchase. They would rather customers pay in almost any other form due to interchange costs.
When talking to big merchants about any new payment product, the first question you will hear is often "so, how does this lower my interchange cost?"
bluGill 1394 days ago [-]
That might be true, but it isn't as obviously true as you would think. Credit cards payments are not subject to being stolen or lost. Once you have the approval the money will reach your account.
Of course there are other frauds you are vulnerable to. Which is why it isn't clear what is really best
ryanwatkins 1394 days ago [-]
There are plenty of other payment methods than cash that have guards against being lost/stolen or the other problems with handling cash, but also dont have the high cost of interchange that funds credit card rewards.
Merchants take credit cards to avoid losing a purchase. Cards have such a high volume that consumers expect it and some small portion will skip a purchase if its not an option. But merchants would much prefer you pay with a store card, debit card or one of many other payment methods that dont have the same (2-3%) cost that credit cards do.
sharemywin 1394 days ago [-]
Pretty much the digital economy. As long as the consumer only get screwed a little per transaction, and consumers don't see the charge directly.
briandear 1394 days ago [-]
The consumer isn’t getting screwed. There is purchase protection, fraud protection as well as extreme convenience. If we are worried about consumer prices, let’s talk about taxes and government malfeasance with the spending of those taxes. Some countries have a 20% VAT. Surely they could survive on 18%? Or even 10%? Less than a percent (in Europe) for interchange or less than 3% (in the US) is minor compared to the 9-20% one directly pays in sales taxes.
scarlac 1394 days ago [-]
It will probably happen, but will take a while. My bet is that this is what Apple is working on. They will launch a version of Apple Card that is free of MasterCard.
So far it's been a really long-haul play where Apple has spent a lot of time establishing deals with banks manually, in order to get a tiny fee, which they can due to the increased security of their system. This hard work is necessary in order to create a payment network that can work for everyone.
Eventually, Apple will be in a position to launch their own network, while increasing fees for themselves and lowering fees for merchants.
As someone who's been a merchant I'm very happy to see this happening, although it's like watching a tree grow (paint drying would be exciting in comparison). It's likely Google will follow suit, and depending on Apple's choice of implementation, we could hope that it will be backed by a stable cryptocurrency - but that's just a shot in the dark.
seibelj 1394 days ago [-]
Unpopular opinion here (from my experience), but crypto / blockchain is ever so slowly and deliberately destroying the moat around payments and the artificial barriers constructed. Probably 5 more years for some very serious mainstream business movements into it, and 10 more for non-technical consumers, but I believe with the rise of stablecoins (USDC) and Ethereum scaling via proof of stake (ETH2) their days are numbered.
erostrate 1394 days ago [-]
And one year after that we will get self driving cars. And the next one will definitely be the year of Linux on the desktop :)
Sure, it could happen somewhere down the line but saying that blockchain is "destroying the moat" today is a big stretch. Blockchain barely just started to realize that the moat is actually much larger than previously thought. And that parts of the moat exist for a reason. It's barely starting to understand the moat, still far from attacking it, let alone destroying it.
Hopefully it will but I'm not holding my breath nor my bitcoins.
throwawaysea 1394 days ago [-]
This has been a problem for a long time and unfortunately the outrage around the duopoly died out the last time we confronted it, which was in 2010 when Visa/Mastercard blocked Wikileaks (https://www.forbes.com/sites/andygreenberg/2010/12/07/visa-m...).
Ultimately, the lack of a provider who acts neutrally is a threat to freedom of speech and expression for all practical intents and purposes.
chejazi 1394 days ago [-]
It's trickled into other mainstream/downstream services as well like Patreon. Patreon bans certain creators because they have a "policy" on acceptable content that is backstopped by visa/mc policies.
sm4rk0 1394 days ago [-]
Let's end the duopoly, but please don't forget Google (or Facebook, Apple, Amazon,...)
seph-reed 1394 days ago [-]
"Both" is word that will not make the Newspeak cut.
vore 1394 days ago [-]
Calm down. Evoking HN's favorite specter of 1984 about payment processors is a bit much, don't you think?
seph-reed 1394 days ago [-]
I was feeling quite calm.
I'm not talking about payment processors so much as the degree to which people feel "either" when they could feel "both."
Divisiveness is quite rampant, and I think the language we use (or don't use) has an effect.
ie "Forget Google" -> why not both?
Animats 1394 days ago [-]
Visa is now a publicly traded company, but it used to be a chaord, owned by the banks that used it. It's a data network and a standards organization. It doesn't issue cards or handle the money, it just passes transactions from one bank to another. The banks settle up separately.
Note that this was a policy decision based on whim and a politician lobbying. No hearing, no evidence, no recourse, no rights and no meaningful alternative. Also a decision not taken by the banks nor, I believe, were they consulted.
The upopular person's (Wikileaks here) rights are your rights and my rights. If you think the've done the wrong thing, you're entitled to that opion and establishing that is literally what courts are for. Much the same way we might want law and courts involved for suspension of a driving license and not simply because a politician doesn't like you and lobbies a bit. "Nobody who drives for UPS can drive on the roads because they love Putin" --not as ridiculous a fabricated politician's quote as it should be.
But going back to it being a data network and standards organisation that describes the classic long-run decreasing average total cost curve of the natural monopoly which makes privatising it for profit a pure "rent-seeking" play.
So we can see how egregious the monopoly is two ways there. Practically with an example and according to classic and relatively uncontroversial micoreconomic theory.
So what about the classic monopolists' defence, which will come up again here. Define the market to be bigger and claim it's a small fraction of that bigger market. Can we just dismiss that as total B.S.? ie "You can also use cash to buy things." Try running a business or calculate the additional cost of buying the things you need without using the visa/mastercard network.
Unless you have multiple networks with very low switching costs it's a disaster. Disclosure: Ajit Pai disagrees with all that totally.
jb775 1394 days ago [-]
Could Stripe swoop in and make a play to become a third major CC option? I feel like they have the core infrastructure in place and are still nimble enough to make it happen if they wanted.
francislavoie 1394 days ago [-]
I feel like if they tried anything, MC/Visa would try to squeeze them until it becomes unviable. They would still need to support MC/Visa until they get enough market share to not totally hinder their existing business.
GordonS 1393 days ago [-]
Visa own a stake in Stripe, and are unlikely to be supportive of such a play.
partiallypro 1394 days ago [-]
I feel like card competition is actually pretty steep. MasterCard and Visa may have the majority of the market, but there are still Discover and AmEx. I have been using things like NerdWallet to figure out what is the best card to go with, it is usually a healthy balance. I think the main thing is that most Debit cards are Visa or MasterCard...and you are locked in by your bank. Where as credit & charge cards are a free for all.
When it comes to advertising online though, you have only 2 choices...Google or Facebook. As a business I can't not go with those two or I'll lose immense business. I can go with a Visa, Mastercard, Discover, Amex...and it really has no effect on me outside of the benefits the card gives me. The fees charged to the banks, etc are essentially the same. So it's really no comparison as to which is worse for the market itself.
teej 1394 days ago [-]
You’re talking about different things. When you shop credit card offers, you are comparing issuers (eg Chase vs Capital One). That’s not the same as the payment processor aka card network (Visa vs MasterCard).
Of course it’s endlessly more complicated then that but it’s important to make the distinction.
numpad0 1394 days ago [-]
When you open a web shop, you pay to get SDK from payment processor to integrate them with the site.
When customer clicks “Checkout”, they are sent to payment processor website to enter card number like 1234 ...5678... and whichever card it is, it goes through, and shop owner receive the payment later.
Which means payment processor has contracts and connects with every card networks, absorb API differences, and on top of that, obeys and agrees to everything CC network thinks or says, to be able to handle any cards customers may have with them.
So if a Visa or MasterCard exec thinks maybe he don’t like Cheetos and make a call to processor CEOs how they think about it, no later than by Friday no one will be able to order a single bag of Cheetos, especially online, using any credit card because payment processors will have explicitly communicated that Cheetos had never been tolerated from the beginning and any store who let that happen will have accounts frozen.
It happens somewhat softer than that but kind of happening once couple years these days.
RichardHeart 1394 days ago [-]
Near the entire economy paying a % rent to these couple companies is unfair. Cryptocurrency can remove these middlemen, however, they're missing some important features. 1. Dispute resolution. 2. Recurring billing. When you see how expensive it is to do #1, credit cards start to look like a wonderful deal.
Someone is going to say:
Micropayments (it's never worked.)
Pre-auth'd lower amounts retailers can pull from you (might work.)
Crypto-escrow (Any place that used to do it has gone out of business I beleive.)
Too volatile: (Peer to Peer stable coins, or "trusted" stable coins protected by laws instead of code address this.)
Thus, peer to peer open source value transfer is the minimum amount of middlemen possible, but is crippled by regulatory overhead at the end points, giving the incumbents entrenched advantage. Caveat: I founded a cryptocurrency.
dannyw 1394 days ago [-]
I would rather see Visa, MasterCard, and other big banks regulated and require them to accept all legal businesses. Fraud can still be blocked but on an individualised, reasoned level.
No more denying legal pornography businesses, no more denying legal fireworks stores, etc.
basicplus2 1394 days ago [-]
One option would be for people to start paying each other in gold.
From your source "More than 82 percent of the value of all U.S. payments goes through ACH"
Note that it's value, and not number of transactions.
Personally, I have only 4 things pay out of my checking account.
Mortgage, HOA dues, and power are all bills that require checking account transactions for auto-payment to avoid credit card fees. These are very large transactions which will greatly skew any measurement by value.
The final thing paid out of my checking account is interesting: the credit card payment. Since any money I spend with my card necessarily is repaid from my checking account, that also greatly skews measurement by value.
If I spent 50% on housing, and spent all of the rest of my money on things with my credit card, then my personal ACH value percentage would be 66%. (1 unit house payment, 1 unit credit card transactions, 1 unit paying credit card bill)
This isn't even starting with business to business transactions. I'm unsure if the source is counting it in that metric, but it would further skew any value measurement. No factory is going to use credit card when buying $100,000 worth of parts from a supplier.
All those things considered, 82% seems about right, even if you assume something like 90% of consumer transactions use credit card.
bretpiatt 1394 days ago [-]
> No factory is going to use credit card when buying $100,000 worth of parts from a supplier.
I have a business who uses a credit card every month to buy more than $100,000 worth of materials from a supplier.
On the consumption end the card programs are wonderful, great purchase protection negotiated, delay on actual payment for additional working capital, and rewards. We basically never have to use cash for employee travel expenses, all via points.
There is no benefit for me paying my suppliers via ACH, wire, or check.
random3 1394 days ago [-]
Yes. But considering Stripe and others charge 2.8% of transaction, it's the more relevant metric.
I think the largest chunk of the volume difference is commercial-use. I don't have the numbers handy but the difference is huge.
kyrra 1394 days ago [-]
(Googler, opinions are my own)
It really depends on the types of products and what the consumer experience is like. Google is an interesting beast in that we provide services across a wide variety of billing models.
You have immediate product purchases, where knowing that the transactions is complete immediately can be important (ex: Play store games, or movies). Credit cards are great for that instant guarantee.
For delayed billing or threshold billing (Ads), slower payment methods can work great (eg: ACH, wires, vouchers). Some of these also allow a standing instruction that a company that just keep paying money against to top-up their account (and Google will see it as a bank statement push payment).
So yes, Credit Cards are a small volume of US payments, they enable specific products that don't work great with ACH or wires. If the US ever gets 100% ubiquitous instant bank push payments, maybe that'll change, but our banking system is too disjoint to move at any kind of speed to do this.
RTP is definitely a step in the right direction. It's coverage is s around 50%, which is good. I'm hoping FedNOW pushes is the rest of the way.
The clearing house is also owned by many of the large banks in the US. While this seems nice, I'm sure there's some paranoia from non owners about joining a network owned by their competition.
The UK went and interesting path of forcing all banks to implement faster payments, so it got wide coverage.
grawprog 1394 days ago [-]
Bet those stats go way up in the next few months as more and more businesses get on the refusing cash bandwagon. Apparently it's for 'safety' but I live in a country where my money's made out of plastic or metal, that shit can be sprayed or dunked in iso. The excuse seems pretty flimsy too when again, places don't seem to bother cleaning off their pinpads before the cashiers or other customers touch them anyway.
drewbug 1394 days ago [-]
The other 82% is ACH, not cash
stevehawk 1394 days ago [-]
That stat won't change much in the US. It's illegal for a store to turn down cash.
There’s no federal law but it’s not a myth. It varies by jurisdiction. Several states (New Jersey, Rhode Island, and I’m sure others) and cities (NYC and Philadelphia, for example) don’t allow a retail business to refuse cash.
fsckboy 1394 days ago [-]
if you owe a business money, you can pay the debt in cash.
jedberg 1394 days ago [-]
Yes, but you don't owe them any money if you want to buy something. From the link:
"There is, however, no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services"
fsckboy 1393 days ago [-]
but if you are going to quibble and point out myths and misconceptions, why not just tell the whole story instead of half of it. If you eat in a restaurant, and they tell you "cards only", you owe them money, and your cash is good. "good for all debts, public and private" has a meaning that is not vitiated by a "no cash" policy.
ByteJockey 1394 days ago [-]
Correct, but if you want to buy something, you don't owe them anything yet.
However, if you stole the thing and were ordered by the court to pay restitution, they would have to accept cash for that.
ur-whale 1394 days ago [-]
18% is freakishly huge, we're talking about the whole of the US here.
What's worse, if you look at the details, there is a swath of products that are darn near impossible to buy without a credit card.
xur17 1394 days ago [-]
And it's important to remember that ACH is typically used to:
* receive direct deposits
* pay credit card bills
* pay rent
Which represent a large amount of the value transferred vs number of transactions.
DennisP 1394 days ago [-]
Just to clarify, that says 18% of the value, not 18% of the number of transactions. From googling a few months ago, credit cards appeared to have the most transactions.
sm4rk0 1394 days ago [-]
However small you think that %-age is, the absolute numbers are still huge (src: Wikipedia):
"100 billion transactions during 2014 with a total volume of US$6.8 trillion"
bitreality 1393 days ago [-]
A major issue here is that payment processors literally choose which industries, and which players will succeed. If your industry is deemed high risk by payment processors, you are fighting a brutal battle to accept customer payments. If you can't process payments, you don't have a business. Conversions will drop off a cliff if you try to switch them to niche payment methods like crypto currency, or even something like Skrill.
Even worse, the payment processors do not apply their own ToS unilaterally. You'll find some websites will retain processing, while you lose it, even though the reason is that your business model is high risk. PayPal is notorious for this. Their ToS will only be enforced in certain countries, leaving companies in places like China with PayPal processing while your company is permanently banned from the platform.
It becomes impossible to compete if you are banned from Stripe & PayPal while your competitors are not. If their own rules are not applied equally across your industry, they effectively pick the winners. Their platform also favors long-standing merchants in many ways.
First by providing them an account manager, second by essentially grandfathering in certain accounts. You'll find it very difficult to process payments in certain industries on PayPal, likely not even being successful in on-boarding, while sites operating in the exact same business have functioning PayPal accounts.
It's incredibly anti-competitive. These processors run such a large scale monopoly; there are so few comparable alternatives, I've seen so many people go out of business purely by losing their PayPal.
sub7 1393 days ago [-]
India figured this out years ago. Launched a domestic government Visa alternative called RuPay and also launched BHIM - an interface where everyone gets an email address like payment address and can send/receive directly. Both have traction.
Sidenote: A bunch of the payment gateways began integrating BHIM and charging merchants a cut of the sale for what they pay 0 for. Can't see that lasting if people move off V/M completely.
m12k 1394 days ago [-]
The experience of receiving credit card payments for a SaaS subscription sucks badly, even if you disregard the inflated payment processing fee. Banks can allow the charge to happen the first five months, then on the sixth charge, randomly turn on a penny and reject the charge with a completely opaque do_not_honor code, which probably translates to 'our fraud detection algorithm felt extra paranoid today'. There's a whole industry of companies who help other companies "poke" their customers when their payments randomly fail, to prevent churn. This seems ripe for disruption. My dream tool for receiving payments:
- Isn't tied to a piece of plastic that expires
- Front loads the fraud prevention by requiring 2FA to make sure up front that the buyer actually wants to pay for this.
- Opt-in, per-transaction chargeback/escrow service (intended for shipment of physical goods) that you don't pay for if you don't activate. Transactions are clearly marked whether they include this during checkout. Otherwise transactions are final
- For subscriptions, allows you to specify the conditions under which future charges should also be accepted, and when they should be held and you get contacted to approve them instead.
- Basically anywhere the current system can fail/reverse a charge, the improved system would verify this up ahead, so the payment processor can be sure the buyer really wants to pay, and the merchant can be sure charges don't fail unless the buyer runs out of money in their account or actively cancels the subscription.
- Charge a much more reasonable processing fee, due to not needing to wade into disputes and fraud recovery all the time.
Polylactic_acid 1394 days ago [-]
The whole system seems to be designed in such a bad way and relies on a bunch of heuristics and insurance to make up for easy fraud.
Why is it that to pay for something you give the seller the keys to your account and they go in and withdraw the money they want instead of the seller sending you a request and you accepting to send the requested money..
Another plus side of your suggestion is it now becomes trivial to cancel any subscriptions since you can simply stop allowing the payment to go through rather than getting the seller to stop taking your money.
imtringued 1394 days ago [-]
I'm still wondering why there is no electronic SEPA mandate. When you want to authorize e.g. for your landlord to be allowed to withdraw rent payments from your account the landlord has to physically mail you a SEPA mandate which you have to sign and mail to your bank.
This may sound like a slightly obsolete but otherwise well thought out system until you notice that revoking the SEPA mandate requires you to contact the vendor first which is kind of silly.
hocuspocus 1393 days ago [-]
> I'm still wondering why there is no electronic SEPA mandate.
There is! Nothing forces vendors to collect a paper form and signature. I know some countries still love paper trails (hello Germany) but even there, you'll find some businesses that don't do it. When I lived in Berlin and signed up for my broadband with 1&1, I just had to copy/paste my IBAN into their online form.
> physically mail you a SEPA mandate which you have to sign and mail to your bank.
Nope. The bank is not involved at this stage. Banks authorize direct debits by default, they don't need to know about the mandate beforehand.
> revoking the SEPA mandate requires you to contact the vendor first which is kind of silly.
It's not. It leaves the responsibility with the contracting parties, and keep banks as a neutral medium. That said, as a customer, you can revert a direct debit with a single click, and permanently reject further direct debits. It doesn't have any effect on your contract (and the vendor will send it to debt collection if it believes you're in the wrong), but you keep full control.
By the way, you can build a fully digitized billing system on top of that (there's SEPAmail in France for instance), and more and more banks support instant payments, which I assume can be used to improve the scheme.
avianlyric 1394 days ago [-]
Interesting this systems already exists. For Mastercard it’s called MDES for Merchants, or to give it its full name Mastercard Digital Enablement Service for Merchants.
It’s an extension of the technology that powers Apple Pay and Google Pay, and basically allows merchants to get a virtual card issued to them.
In the EU that would require 2FA to happen, along with describing to the customer what the billing schedule is (required for SCA but being implemented slowly).
The end result is the merchant gets a non-expiring virtual card to bill the customer, and the customer get the ability to disable certain merchants by asking their bank to destroy the card linked to a specific merchant.
Unfortunately all of this stuff is very new, and there are a bunch of issues that will prevent merchants from using the tech. But it is happening slowly.
shuringai 1394 days ago [-]
the ideal system you described is called bitcoin
ggm 1394 days ago [-]
It always fascinated me that the process went to a semi regulated user pays cost recovery competition model, not to a regulated utility model.
At this point, the innovation stream has just about dried up. We're left with a need for micropayments that don't cost more to process than the value of the transaction, and almost all innovation has taken place to one side of card services.
If we fixed international funds transfer we'd probably get some incremental benefit. KYC is only part of the problem here, I recently did some IBAN transactions to the UK government from Australia and the expectations of fixed-field width (send this 15+ char reference string, but the input side has 12 chars for the reference field) were bizarre.
Huge amount of excess profit in TT.
Cheques? dead except for the USA.
Coins are dying of covid.
Remittence processes and the Islamic banking tradition is waiting to be somewhat unlocked. (trust is not transitive, unless you are a migrant worker from S.E.Asia and you have to get money back to mom and dad efficiently, without having any formal ID in the host country because your boss took your passport)
arcticbull 1394 days ago [-]
> We're left with a need for micropayments that don't cost more to process than the value of the transaction.
I disagree completely.
There's no technical or business reason why we couldn't have micropayments tomorrow. It's been tried many times already. The thing about micropayments is nobody actually wants them. Each time you make a payment of any magnitude, your brain has to process a 'purchase' which carries a large mental burden, and eventually you get decision fatigue.
Micropayments are one of those ideas that people think we want, but in practice, nobody does.
As a thought exercise, why do you pay Netflix $13/month and deal with sporadic content disappearances, when you could pay Apple $1.99 for a perpetual license to whatever piece of content you could ever want? Nobody wants to make that purchasing decision each and every time they want something. They'd rather pay for an all you can eat buffet even if it's objectively worse and more expensive over time.
> If we fixed international funds transfer we'd probably get some incremental benefit.
Check out TransferWise! They've done a ton to solve this problem. They even have a currency agnostic bank account with local banking details in 6+ regions and supports 50+ currencies. [1] IMO they've largely solved remittences for the average joe.
If you've got a ton of money to move you can use InteractiveBrokers to exchange currencies at market rates for $20 per million (!!) in commission.
> And it could potentially have been even worse. Had their few competitors also gone down, literally all electronic payments would have broken at once.
This... is not true. As noted by another comment here, a vast majority of the value transferred (82%) is ACH in the US.
deadalus 1394 days ago [-]
Visa recently banned gab.com from accepting payment over dubious 'hate' speech.
erostrate 1394 days ago [-]
How come we haven't had big privacy scandals from Visa/ Mastercard?
Big companies, a rent-like business, no pressure to do things well, own lots of very sensitive personal data, clients giving the data away without realizing it, little regulatory oversight on the data front, etc.
I would expect them to sell or leak poorly anonymised personal data, leading to huge privacy issues.
Why hasn't this happened?
osamagirl69 1394 days ago [-]
Because they know they have a golden goose and are not willing to risk it all pushing boundaries like the FANG companies are. They also have literally 50 years of experience with their data mining and the only think more powerful that incompetence is 50 years of bureaucracy....
julienb_sea 1394 days ago [-]
There is literally direct competition with Amex. Sure not everywhere takes amex but the majority do, and you can speak with your dollars (and still hold Visa / MC in case amex fails you). Consumers derive huge benefit from the safety, consistency and reliability of the networks Visa and MasterCard have built out, and yes the consolidation is a certain price to pay for that. These companies invest billions into anti-fraud technology.
But they are at their core public companies that want to maintain their image. They are reactive to public pressure and political headwinds, and will cover their bases by running away from thorny messy situations. This crosses the aisle in every imaginable way - whether its stifling whistleblowers or stifling supposed hate speech. The reaction to public pressure is not going to be avoidable with any conceivable system, privately owned or otherwise.
The best defense is competition, and despite this post's assertions, there is competition in this space.
pfundstein 1394 days ago [-]
> Sure not everywhere takes amex but the majority do
Perhaps in the US, but elsewhere around the world Amex is barely ever accepted.
That said this duopoly only really applies to internationally accepted credit cards, lots of countries have alternative payment methods, but these generally don't reach beyond the borders.
wolco 1394 days ago [-]
American Express is not the answer. Let's not replace bad for worse.
Karupan 1394 days ago [-]
I use my Amex regularly. Can you explain how it’s worse?
PeterisP 1394 days ago [-]
The problem with VISA-MasterCard duopoly is that in many markets the intermediaries (banks plus VISA/MC) skim off 2.5% off of the transaction between the mercant and the customer.
Amex takes much more (~4%?), so the problem is even worse there. Of course, they can and do bribe the customer with part of that fee so that it seems attractive, but from the wider perspective it's a huge overhead for no good reason, and if every transaction was like this (i.e. if Visa-MC was replaced by Amex) then that would be a big drain on the economy.
rvz 1394 days ago [-]
Well one of the reasons why they (MasterCard and Visa) backed Libra is because they were after the potential of cryptocurrencies, but in a controlled fashion, which Libra was perfect for them, Unlike other alternatives until they themselves left Libra.
Anything this duopoly can't control is a big no-no to them which is why they detest Bitcoin and the other alternative cryptocurrencies. Some online services are beginning to accept cryptocurrencies, which is a start. Cryptocurrency ATMs are a thing to cash out money, thus one could say that you might have bypassed them.
A side note, for those offended by master/slave terminology perhaps now you can ask Mastercard to change their name. Since, its pretty much has somehow offended somebody out there. /s
sonicggg 1394 days ago [-]
The terminology issue just shows us that people have got way too much spare time during the pandemic.
monkeycantype 1394 days ago [-]
Terms like master and slave would probably be fine with everybody if we actually properly addressed the history of slavery and genocide that set our countries up so comfortably for some of us. I don't think anyone really cares about a word, they care about a casual flippant reference to something they care deeply about, an unfair society in which some of us are beneficiaries of brutality that is not entirely in the past.
IvanK_net 1394 days ago [-]
The worst part is, that the fee for a card payment is shared between Visa/MasterCard and your bank.
Bank transfers within a country are often free of charge, but are quite uncomfortable to make (typing numbers) and usually are not sent immediately (so that you can not pay this way in a grocery store).
Banks have no interest in making bank transfers easier or faster, or opening up to cheaper competitors of Visa/MasterCard. Meanwhile, people happily keep their money in a bank, seeing that all bank services are free and that it "can not get any better".
I think, if anyone is to replace Visa/MasterCard, they should also make their own bank (a place where people keep money in a long-term).
spockz 1394 days ago [-]
We have instant transfers between banks here in the Netherlands. It is coming for the whole EER.
Some payment terminals now can also generate a QR code that you can use to pay, in addition to the normal debit/credit card payments.
choiway 1394 days ago [-]
Ending the duopoly is easy: create a payment processing system that charges nothing. However, you start peeling the onion on that and you wonder if it's just easier to create a new search engine.
jerrysievert 1394 days ago [-]
there's a Futurama gag about a 3rd option that's just as apropos as when it aired:
> Fry: $30? I can't afford that. Unless... Do you take Visa?
> Salesman: Visa hasn't existed for 500 years.
> Fry: American Express?
> Salesman: 600 years.
> Fry: Discover card?
> Salesman: Sorry we don't take Discover.
the good news is that Amex seems to have stepped up while partnering with Walmart for their BlueBird cards - while not perfect, at least helping to add more options. and with walmart in the mix it seems to help get a 3rd (Amex) option accepted more places.
maybe not the perfect solution, but at least a step in the right direction.
HeavyStorm 1393 days ago [-]
The author clearly has little knowledge on the subject of payments. He's likely a consumer.
Getting this "duopoly" right is very hard. Payments has a number of actors, and the label is there to ensure fair play between acquirer and card issuer.
While mastercard and visa controls the market, it's not like there isn't competition: Amex, discovery, etc., are all labels that compete with the so-called duopoly.
tistoon 1394 days ago [-]
Speaking of monopolies: what about the handful guys (there are only 3!) who manage ALL of our credit scores.. Experian
,TransUnion and Equifax.
ssn 1393 days ago [-]
I don't understand Hacker News. Tim Bray's post on Break Up Google was buried and not visible on HN's front page. The next day this on Visa-MasterCard post shows up on the top with a "forget Google" comment. Why?
Is this a result from the community or the algorithm?
HN seems to have changed a lot in the last few years.
coronadisaster 1394 days ago [-]
It is kind of crazy that anyone can buy my purchase history... Are there any way around this besides using cash?
CryptoPunk 1394 days ago [-]
Aren't they just networks for transmitting credit issuance messages, and a set of processes for handling disputes?
Anyone familiar with the intricacies of these operations know how amenable they are to being debundled into discrete components and provided via an Ethereum-like protocol?
dao- 1393 days ago [-]
> Like almost complete control over what can be sold online. Ever wonder why certain things are difficult to buy via PayPal or other similar systems?
So, why? The article doesn't seem to answer that question. What prevents shops from supporting alternative payment systems?
1394 days ago [-]
stiray 1393 days ago [-]
What is extremely important here: we will not forget Google (Facebook, Amazon,...) but just add Visa and Mastercard to the same list. But still concentrate on Google (...) as large technological corporation have potential to end up worse.
ricksunny 1393 days ago [-]
Nicely put. The problem of duopolies isn't limited to the debit-cards space. Every single industry with a strong US footprint regresses to duopology structure. The root cause of this phenomenon needs to be identified and addressed.
Immediate wire transfer could exchange it if people wouldn't be so used to the card. What would be the motivation to do a wire transfer from you account directly to the merchant instead of tapping your Paypass card...
1393 days ago [-]
craftydevil 1394 days ago [-]
Already India start doing it, its UPI system enable us to avoid cards for all type of payments with processing fee. Also Rupay backed by GOI enable us to use those cards in abroad using vast connection.
rishav_sharan 1394 days ago [-]
UPI is godsent. Probably the only good thing to come out of demonetization.
I use it everyday, from buying groceries at roadside stalls to paying for my life insurance.
I have pretty much stopped using cash altogether and use cards mainly in those outlets which don't have upi.
kidsil 1393 days ago [-]
The fastest way to do that is through phone-based payments.
Those protocols are substantially more open than Visa/MasterCard, and introducing a competition shouldn't require hardware changes for the POS.
adultSwim 1394 days ago [-]
Let's tackle both. Harmful anti-trust violations are rampant.
bibbitybobbity 1392 days ago [-]
We shouldn't forget about google. It also needs to be regulated.
This is addressed in the article but the title doesn't reflect this accurately.
TLDR; Clickbait title :sad face:
app4soft 1393 days ago [-]
> Forget Google, time to end the Visa-MasterCard duopoly
It's bad idea to forget "issue 1" and focusing on "issue 2".
Both issues are major.
Ratiofarmings 1393 days ago [-]
So instead of sometimes one of the two not being accepted, you want me to carry 50 different ones and have 2/3 rejected?
No, thank you.
apexalpha 1393 days ago [-]
The only reason some cards are not accepted somewhere is because Visa-Mastercard are so powerful they force 3%-5% margins on transactions for merchants.
In the EU the just use bank cards. And since there's regulations the fees are lows and everyone can use it everywhere.
rbrtl 1393 days ago [-]
No... You have the option of any of 50, and they can all be accepted everywhere; rather than the option of only two if you want a chance of being accepted. I believe this is already law in the EU anyway, but there are few competitors to the big two.
richardwhiuk 1393 days ago [-]
What's law? That you have to accept all types of payment? Nope.
If everything has to be accepted everywhere, then there's no differentiation
ww520 1394 days ago [-]
Amex/Discover, plus PayPal and a host of lessor money transfer apps/companies, like Venmo and Zelle.
adjkant 1394 days ago [-]
Venmo is owned by Paypal. Zelle is owned by all of the big banks collectively (Bank of America, Capital One, Wells Fargo et al.). The closest thing to a "small" player is the Cash app, owned by Square.
No commentary on the larger picture here or Amex/Discover, just pointing out your other examples don't exactly fit your point fully.
ww520 1394 days ago [-]
Good points. Thanks for pointing out.
julius_set 1394 days ago [-]
Just curious why PayPal or Venmo?
ww520 1394 days ago [-]
Well. PayPal is a payment gateway/system where merchants and consumers can both use; it's serving the same role as Visa/MasterCard. Venmo is a bit off but once Venmo allows merchants as cash recipients, it will serve the same role.
annadane 1394 days ago [-]
...can't we go after every monopoly and power abusers and not 'forget' any of them?
vinniejames 1393 days ago [-]
OP needs to read about Bitcoin, it solves most of the problems discussed in the article
x87678r 1394 days ago [-]
Amex/Discover cards exist too, you should use them!
jedberg 1394 days ago [-]
I used to carry an Amex, but I also had to carry a Visa for all the times the merchant wouldn't take my Amex. Life got a lot easier when I got a Visa with all the same rewards as my Amex.
except 1394 days ago [-]
So, how does one build a card network?
User23 1394 days ago [-]
It's easy, you just convince a plurality of banks to honor your IOUs.
raffraffraff 1394 days ago [-]
Well whatever, but the mastercard name is so uncool right now I'm amazed they haven't changed their brand to primarycard.
1394 days ago [-]
xtat 1393 days ago [-]
was all on board until the conclusion was "regulation"
MaximumYComb 1394 days ago [-]
What was on NP2 that it's been censored by Mastercard? A quick search online suggested it was right wing politics but I suspect it must have had some content cross some legal line in order for it to be blacklist.
biolurker1 1393 days ago [-]
blockchain can change that with stablecoins.
frankzen 1393 days ago [-]
Bitcoin Cash
moralsupply 1394 days ago [-]
> time to end the Visa-MasterCard duopoly
Why? Because monopolies are bad, and we don't like them, no matter if they provide value to people, if they are not built around government regulations that stop competition from happening.
notpushkin 1394 days ago [-]
They would have to provide more value for less money, were there some competition. I don't see a way in which one can compete with those two (without resorting to aggression) on a global level though.
mtgx 1394 days ago [-]
Why forget Google? Who says anti-trust should be applied in a mutual-exclusive way?
I hate headlines like these.
Proven 1393 days ago [-]
Really?
Can't say I give a damn about Visa and MasterCard.
twirlock 1394 days ago [-]
No actually fuck Google.
programAgaib 1394 days ago [-]
Forget finance and tech, medical is under the tight grip of Physicians.
Every medical service requires paying a physician. And it's no trivial amount, its a huge expense. Further, any numbers on physicians salaries are horribly skewed because they don't consider specialists "physicians".
exprZ 1394 days ago [-]
Giving everyone access to payment processing means giving platform to unworthy people like misogynists, white supremacists and conservatives as well.
Maybe we are better off with VISA.
voldacar 1394 days ago [-]
Can't tell if satire or not
1394 days ago [-]
1394 days ago [-]
pwdisswordfish2 1394 days ago [-]
Let's tackle Google first then we will have a look at the other complaints. Not going to "forget" Google. Sorry.
programmarchy 1394 days ago [-]
Why not nationalize credit and banking? The industry has shown its gross incompetence time and time again, notably in 2008 and now with COVID they’re yet again settled with bad debt, this time corporate instead of housing. The nation already subsidizes their risks and failures, so why not the upside. Establish a clear hierarchy of accountability rather than the free for all smash and grab we’ve been seeing for decades.
Jerry2 1394 days ago [-]
>Forget Google
How about NO! How about we go after all three of them? Google should not be left off the hook. This is just whataboutism by Google's PR.
Anyway, Google's employees are all over this thread.
Rendered at 20:33:07 GMT+0000 (Coordinated Universal Time) with Vercel.
The card network (Visa, Mastercard, etc) do NOT make money on Interchange.
It’s hard to have a healthy dialogue on this topic if folks don’t understand the basics of how the card networks generate revenue.
Below is a decent primer.
https://www.investopedia.com/articles/markets/032615/how-mas...
Interchange fee pricing is set based on how much mastercard charges the banks, so while technically true, the interchange fees are basically set by mastercard's pricing.
That’s not true though, or at least is a massive oversimplification. In the US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.
And that's a bad thing, because it's essentially the poor subsidizing the rich. People who aren't able to get credit cards (or the "good" cash back credit cards) tend to be worse off financially than people who do.
Cash is not free for the business. People always assume that businesses are losing out on revenue by accepting cards, and thar cards inflate the price for everyone.
But it's not free to accept cash - you have to manage your float, transport cash between the bank and your premises, and there can be bank charges to account for too. All of which can easily eclipse the cost of card fees, especially in markets like the EU where those are capped.
Usually the main reason some shops prefer cash is because they can put the cash directly in their pocket and do tax fraud on a percentage of their revenue.
Stores need to accept cash regardless, so there’s still some minimal added costs to using cash, but even with the offered discount it’s less than the credit cards...
however if stores stopped accepting credit cards they would quickly find themselves drowning in the same costs that credit cards were invented to avoid.
I'm not sure I buy "drowning in the same costs". I think there's something more akin to a prisoner's dilemma here.
Not sure were you were. I am from northern Germany, around Hamburg.
But every single store that does accept cards (not every little store can bear the fees, though) has theses signs.
So I would counter your n=1 anecdotal argument with an equally non representative n=1 argument. No one learns anything, except that some shops in Germany ask for the use of cash-alternatives, others don't.
On a recent trip to Germany, I didn't see a single such sign.
Germany is changing gradually, perhaps due to the EU's limits on the fees Visa and MasterCard can change, but Covid-19 doesn't seem to have much effect.
But I asked someone in a popular local store ( Belgium) and consumer behaviour hasn't changed.
Also, you mention Covid would be a stimulator for digital payments and that doesn't seem the case in Belgium. So I wouldn't know why it would be the case for Germany.
Before COVID one of the main banks AIB was to introduce some extra charges but they stopped that charge increase https://www.irishtimes.com/business/retail-and-services/aib-...
Maybe your city has a “safety of crowds” thing going on but when cash only businesses start going scarce, I bet the remaining holdouts start getting more and more scrutiny.
The money industry tends to be heavily regulated, and self-regulated (PCI DSS) for a reason. Crime happens there because that's literally where the money is.
I'm doing my part, though. I pay with cash whenever I can. In Germany that's easy (often the only option e.g. in restaurants). In Sweden, not so much. And then there are countries in between.
It's been accelerated sharply by the pandemic. The few holdouts changed tack. There's accessibility concerns for the unbanked.
Characteristic of hyperinflation, is that nothing keeps up with it. Forget wages keeping up: your very paycheck is worth less at the end of two weeks than it was when you received it.
Sincerely, a guy who survived 313 000 000 % inflation per month.
Does it? In an inflationary environment the status quo is that your wages shrink. I guess it’s better than holding cash because you can renegotiate your wages back, but I don’t think rich people have most of their assets as cash.
The US is a classical inflationary environment and wages have kept pace with inflation forever.
Indeed, inflation only, and intentionally, punishes those who hoard cash.
I would note that chart begins prior to ending the gold standard in 1971, and it has tracked very well since 1995.
I was off-base when I said "forever." I should have said in recent history.
Funny you mention that, because that’s yet another case where it’s expensive to be poor. If you’re living paycheck to paycheck, barely making ends meet, you likely don’t have the cash flow to stock up on a sale. So rather than buying 18 months worth of TP when there’s a sale + coupon on the 64 pack, you are buying the 4 pack at regular price that costs twice as much per unit.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”
And the point Samuel Vimes is making goes far beyond a simple "If you buy cheap, you buy twice." It extends that basic knowledge by realizing that some people have no other option than to buy cheap, forcing them to spend resources over and over and over again and still get a worse result in the end, and how this is a fundamental and systemic social unfairness.
And for the kinds of goods I buy, in most cases it doesn't hold up. Cheap shoes might be only 25% of the price of good shoes, but in my experience last 50% as long, costing less overall. Compound that with other chances of loss (getting dusty in the back of a cupboard and eventually being thrown out in a declutter), and cheap works out far cheaper
[1] https://www.vox.com/2014/6/27/5849280/why-free-parking-is-ba...
Instead of 2% cash back for some, they could just add 20 percentage points or so to the interest rates of everyone else. If you think this is unfair, you're really just saying that interest rates are applied unfairly. But it doesn't sound like that's your actual thought process. Is everyone who pays higher rates subsidizing those who pay lower? How do you know?
*This is not my original idea, but something I read somewhere.
The money for cash back comes from transaction fees. It would have to. People go out of their way to find ways of maximizing their return from these kinds of systems so any cash back scheme that could be too easily gamed would fall prey to these people. That actually happened once, albeit to a “merchant”. The US mint used to let you buy $1 coins, online, with a credit card, for $1 each and free shipping. You could literally buy your entire credit limit’s worth of $1 coins, deposit those same exact coins at your local bank branch to pay your credit card bill before it came due, and straight up profit from the cash back.
You pay 2% in transaction fees, you may or may not get almost all of it back as "cash back".
In a world without significant transaction fees, we wouldn't have the grace period either, and the people who get the most cash back would pay lower rates and others higher.
The reason the powers that be like the current system and would lobby against a crackdown on fees is because it feels like they're giving you something with the grace period, and giving you something if you get cash back.
But it's just a play on psychology. If there's an injustice, I think it has to boil down to evaluating credit risk incorrectly.
Guaranteed per-transaction revenue is not fungible with interest revenue. Interest revenue is extremely discounted by both time value and default risk.
> In a world without significant transaction fees, we wouldn't have the grace period either...
At that point, most of the lower-risk customers who use credit cards would switch to debit cards, credit card interest would probably have to go up due to adverse selection and higher default risk, and credit cards would be a much smaller business overall.
Most of us would not extend credit to somebody with low odds of returning it, so why do should we expect companies and organizations to behave differently? I feel like wrapping this up as in the pretty words "systemic inequality" is framing it as some constructed oppressive structure, which I'm loathe to do.
You don't like the term "systemic inequality" yet you're framing the problem in terms of our current system: very impersonal, only-the-numbers-and-ROI matters.
If you phrased it as "most of us would choose to exploit the more desperate because they have very little alternatives instead of willingly helping out" you might trigger different instincts. Instincts that would favor restricting interest rates and favoring a stronger social safety net.
There are more generous and forgiving systems that have existed successfully elsewhere in human history, so they're not incompatible with human nature, so yes, I think it's fair to characterize the American system as iniquitous.
Why should someone else's desparation and need be solely viewed through the lens of economic opportunity for someone else?
In it's simplest form, to make a loan, you have to have the resources to loan out to begin with. Furthermore, dereliction of debt is expected. There is no guarantee that people will repay in a timely manner, and missed payments/discharged debts are not uncommon. As such, interest rates can serve to create a sustainable system by helping to cover these debts.
Discount any consideration of their ability to repay, and what you give is no longer a loan, but a gift. A gift at the cost of others that you loan to.
What would be a more personal approach when figuring out whether or not to loan the money to someone?
And that condition will always benefit those who can return back. It's not about being newcomer or stranger, it's about being able to identify if it's a loan you can do.
Denying a 2% discount to people who are likely to default: ???
The problem is not that the company is trying to make money, it's that this market has become an oligopoly with too much pricing power. With the prevalence of credit card purchases this is a tax on every transaction in the economy. Even people that don't use a CC pay a price set for those that do.
This has indeed meant that rewards and cashback credit cards have largely disappeared (with the exception of Amex, which operates outside the interchange system?).
Rewards/cashback cards that do still exist are typically tied to specific retailers, with whom the issuing bank has cut their own deals.
With AMEX the merchant does know the exact fee structure and can therefore decide to accept or not to accept AMEX ahead of time. That's essentially the argument why the fees for AMEX were not capped.
Right, but try using Amex in Europe.
Outside of major international hotel chains, or where you can do your purchase online through Paypal, you may as well not bother asking if they accept it.
It's very interesting to hear that.
When I first started traveling to Europe, having an American Express card (or even better, AmEx travelers checks) was the best way for an American to pay for things. It's even written into some classic books and movies.
My how things have changed.
I would guess 90% of Europeans have never even seen one of these cards, unless they work in international hotels or tourist places.
And there is a lower % for normal/popular cards (Visa/Mastercard) and higher (even 4%) for Amex, so most stores just ignore it and remove the Amex symbol from their terminal.
And yet, my company provides Amex corporate card for bussiness travel, but we usually go to US, so Amex is more accepted there.
That was one of the deciding factors when I was planning on getting a second credit card (so I'd have a backup while travelling).
I knew here in Australia they are not widely accepted, with only major retailers accepting it typically, but I thought that this was just Australia being backwards.
After spending the first two or three weeks trying to pay for things with it, I gave up except on checking into a new hotel.
You could probably get by here with just an Amex card and cash, but I keep a backup card for the places that don't accept Amex.
Your neighbours (Norway and Denmark) were unwilling to accept it. I forget which supermarkets I tried it in in both of those countries, but three large chains all had their card terminals reject it and the staff looked at it like I'd tried to use a hotel keycard or something.
https://www.americanexpress.com/nl/voordelen/shopping/
I'm not surprised supermarkets accept it. Does your local pizza takeaway, kiosk or bar accept it?
Yes, but in reality, the program comes from an upside down approach to overcoming the obviously anti-competitive practices that VISA/MC use to forbid retailers from offering discounts for not using VISA etc..
You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.
You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)
But you can possibly find ways to give points, or 'cash-back'.
Until now ... [1]
VISA is now saying that even such 'cash back' rewards programs are a violation of its rules.
Have a look at the press release - it's positively Orwellian:
"In order to maintain a level playing field" -> "In order to avoid all transparency and maintain our hidden monopoly" we require that nobody can take steps which highlight the how our transaction fees are embedded in the price.
These are pretty blatant anti-competitive practices and taking them on is tantamount to taking on the entire banking system. It's not going to happen.
There would need to be an 'outside disruptor' like the Word Processor to the Typewriter kind of thing.
[1] https://www.pymnts.com/visa/2018/non-compliant-cash-discount...
Any payment/money movement system needs a license and you’re still bound by federal rules on AML and KYC. It makes it hard to support the cannabis industry. AML laws will force you to report large cash movements.
The $30 wire fee is what a bank charges you to make money and dependent on the bank. Underlying systems near free to use like ach for domestic wires.
I see this all the time. * At more than one bookstore, the dry cleaner, markets, my current and previous landlord, my accountant, and pretty much every gas station since the 1990's.
* Pre-quarantine. Now I don't see anything.
Gas stations I find weird, in general. How did they get that exception?
Some gas stations where I live have a "credit" price and a lower "cash" price.
The above poster was incorrect.
(2) Credit surcharges and minimums used to be forbidden, but they are not anymore ("2% surcharge for paying with credit, minimum $10 for card payments")
(3) It wasn't federal law, it was the merchant agreements that precluded credit card minimums and surcharges as a condition of signing up to accept credit card payments from each of the major issuers.
> You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)
We see these a lot in Australia. I wish they'd enforce the same pricing here for cash and card — I don't like to carry cash around, and I hate it that I have to pay a surcharge when paying by card.
https://www.accc.gov.au/consumers/prices-surcharges-receipts...
A Visa or MC credit or debit card txn go via the Visa or MC networks.
An EFTPOS txn goes via the EFTPOS network, it's much cheaper.
In AU, the fees are regulated and must be disclosed to the user as an extra charge. Most businesses much prefer the EFTPOS network because it's much cheaper.
Until recently, the contactless environment didn't support EFTPOS, so it always used the Visa or MC networks. Same applies to Google and Apple Pay.
If there is no price differentiation, this just means everyone has to share the cost, rather than the people who choose to use it
So you think your use of a credit card should be subsidized by people who pay in cash?
Cash is not free for a store to handle. Stores pay transaction fees on credit cards, sure, but they save on all the costs of cash. A hypothetical store that takes credit cards only would not have any of these costs and their vulnerability to robbery/theft would be limited to merchandise and capital only, saving the cost of insurance against theft of cash. For some types of businesses (services rather than retailers), this makes their office a pretty unattractive target for burglars and eliminates employee theft of cash.
Stores generally try to give extra charges for using credit cards, not the other way around.
It seems like the fair thing to do, should be to allow a store to do whatever it wants, and make these credit card requirements illegal.
So, it would be allowed for stored to charge extra for either cash or credit, whatever they choose, and the credit card companies would be forbidden from stopping this.
It's common for online stores to charge a few percent extra for credit card payment (the base price usually applies for the most common form of online payment, iDEAL, which is cheaper, I guess because the banks cut out Visa/MC).
On the other end of the spectrum, there are some physical stores and restaurants (usually chains) that don't accept cash. They're allowed to do that, given that they state so very clearly upfront.
that's like saying opening the doors everyday to customers is not free. it's true, but misses the point. handling cash, like paying for utilities, is a fundamental cost of doing business, and so it should be, because the right to anonymity and privacy is woven into cash. not so much with electronic transactions, which are optional, alternative costs.
(Especially when the cost between different payment mechanisms differ a lot.)
It just happens that they dont want to do that, because dealing with cash is cheaper
One small cafe near a place I used to work said it usually took 30-60 days for funds to clear into their account after a card transaction. That, for them, was a major problem as it meant that they couldn't then pay their suppliers in a timely manner when cashflow was highly variable.
Then again, a bakery I visited that was in a small town said they'd stopped taking cash, as they got robbed some huge number of times.
I don't think it should be so clear cut like that. The credit card processing fees charged by the processor is a cost of doing business and should just be factored into the pricing without being explicitly passed on to a subset of customers. For example, a shopping centre or convenience store may have toilets that only a subset of customers would use. Should the customers who bought something without using the toilet be "subsidising the cleaning costs"? If a store offers online ordering, should customers who ordered online be "subsidising the rent of the physical store"?
It's a valid business decision to NOT charge extra for the toilets, too. Just like shops usually don't charge people who are a bit slower in the checkout line more for taking up cashier time.
https://en.wikipedia.org/wiki/Expressions_Hair_Design_v._Sch...
Plus, plenty of gas stations show a cash/credit price on their signs.
The merchants are no longer allowed to block this behavior.
But that's only if you pay by cash, you don't get any point by paying by card.
The place I went to yesterday for lunch did this. This is in Silicon Valley. I believe it was a 3.9% credit card fee.
The fraud protection of credit cards mostly comes out of the pockets of the merchant, I think? So the merchant could give people a discount for using means of payment without a chargeback, like cash.
You are right about the actual credit. Though eg in Germany people usually use their overdraft in a same way that American seem to be using their credit cards for short term credit.
(For either convenience is the main selling point. The fees and interest rates for overdraft and credit card debt are usually quite high, I think?)
People will freak about their customary rent/take being threatened. They gotta come out of the woodwork and justify the charge... somehow. A HN proxy battle!
d = dollars t = transactions count
I(d,t) = Interchange total profit/cost to a bank from fees in and out F(d) = scaling function for interchange returns based on cash pushed through as an arbitrary function G(t) = transaction cost function based upon arbitrary scaling.
I(d,t) =F(d) - G(t)
But..... You have the main point here. The whole premise of monopolies is that monopolies dominate bottlenecks, and use them to generate outsize revenue and protection from competition.
Facebook doesn't make money directly from whatsapp. It can be used to generate data for FB's main advertising business. Most importantly, it helps maintain facebook's dominant position in social media. That position is revenue generating.
I agree that understanding the mechanics are important. But, we can't keep treating monopolies as innocent of monopolistic practice until proven guilty. The reason we have antitrust in the first place is that monopoly positions lead to monopolistic practices. We need to assume monopolistic practices exist in the case of a monopoly. When one monopolistic practice (eg amazon marketplace or adwords) has been proven in court, this should be treated as proof of monopoly, not a standalone violation.
Same with the CCs.
EDIT: Warning in some German cities (e.g. Berlin) you will find a lot of cash only restaurants, mostly due to high costs of payment terminals not being worth it due to most people paying with cash anyway. Like the a local restaurant from where I live they bought a payment terminal it broke in some stupid accident no insurance want's to cover so now it's back to cash only.
These cards used to be called EC card, however MasterCard now has all the rights to the EC brand. In fact debit MasterCards with EC branding are starting to pop up now.
You either want to speak of "girocard" which is our own payment network or "debit cards", which includes the likes of Maestro V-Pay, but also some Visa and MasterCards. In the same sense, you don't need a credit card for most online shops, you just need a Visa/MC (some will only take credit, but most will take debit).
And as for PayPal: they don't use your "EC card" either. PayPal offers to process the charge by way of direct debit, which is (now) a SEPA process and totally unrelated to any debit or credit card you may have. It just so happens that girocards list your SEPA account info.
/rant. Sorry, this is just one of those things that gets me.
When I finally understood how that system worked I also finally understood this weird trope in American movies where a character has a half a dozen credit cards in their wallet, and they burn through those as if it were free money for some reason. That never made any sense to me up until that point.
I’m not asking for pity, I knew what I agreed to and I’ll pay it but sometimes high interest revolving credit (credit cards ) only choice you have.
To build a credit score. When everybody lives in debt, it is expected for you to do the same.
[0] https://stripe.com/pricing#pricing-details
[1] https://www.paypal.com/us/webapps/mpp/merchant-fees
See here for info: https://www.fool.com/the-ascent/research/average-credit-card...
https://www.thebalance.com/debit-or-credit-315293
https://pocketsense.com/pinless-debit-card-rules-9651.html
https://consumer.sd.gov/fastfacts/credit.aspx
PIN/contactless debit transactions go through VISA/MC here and they definitely cost less, see below.
However, not 100% sure about remote online/web transactions - most of those providers here are "contact for pricing", but e.g. BlueCommerce and Checkout.fi seem to have a single rate for card payments - though it could be the difference is just "averaged out" (like e.g. iZettle does for card-present EMV transactions: 1.95% for all cards).
Couldn't find an up-to-date English price list for Nets Finland, but here is a 2017 one in Finnish: https://ttlsystems.fi/wp-content/uploads/2017/10/SME_Hinnast...
Base rates: VISA Debit 0.41%, VISA Credit 0.91%, MC Debit 0.42%, MC Credit 0.92%. Additionally +0.04€ per transaction.
Remote transaction: +0.30%, foreign EU +0.10%, foreign non-EU +1.30%, corporate card +0.80%.
SumUp Finland: https://sumup.fi/maksupaate-hinta/
0.95% VISA/MC Debit, 2.75% credit cards.
It would be nice if the US had PINs like Europe does for credit cards.
I make around $1500-$2000 a year in cash back from my credit cards and $195 in fees. 6% back for groceries, 3% for gas, 3% on online shopping, and 3% for restaurants. All my household utilities and bills are run through my Delta card to collect miles and a $200 yearly voucher.
Some cards do offer this feature, all issued by credit unions as I recall. Spokane Teachers Credit Union, First Technology Federal Credit Union, and State Department Federal Credit Union are the three I know off the top of my head. Target's MasterCard version of its REDcard also has a PIN but you cannot apply for that card directly.
(I have cards from each of them, except SDFCU, and have considered getting that one simply because it would be a chip-and-PIN Visa card and I don't have that particular combination.)
Care to expand on that?
"International Credit Card" are a small fraction of the total -- under 5%. The vast majority of transactions by number and value are by debit card.
(The national/international distinction is between Dankort, the Danish card payment system only used on most debit cards here, and the foreign companies like Visa and MasterCard.)
https://www.dst.dk/en/Statistik/emner/penge-og-kapitalmarked...
(For international readers, in Denmark, unlike Germany, the national debit card can be combined with a credit card on one card and then the terminal just chooses automatically)
I can't get a credit card anyway since my income isn't high enough, and I wouldn't want one because they charge annual fees in Australia.
Banks in Australia run their own payments system, so it's possible to pay by card without going through Visa / Mastercard. Some cards issued by banks don't even have the Visa / Mastercard affiliation, but I think the Visa / Mastercard debit feature is needed it you want to make card-not-present transactions online.
They generally don't have any kind of linked reward points structure, but that's not a huge loss as most of those got nerfed after the ACCC changes a while back (see elsewhere in these comments).
I do have a Visa DC and a MC CC for redundancy if my bank is down, most people I know doesn't even get why.
https://www.riksbank.se/en-gb/statistics/payments-notes-and-...
(Seriously, people, these kind of statistics are extremely easy to find. No need to make them up!)
Very few people even have credit cards.
Places like restaurants and groceries still usual demand something like "minimum 5/10€ to use card", but those signs are disappearing.
same for so many finance and legal topics
you should see the stuff people say in cryptocurrency land, you can even agree with their technology but still be surrounded by the weakest arguments
The number of voices with an accurate understanding is far outweighed by the number of people with some kind of personal and ideological axe to grind about (insert some combination of one or more of: government/regulation/inflation/economics/etc) and from my perspective the whole scene got increasingly wild.
Though I mostly read him for his writings on eg the private mints that solved the British small change shortage during the industrial revolution. https://www.goodreads.com/book/show/3392302-good-money
One way or another every fee must be absorbed by someone that pays.
Interchange goes to issuing banks, not Visa/Mastercard, and that's a big part of why the system is so stable as any competing scheme with a lower interchange will not be offered to customers because it won't be as profitable for the issuers. And, if needed, they can use the whole interchange amount for marketing and cashbacks to make any new scheme uncompetitive, because if it has lower interchange, then it can't match that without losing money.
In particular, it is they that are able to set rates for transactions, and do anti-competitive things like ban e-retailers from offering relative discounts like 'save 2.5% if you use cash' etc..
It's absolutely an ancient cabal banking network, that would be disrupted in any normal, competitive system.
2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.
Edit: monopoly->oligarchy
The fact that banking wasn't a cabal led to the creation of Visa & MC, they provide the function of operating a deliberately independent interchange so competitive banks can work together without having to talk. The fact they havent been replaced isnt due to a lack of "normal competition", its just a system that has built in network effects (but is sticky unlike most social networks).
Dont get me wrong - banks love cabals! Thats why domestic switches (led by central banks) are replacing the scheme networks in most countries for domestic transactions with the domestic switches being linked for international transactions, pushing Visa & MC out.
>> 2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.
I think your wrath is misdirected - that 2.5% may be stated in a Visa/MC press release, but it doesn't actually come from Visa or MC! The banks set interchange through the schemes. You add in 5000 different schemes thats not gonna change the fact that your bank is going to try to get the best bang for their buck if they "acquire" merchants or "issue" cards.
The porn thing is linked too, banking is a heavily regulated space, easy to put pressure on. Acquiring banks get in trouble easily, they rely on schemes to blacklist anything which could land them in hot water. Even if there was no MC/VISA banks would still be paying random service providers to operate blacklists. The only difference would be that it would be cheaper. And typically thats not a good thing.
The evidence that they are an oligarchy lies in their power to set prices. Which points right to the definition of what a monopoly is.
If such systems were truly competitive, and we had say, 5 completely different systems that were truly competitive, the price would not be a total of 2.5%. The price would be set by the market, not the providers of the service and it would be much, much lower than 2.5%.
The article's main point is that such large companies are a cybersecurity risk, and that the government should regulate/nationalize/globalize payment infrastructure.
Unfortunately, experience tends to show that governments would be far worse at providing secure, low-cost payment services. Also, credit cards already are highly regulated when it comes to consumer protections.
So, this article is just not making a lot of sense to me.
If you're a bank who wants their business customers to receive payment via Mastercard, you are not allowed to give a bank account to or otherwise handle payments for anyone on the MATCH list, otherwise Mastercard will shut off your bank's access to their network completely, probably putting you out of business. There is little transparency about how entities end up on this MATCH list. The article does not propose an exact regulation, but the end goal would be that a single company can't arbitrarily shut people out of most of the financial system.
People laugh about bitcoin, and the implementation surely has its drawbacks, but the idea of a decentralized digital payment system is alluring.
Paper from 2010 showing this: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1652260
News article with a good summary: https://www.reuters.com/article/us-usa-fed-wealthtransfer/cr...
tldr: >> ...the lowest-income household ($20,000 or less annually) pays $21 and the highest-income household ($150,000 or more annually) receives $750 every year.
Predatory lending generally refers to companies like payday loan companies and cash advance companies which feed off of forcing people to continuously borrow until they can't borrow any more.
Lending should absolutely be accessible to everyone in some way or another, especially in a world where a transmission failure can lead to a lost job if you can't afford to fix it right away.
It is highly restricted in many places.
Such protections should either be scrapped or extended to cover all methods.
You are free to invent a payment method and provide all these protections to your customers. Why would you want to remove protections that CC companies are providing to their users?
Is being able to read and write an "individual responsibility?" How about the ability to communicate in a language at all? What about any other basic core skill that would make a person capable of learning more things to make them "productive?"
"Individual responsibility" as it pertains to these topics is at best a misnomer, if it even names an existent thing at all.
Surely you don't think it's ok for, say, a Company Town to exist? Can you extrapolate from there why it's not ok for credit card companies to bamboozle less educated Americans for money?
I guess we could look at the general fact that education is one of the better investments to increase a nation's GDP, bit I'm more concerned with the ethics than the money.
I could follow your argument if the card issuers weren’t transparent in their pricing and terms like payday loan companies. However, the interest rates are laid out very clearly several times as you apply and are approved as regulations demand. I’m all for education but at some point you have to let people do what they want with their money.
I'm not sure the country has taken the necessary step up in early education to even have the population have a baseline understanding of what interest rate is. I didn't learn that anywhere in elementary, middle, or high school. I had to figure it out on my own.
I don't think that's acceptable. I think that leaves our population vulnerable to predatory companies, who have a disproportionate ability to lobby the government to allow them to stay predatory.
I envision a capitalist hellscape where the population is kept purposefully reapable.
If you've got great credit, you get a high limit, slightly-less-astronomical rates, and all the rewards.
The cost of the rewards is (as I understand it) mainly carried by the transaction fees, spread out over all purchases everywhere. So you have pointless price increases for people who /don't/ use credit cards (like me) or have poor credit, and the benefits of that 'tax' going to users with good credit (ie, rich people). So, yeah, it's a wealth transfer to people with better credit.
There are relatively few businesses in the world that can rip someone off for a year, then allow them to pay a more reasonable fee in exchange for guaranteed business, and still have the consumer claim that the system “doesn’t feel punitive.” The whole thing is kind of brilliant.
By participating in the cashback scheme you're putting more people through that ordeal by means of higher fees.
The only way to win is not to play.
At that moment in my life, the risk on lending me money was high and therefore the product I could access was limited. There was little incentive for the bank to risk lending me money, so I needed to purchase my way into rebuilding my credit. As the risk in lending me money decreased, banks became incentivized to offer me lines of credit so the cash backs kicked in.
Rebuilding my credit has allowed me to access lower rates on my mortgage , investments loans and other financial tools that have greatly contributed to my quality of life. I would consider that to be the reward.
It's frankly a brilliant scam, and the fact that people don't think it's a scam is its most brilliant aspect.
Visa/Mastercard charge merchants 1-2% interchange fees for each transaction.
I'd guess that people putting $20k a month on their Visa (I know a few that do) are paying for themselves with the interchange fees.
> "Out of the various fees, interest charges are the primary source of revenue." [1]
Yes, credit cards charge a large transaction fee, but wind up refunding a large portion of that back to the consumer in the form of rewards, so these days that's not the main source of profit.
[1] https://www.valuepenguin.com/how-do-credit-card-companies-ma....
I still have to pay the higher transaction costs even without a credit card, because the credit card companies require that vendors have the same prices for card or cash, resulting in higher prices for everyone.
You'll see cash discounts at some gas stations, and the occasional small coffee shop or takeout place will have a $10 minimum, but otherwise it's gonna be the same price most places.
Then it's nothing like taxation and it is optional.
https://news.ycombinator.com/newsguidelines.html
The card companies charge merchants for transactions. The merchants raise their prices to cover those transaction costs: For a very long time (and still, in a few places) it was against the card company's terms of service to have a card usage surcharge. A very few places now have 'cash discounts' or don't accept cards at all, but these are by far the exception. As a result, /everyone/ ends up paying for credit card rewards, even those who don't use credit cards.
I'm in Canada. With one exception, no bank client card I have had (which were all usable for debit) had any Visa logo on it. That includes current ones.
The exception is one TD client card.
The situation is explained here:
https://en.wikipedia.org/wiki/Visa_Debit#Canada
TD is one of the banks that offer Visa Debit. This TD client card is also Interac-branded, so I'm guessing that the card will use the Interac network for domestic transactions, and in that case its Visa Debit personality does not come into play.
Those are not the only two networks for debit/ATM in Canada. There is also "The Exchange":
https://en.wikipedia.org/wiki/Accel_(interbank_network)#The_...
(used by a lot of smaller banks and credit unions).
The Canadian Credit Union Association also runs an ATM network called AccuLink.
It's important to know which network your card uses if you want "ding free" transactions. E.g a "The Exchange" card can be used at an "Interac" ATM, but there will be a fee.
> Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers.
Even if they aren't extending credit they're still facilitating the transaction - it's not like the visa sticker is on there for marketing purposes
There's plenty of cases in technology where "but we don't do anything with your data!" is not a good enough excuse. Many of us still argue for decentralization or federation or user controlled data, etc. Similar concerns I have for visa.
It's a plastic card, it is issued by your bank, it's still using the visa/mastercard network, but instead of credit, it is tied to actual funds in your bank account.
Tell that to the increasing number of shops that no longer accept cash.
Definitely not the case here in the UK, credit cards are very common.
Credit card fees and rebates are such an amazing example of how systems can fool human beings. The entire system clearly could not exist in a frictionless, well-functioning marketplace —- but people seem hard pressed to actually figure out how the whole thing works. It’s kind of brilliant.
Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor.
> I suppose a well-functioning competitive market
You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is why.
You are also ignoring the cost of cash. Theft and cash handling isn’t a zero cost. Why should I, as a credit card user, be forced to subsidize losses due to cash handling? We could also talk shoplifting as well; policies that don’t punish shoplifters means I get to subsidize that as well. We could go on and on and ultimately it gets absurd. If you don’t like the price, go somewhere else and the market can sort it out.
How about the store gets to decide what to charge?
Most stores seem to believe that credit cards are more expensive, which is why they try to offer discounts for cash.
So the facts do not back you up.
Then shops will have two prices cash price and credit card price. Then people will use cash more, and the government will lose some of the information they get from reading everyone's credit card transactions.
Do you think this affects the government's decision? Or are politicians simply bribed by visa/mastercard?
Obviously not everyone does it, but it's certainly not uncommon.
On the other hand, there are also a lot of costs associated with handling cash. The expense of tracking bills and coins and going to the bank every day is not insignificant. So it's pretty easy to argue that there's no reason for cash discounts either, because handling cash can actually be more expensive than handling cards, particularly when you're doing it for only 5 or 10 percent of customers.
The CC companies are only taking 2.5%-3.2%. If they're offering a 5% discount for cash - it's almost certainly tax evasion.
So if you buy a $2 Coke, it's not a $0.054 fee (2.7%), it's $0.354 (or a whopping 17.7%).
Maybe my dentist evades a few taxes, I dunno. But people buy cheap things at the bodega, so it probably is closer to the actual fees.
If it says debit on the front of the card, it is debit.
I’ve never seen this work in person, but some people claim their debit card worked as a credit card and whatnot. Even if that is true, all merchant systems I’ve worked with allow the merchant/cardholder to select debit or restrict transactions to only debit.
This isn't the full picture. Debit card transactions might only be a few cents. But you still have to pay a fixed cost for the machine and related bits. For some businesses, that cost might be too high to justify.
Also, India came up with RUPAY which is a great answer to VISA/MasterCard monopoly. But somehow it didn't catch up in usage I think.
No one cares about numbers like that. That's way, way below the convenience threshold for a typical consumer. Most of us, me included, would rather pay an extra 3.5% than fiddle with deciding on which card to use.
Which is to say: the market has spoken. We've settled on the duopoly not because it's a trap but because it actually maximizes utility. The uniform convenience of "credit cards just work" has quantifiable economic value. And it turns out to be somewhere around 2-5% of the transaction.
Which leads me to believe that it's generally worth it for businesses, despite the "fees".
https://wallethub.com/edu/cc/market-share-by-credit-card-net...
https://gs.statcounter.com/search-engine-market-share/all/un...
"Visa holds a 60% share of the credit and debit card market, followed by Mastercard with 30%, according to Ellis, with American Express far behind at 8.5%."
That puts Discover + AmEx at 10% or so.
1. https://www.reuters.com/article/us-visa-mastercard-stocks/sw...
In reality an intermediary called “payment processor” handle all CC brands in single system and they are the ones enforcing ideological punishments to merchants.
Like there’s web search and web browser, card networks and payment processors both should be brought up.
Yes, payment processors enforce the rules, but don't typically make the rules.
As I am sure you can imagine, this can result in plausible-deniability-type finger pointing ("we don't make the rules" / "we're not responsible for the rules being misapplied") when an organization is cut off.
Interestingly, even now that many merchants are allowed to offer a discount for using cash, most don't because they've likely figured out (a) if they lose just 1 sale in 30 it's likely a net negative for them, plus (b) people are likely to spend more, especially on impulse purchases, when using a card, and (c) there is just a sense that it can be annoying to customers to have to pay more for using a card, taking away from customer goodwill.
https://en.wikipedia.org/wiki/Durbin_amendment
I imagine it's because of lack of enforcement?
So, I still favor the discover (despite now being part of Morgan Stanly?) for most purchases, but when its rejected I fall back on a MC with a cashback program.
That program pays for my computer hardware...
Citation needed.
A big part of the reasons credit cards rose to such prominence is that the banking and payment rails are so incredibly stupidly designed. The check system and ACH which is the highest volume way that money is sent between people with different banks requires you to give out the secret key every time you make a payment. Plus it takes at least 1-2 days to clear which makes fraud more difficult to deal with.
Interestingly the credit card system also suffers from the first part, your number is printed right there on your card. But they’ve managed to find and/or strong arm ways to reduce fraud on their network, and as a consumer I’m not liable for paying it which is a huge benefit.
The author really lost me at the end though, I don’t see how regulation magically solves everything and they didn’t explain it at all. There is already a ton of regulation in the payment industry. And this comically flimsy underlying system could easily be improved by existing regulators, how about starting with small steps and seeing how that goes? Instead of advocating for throwing out the entire payment system all at once under the very flimsy assumption that the government will do it better.
However, I still prefer to use a credit card, because of the chargeback — the legal protections with credit cards are still higher.
—-
Edit: about “you’re paying the fees” — maybe, but most of the merchants don’t show different price or don’t charge extra for credit card payment. So why not use the IMHO better option if it costs me the same.
(strangely, in australia, card surcharges became normalised just before cash payments fell off a cliff. credit card transactions have also declined; it's visa/mc debit that have skyrocketed.)
This is basically the situation VPN service providers are in. Yes, in theory, any given provider could be beholden to the state. However, when a new VPN provider can spring up so easily (spin up some DigitalOcean instances, stand up a WordPress/Shopify e-commerce frontend), it's unlikely that any given new player in the space has been gotten to yet by the state (unless, of course, it's a new marque of an existing company, set up specifically to serve as a honeypot for switchers.)
The system that was designed to do bank to bank, without the card systems being involved failed horribly. It was late to market and the launch has horrible mismanaged and covered in unnecessary secrecy. MobilePay had already launched and crabbed a large share of the market, the secrecy was completely pointless and I believe it was partly to blame for the massive failure of the solution.
This is incorrect. MobilePay started out as a layer on top of Dankort (Danish debit card), but after gaining sufficient volume they made a deal with all Danish banks to enable direct bank-to-bank transfers (without using the Dankort infrastructure).
The only difference between Swipp and MobilePay is that Swipp started out only supporting bank-to-bank transfers (thus only supporting a few banks) while MobilePay started out using Dankort (thus supporting all banks). And, as soon as MobilePay had sufficient volume, all banks were interested in circumventing the Dankort network.
It's interesting that it uses card tracks to move the money, but the identification and recipient is not based on card numbers, so the card stays anynomous for the recipient.
Mastercard and visa have recently been very open to this kind of methods, and also issuing virtual one-time-use cards. These new use cases for their network are quite healthy to the payments ecosystem.
Heres to hoping that Apple Pay (and Android) will open up directly to banks or solutions such as Mobile Pay, which bridges to direct bank transfers for member banks and then utilise credit cards as a backup for unsupported banks.
Do you think that the credit card companies having too much power is a big problem in the Nordics?
Our politicians and banks probably don't see it this way, but having a local alternative can help keep MasterCard and VISA in check. If they become to expensive or unreasonable most people already have a competitor in their wallet, one for whom fees are strictly controlled.
I just don't think there's much room for competition when one party gently keeps another in a chokehold. Klarna depends on Visa, but not vice versa.
Even Amex has an even lower market share than in the rest of the world.
-Direct bank payments use your bank id. You can have bank id stored in the phone, but you can also use a personal keychain authenticator
-Klarna, Collector, etc use your social security number as the primary identification method
-Mobile payments like Swish and mobile pay use your mobile number, so it is linked to your phone subscription, not your phone.
Of course you still need to have a bank account, but there are a lot of banks out there.
So no batterie, money ? No network, no money ? Phone stolen, no money ? Phone broken, no money ?
What if I don't want to have a spying hardware on me at all time ?
I don't think that is essentially a bad thing. Forcing a digital signature for every transaction makes criminal activity difficult. Modern AML works much better because there is always a digital fingerprint for every transaction.
But I think that these are two distinct issues? Some crypto -things could somewhere in the future solve the privacy issue... But no society wants that, because real privacy makes criminal activity and money laundering possible. But that has nothing to do with credit card duopoly?
But the matter here is card vs phone. Your card do spy on you, but it doesn't have your contact, a microphone, the history of where you have been, etc.
You can easily give your card away to a friend for the day. Your card doesn't need an update. It's not connected to internet all the time. It won't die if it falls, if it rains or of it's too hot. You can have a replacement easily as well.
It's also way more accessible. My grandma can use it. A blind man can. They all work the same way.
A phone is only a good card alternative when every thing goes right. But I value resilience in my paiement system.
Regardless, an acual card and a payment processing network would cost billions to deploy.
Anyway, I was just thinking out loud my idea. I hate interest and mandatory insurance alike.
So in one year i have to pay you 11k.
It is basically 10% interest.
https://www.revk.uk/2020/06/beyond-credit-cards-is-this-way-...
The traditional problem with bank-to-bank transfers in a retail, or point-of-sale, setting has been speed. Cheque was about the fastest that could be mustered.
But with developments like UK Faster Payments (which is mentioned in your link) bank-to-bank transfers are getting faster, in some cases instant. And so usability at the point-of-sale is now on par with cards.
In Holland, iDEAL is used a lot for retail purchases. It's an instant bank-to-bank payment option that competes with the card networks.
The equivalent in Sweden is Swish. It too is moving into point-of-sale payments.
As for the US, I suspect that at some point Zelle will pivot into retail point-of-sale payments. At which point the card networks will have a big competitor.
All of this is good news if you are worried about the card oligopolies!
https://en.m.wikipedia.org/wiki/European_Mobile_Payment_Syst...
As a consumer, a credit or debit card gives me a lot of protection. I wouldn't give that up for anything (oh, and the cashback I get too).
You open the MobilePay app, and touch the NFC thing. The amount and payee is shown, and you swipe to confirm the payment. The retailer's POS gets a message.
In a small shop without a fancy POS system, they just print a paper QR code. You can scan that, but you need to type the amount yourself.
[1] https://images.squarespace-cdn.com/content/5564e82de4b0edcad...
They also assume you are involved in the illegal activity and you have to interview at the bank. All this for what can amount to a 20-50 GBP payment, and even if it represents <1% of your transfer volume.
If bank payments are going to become prevalent in e-commerce, this type of primitive reaction to fraud will need to improve drastically.
Apple Pay/Google Pay already offers near-instantaneous, highly-secure transactions in most stores - and with good consumer protection. Contactless cards offer the same up to £45.
I can get cashback/miles/reward points too.
What does a bank to bank transfer offer me as a consumer?
The difference between the Nordic countries and elsewhere may be that 10 years ago, these contactless payment methods weren't widespread.
If you have a basic consumer dispute about something (such as a retailer not giving a repair/refund for a faulty item), you should be able to file a chargeback with the card issuer and get a refund.
In the UK, a credit card is much better though, as for any purchase over £100, the card issuer is joinly liable with the retailer for any issues.
https://www.which.co.uk/consumer-rights/regulation/section-7...
In the US, most PIN debit card transfers occur via either MasterCard's Maestro or Visa's Interlink debit networks. Signature debit payments go through MasterCard/Visa's credit card networks. So you've still got the duopoly problem.
VISA has always struck me as a very nebulous entity, whose structure, governance, is not very well know by the general public.
I wonder how they managed to grow so large while managing to keep such a conspicuously low profile.
edit: and to answer my own question, the wikipedia page is quite informative : https://en.wikipedia.org/wiki/Visa_Inc.
https://money.cnn.com/2008/03/21/news/companies/visabanks/in...
Mastercard so much so that the recently removed their name from their logo as its nolonger needed.
One fintech startup recently sold for $5 billion to VISA. They issused a PR statement that was completely false, but if you didn't work in payments you'd never know they didn't have 11,000+ clients (hint: that's the number of institutions in NACHA.)
https://en.wikipedia.org/wiki/ACH_Network
https://en.wikipedia.org/wiki/NACHA
Visa / MC remind me a bit of Ticketmaster in that they've got parties on both sides defending them because of kickbacks. You charge the merchant the "interchange fee" plus some amount and that fee goes back to the "card issuing" bank, so they like the system.
The merchant passes on the cost (generally) to the consumer, so they don't really notice, and the ease of moving the money in 99% of cases means everyone is happy.
That's not the case any more, by now all these local companies have stopped accepting bitcoin, because after the first hype, the volume simply was not there to make it worth their while. Some people (often the same people!) bought some stuff initially to try it out, but that was it, there was no sustainable mainstream business. It's still usable for some online services targeting the tech crowd, especially where anonymity might be a feature, but for everyday use of paying for physical goods and in-person services there has been the opposite of "mainstream-ization" in my experience; by now the mainstream businesses have tried crypto and found it not useful. There's enough well developed infrastructure and service providers so that mainstream businesses could easily accept cryptocurrencies if they wanted, but they don't, because there's no significant customer demand outside specific niche markets.
Venmo is the thing in the US, but China has Alipay/Wepay, SE asia has various digital payment apps, Japan has had a huge "cashless" push in the past 12 months....
If I were running a retail shop in the US I definitely would accept payment by Venmo if I could.
It's hard to say whether these apps are actually focused on B2C transactions, so far it's almost entirely C2C (P2P).
For instance, in China WeChat Pay only charges 0.1% above 10,000 RMB (from what various articles say). Square is not even in the same category, charging 2.6% + 10¢. And you don't need to buy any equipment to use WeChat Pay; you just need to pull up a QR code on your phone.
This allows people to on-board to WeChat Pay easily through online banking. They also have way less KYC hurdles, so people can go from signing up to sending money in minutes.
US online banking is eons behind China, and almost any other country. So many online banking systems in the US are prone to unauthorized access, which makes on-boarding and security highly inefficient.
The big difference is how fast and cheap these standardized bank-to-bank transactions are; with USA lagging behind in this area somewhat. In USA a wire transfer is more expensive than a credit card payment, in China, EU, Russia, etc it's cheaper than a credit card payment.
And modern Tendermint[1]/Cosmos SDK-based chains or Solana are basically distributed databases, using consensus models similar to Raft, except with byzantine fault tolerance and Proof of Stake for leader selection.
No mining, no forks, finality within seconds, large throughput. Pretty boring, actually, with little hype surrounding it - it just works, like a regular database, except there's no single entity controlling it.
One of the top five payment gateways in Korea - CHAI - uses the decentralized Terra[2] blockchain as their backend.
[1]: https://tendermint.com/docs/tendermint.pdf
[2]: https://terra.money
When talking to big merchants about any new payment product, the first question you will hear is often "so, how does this lower my interchange cost?"
Of course there are other frauds you are vulnerable to. Which is why it isn't clear what is really best
Merchants take credit cards to avoid losing a purchase. Cards have such a high volume that consumers expect it and some small portion will skip a purchase if its not an option. But merchants would much prefer you pay with a store card, debit card or one of many other payment methods that dont have the same (2-3%) cost that credit cards do.
So far it's been a really long-haul play where Apple has spent a lot of time establishing deals with banks manually, in order to get a tiny fee, which they can due to the increased security of their system. This hard work is necessary in order to create a payment network that can work for everyone.
Eventually, Apple will be in a position to launch their own network, while increasing fees for themselves and lowering fees for merchants.
As someone who's been a merchant I'm very happy to see this happening, although it's like watching a tree grow (paint drying would be exciting in comparison). It's likely Google will follow suit, and depending on Apple's choice of implementation, we could hope that it will be backed by a stable cryptocurrency - but that's just a shot in the dark.
Sure, it could happen somewhere down the line but saying that blockchain is "destroying the moat" today is a big stretch. Blockchain barely just started to realize that the moat is actually much larger than previously thought. And that parts of the moat exist for a reason. It's barely starting to understand the moat, still far from attacking it, let alone destroying it.
Hopefully it will but I'm not holding my breath nor my bitcoins.
It is still a problem in 2020. Gab was recently impacted by Visa blacklisting them (https://news.gab.com/2020/06/19/gab-blacklisted-by-visa/) and also drew parallels to the realities of the "social credit score" system used in China (https://news.gab.com/2020/06/26/social-credit-score-is-in-am...). The vagueness of Visa's allegations stood out to me as problematic, given the lack of viable alternatives.
Ultimately, the lack of a provider who acts neutrally is a threat to freedom of speech and expression for all practical intents and purposes.
I'm not talking about payment processors so much as the degree to which people feel "either" when they could feel "both."
Divisiveness is quite rampant, and I think the language we use (or don't use) has an effect.
ie "Forget Google" -> why not both?
Note that this was a policy decision based on whim and a politician lobbying. No hearing, no evidence, no recourse, no rights and no meaningful alternative. Also a decision not taken by the banks nor, I believe, were they consulted.
The upopular person's (Wikileaks here) rights are your rights and my rights. If you think the've done the wrong thing, you're entitled to that opion and establishing that is literally what courts are for. Much the same way we might want law and courts involved for suspension of a driving license and not simply because a politician doesn't like you and lobbies a bit. "Nobody who drives for UPS can drive on the roads because they love Putin" --not as ridiculous a fabricated politician's quote as it should be.
But going back to it being a data network and standards organisation that describes the classic long-run decreasing average total cost curve of the natural monopoly which makes privatising it for profit a pure "rent-seeking" play.
So we can see how egregious the monopoly is two ways there. Practically with an example and according to classic and relatively uncontroversial micoreconomic theory.
So what about the classic monopolists' defence, which will come up again here. Define the market to be bigger and claim it's a small fraction of that bigger market. Can we just dismiss that as total B.S.? ie "You can also use cash to buy things." Try running a business or calculate the additional cost of buying the things you need without using the visa/mastercard network.
Unless you have multiple networks with very low switching costs it's a disaster. Disclosure: Ajit Pai disagrees with all that totally.
When it comes to advertising online though, you have only 2 choices...Google or Facebook. As a business I can't not go with those two or I'll lose immense business. I can go with a Visa, Mastercard, Discover, Amex...and it really has no effect on me outside of the benefits the card gives me. The fees charged to the banks, etc are essentially the same. So it's really no comparison as to which is worse for the market itself.
Of course it’s endlessly more complicated then that but it’s important to make the distinction.
When customer clicks “Checkout”, they are sent to payment processor website to enter card number like 1234 ...5678... and whichever card it is, it goes through, and shop owner receive the payment later.
Which means payment processor has contracts and connects with every card networks, absorb API differences, and on top of that, obeys and agrees to everything CC network thinks or says, to be able to handle any cards customers may have with them.
So if a Visa or MasterCard exec thinks maybe he don’t like Cheetos and make a call to processor CEOs how they think about it, no later than by Friday no one will be able to order a single bag of Cheetos, especially online, using any credit card because payment processors will have explicitly communicated that Cheetos had never been tolerated from the beginning and any store who let that happen will have accounts frozen.
It happens somewhat softer than that but kind of happening once couple years these days.
Someone is going to say: Micropayments (it's never worked.) Pre-auth'd lower amounts retailers can pull from you (might work.) Crypto-escrow (Any place that used to do it has gone out of business I beleive.) Too volatile: (Peer to Peer stable coins, or "trusted" stable coins protected by laws instead of code address this.)
Thus, peer to peer open source value transfer is the minimum amount of middlemen possible, but is crippled by regulatory overhead at the end points, giving the incumbents entrenched advantage. Caveat: I founded a cryptocurrency.
No more denying legal pornography businesses, no more denying legal fireworks stores, etc.
Note that it's value, and not number of transactions.
Personally, I have only 4 things pay out of my checking account. Mortgage, HOA dues, and power are all bills that require checking account transactions for auto-payment to avoid credit card fees. These are very large transactions which will greatly skew any measurement by value.
The final thing paid out of my checking account is interesting: the credit card payment. Since any money I spend with my card necessarily is repaid from my checking account, that also greatly skews measurement by value.
If I spent 50% on housing, and spent all of the rest of my money on things with my credit card, then my personal ACH value percentage would be 66%. (1 unit house payment, 1 unit credit card transactions, 1 unit paying credit card bill)
This isn't even starting with business to business transactions. I'm unsure if the source is counting it in that metric, but it would further skew any value measurement. No factory is going to use credit card when buying $100,000 worth of parts from a supplier.
All those things considered, 82% seems about right, even if you assume something like 90% of consumer transactions use credit card.
I have a business who uses a credit card every month to buy more than $100,000 worth of materials from a supplier.
On the consumption end the card programs are wonderful, great purchase protection negotiated, delay on actual payment for additional working capital, and rewards. We basically never have to use cash for employee travel expenses, all via points.
There is no benefit for me paying my suppliers via ACH, wire, or check.
I think the largest chunk of the volume difference is commercial-use. I don't have the numbers handy but the difference is huge.
It really depends on the types of products and what the consumer experience is like. Google is an interesting beast in that we provide services across a wide variety of billing models.
You have immediate product purchases, where knowing that the transactions is complete immediately can be important (ex: Play store games, or movies). Credit cards are great for that instant guarantee.
For delayed billing or threshold billing (Ads), slower payment methods can work great (eg: ACH, wires, vouchers). Some of these also allow a standing instruction that a company that just keep paying money against to top-up their account (and Google will see it as a bank statement push payment).
So yes, Credit Cards are a small volume of US payments, they enable specific products that don't work great with ACH or wires. If the US ever gets 100% ubiquitous instant bank push payments, maybe that'll change, but our banking system is too disjoint to move at any kind of speed to do this.
The clearing house is also owned by many of the large banks in the US. While this seems nice, I'm sure there's some paranoia from non owners about joining a network owned by their competition.
The UK went and interesting path of forcing all banks to implement faster payments, so it got wide coverage.
https://www.federalreserve.gov/faqs/currency_12772.htm
Private companies can refuse cash.
"There is, however, no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services"
However, if you stole the thing and were ordered by the court to pay restitution, they would have to accept cash for that.
What's worse, if you look at the details, there is a swath of products that are darn near impossible to buy without a credit card.
* receive direct deposits
* pay credit card bills
* pay rent
Which represent a large amount of the value transferred vs number of transactions.
"100 billion transactions during 2014 with a total volume of US$6.8 trillion"
Even worse, the payment processors do not apply their own ToS unilaterally. You'll find some websites will retain processing, while you lose it, even though the reason is that your business model is high risk. PayPal is notorious for this. Their ToS will only be enforced in certain countries, leaving companies in places like China with PayPal processing while your company is permanently banned from the platform.
It becomes impossible to compete if you are banned from Stripe & PayPal while your competitors are not. If their own rules are not applied equally across your industry, they effectively pick the winners. Their platform also favors long-standing merchants in many ways.
First by providing them an account manager, second by essentially grandfathering in certain accounts. You'll find it very difficult to process payments in certain industries on PayPal, likely not even being successful in on-boarding, while sites operating in the exact same business have functioning PayPal accounts.
It's incredibly anti-competitive. These processors run such a large scale monopoly; there are so few comparable alternatives, I've seen so many people go out of business purely by losing their PayPal.
Sidenote: A bunch of the payment gateways began integrating BHIM and charging merchants a cut of the sale for what they pay 0 for. Can't see that lasting if people move off V/M completely.
- Isn't tied to a piece of plastic that expires
- Front loads the fraud prevention by requiring 2FA to make sure up front that the buyer actually wants to pay for this.
- Opt-in, per-transaction chargeback/escrow service (intended for shipment of physical goods) that you don't pay for if you don't activate. Transactions are clearly marked whether they include this during checkout. Otherwise transactions are final
- For subscriptions, allows you to specify the conditions under which future charges should also be accepted, and when they should be held and you get contacted to approve them instead.
- Basically anywhere the current system can fail/reverse a charge, the improved system would verify this up ahead, so the payment processor can be sure the buyer really wants to pay, and the merchant can be sure charges don't fail unless the buyer runs out of money in their account or actively cancels the subscription.
- Charge a much more reasonable processing fee, due to not needing to wade into disputes and fraud recovery all the time.
Why is it that to pay for something you give the seller the keys to your account and they go in and withdraw the money they want instead of the seller sending you a request and you accepting to send the requested money..
Another plus side of your suggestion is it now becomes trivial to cancel any subscriptions since you can simply stop allowing the payment to go through rather than getting the seller to stop taking your money.
This may sound like a slightly obsolete but otherwise well thought out system until you notice that revoking the SEPA mandate requires you to contact the vendor first which is kind of silly.
There is! Nothing forces vendors to collect a paper form and signature. I know some countries still love paper trails (hello Germany) but even there, you'll find some businesses that don't do it. When I lived in Berlin and signed up for my broadband with 1&1, I just had to copy/paste my IBAN into their online form.
> physically mail you a SEPA mandate which you have to sign and mail to your bank.
Nope. The bank is not involved at this stage. Banks authorize direct debits by default, they don't need to know about the mandate beforehand.
> revoking the SEPA mandate requires you to contact the vendor first which is kind of silly.
It's not. It leaves the responsibility with the contracting parties, and keep banks as a neutral medium. That said, as a customer, you can revert a direct debit with a single click, and permanently reject further direct debits. It doesn't have any effect on your contract (and the vendor will send it to debt collection if it believes you're in the wrong), but you keep full control.
By the way, you can build a fully digitized billing system on top of that (there's SEPAmail in France for instance), and more and more banks support instant payments, which I assume can be used to improve the scheme.
It’s an extension of the technology that powers Apple Pay and Google Pay, and basically allows merchants to get a virtual card issued to them.
In the EU that would require 2FA to happen, along with describing to the customer what the billing schedule is (required for SCA but being implemented slowly).
The end result is the merchant gets a non-expiring virtual card to bill the customer, and the customer get the ability to disable certain merchants by asking their bank to destroy the card linked to a specific merchant.
Unfortunately all of this stuff is very new, and there are a bunch of issues that will prevent merchants from using the tech. But it is happening slowly.
At this point, the innovation stream has just about dried up. We're left with a need for micropayments that don't cost more to process than the value of the transaction, and almost all innovation has taken place to one side of card services.
If we fixed international funds transfer we'd probably get some incremental benefit. KYC is only part of the problem here, I recently did some IBAN transactions to the UK government from Australia and the expectations of fixed-field width (send this 15+ char reference string, but the input side has 12 chars for the reference field) were bizarre.
Huge amount of excess profit in TT.
Cheques? dead except for the USA.
Coins are dying of covid.
Remittence processes and the Islamic banking tradition is waiting to be somewhat unlocked. (trust is not transitive, unless you are a migrant worker from S.E.Asia and you have to get money back to mom and dad efficiently, without having any formal ID in the host country because your boss took your passport)
I disagree completely.
There's no technical or business reason why we couldn't have micropayments tomorrow. It's been tried many times already. The thing about micropayments is nobody actually wants them. Each time you make a payment of any magnitude, your brain has to process a 'purchase' which carries a large mental burden, and eventually you get decision fatigue.
Micropayments are one of those ideas that people think we want, but in practice, nobody does.
As a thought exercise, why do you pay Netflix $13/month and deal with sporadic content disappearances, when you could pay Apple $1.99 for a perpetual license to whatever piece of content you could ever want? Nobody wants to make that purchasing decision each and every time they want something. They'd rather pay for an all you can eat buffet even if it's objectively worse and more expensive over time.
> If we fixed international funds transfer we'd probably get some incremental benefit.
Check out TransferWise! They've done a ton to solve this problem. They even have a currency agnostic bank account with local banking details in 6+ regions and supports 50+ currencies. [1] IMO they've largely solved remittences for the average joe.
If you've got a ton of money to move you can use InteractiveBrokers to exchange currencies at market rates for $20 per million (!!) in commission.
[1] https://transferwise.com/us/borderless/
> And it could potentially have been even worse. Had their few competitors also gone down, literally all electronic payments would have broken at once.
This... is not true. As noted by another comment here, a vast majority of the value transferred (82%) is ACH in the US.
Big companies, a rent-like business, no pressure to do things well, own lots of very sensitive personal data, clients giving the data away without realizing it, little regulatory oversight on the data front, etc.
I would expect them to sell or leak poorly anonymised personal data, leading to huge privacy issues.
Why hasn't this happened?
But they are at their core public companies that want to maintain their image. They are reactive to public pressure and political headwinds, and will cover their bases by running away from thorny messy situations. This crosses the aisle in every imaginable way - whether its stifling whistleblowers or stifling supposed hate speech. The reaction to public pressure is not going to be avoidable with any conceivable system, privately owned or otherwise.
The best defense is competition, and despite this post's assertions, there is competition in this space.
Perhaps in the US, but elsewhere around the world Amex is barely ever accepted.
That said this duopoly only really applies to internationally accepted credit cards, lots of countries have alternative payment methods, but these generally don't reach beyond the borders.
Amex takes much more (~4%?), so the problem is even worse there. Of course, they can and do bribe the customer with part of that fee so that it seems attractive, but from the wider perspective it's a huge overhead for no good reason, and if every transaction was like this (i.e. if Visa-MC was replaced by Amex) then that would be a big drain on the economy.
Anything this duopoly can't control is a big no-no to them which is why they detest Bitcoin and the other alternative cryptocurrencies. Some online services are beginning to accept cryptocurrencies, which is a start. Cryptocurrency ATMs are a thing to cash out money, thus one could say that you might have bypassed them.
A side note, for those offended by master/slave terminology perhaps now you can ask Mastercard to change their name. Since, its pretty much has somehow offended somebody out there. /s
Bank transfers within a country are often free of charge, but are quite uncomfortable to make (typing numbers) and usually are not sent immediately (so that you can not pay this way in a grocery store).
Banks have no interest in making bank transfers easier or faster, or opening up to cheaper competitors of Visa/MasterCard. Meanwhile, people happily keep their money in a bank, seeing that all bank services are free and that it "can not get any better".
I think, if anyone is to replace Visa/MasterCard, they should also make their own bank (a place where people keep money in a long-term).
Some payment terminals now can also generate a QR code that you can use to pay, in addition to the normal debit/credit card payments.
> Fry: $30? I can't afford that. Unless... Do you take Visa?
> Salesman: Visa hasn't existed for 500 years.
> Fry: American Express?
> Salesman: 600 years.
> Fry: Discover card?
> Salesman: Sorry we don't take Discover.
the good news is that Amex seems to have stepped up while partnering with Walmart for their BlueBird cards - while not perfect, at least helping to add more options. and with walmart in the mix it seems to help get a 3rd (Amex) option accepted more places.
maybe not the perfect solution, but at least a step in the right direction.
Getting this "duopoly" right is very hard. Payments has a number of actors, and the label is there to ensure fair play between acquirer and card issuer.
While mastercard and visa controls the market, it's not like there isn't competition: Amex, discovery, etc., are all labels that compete with the so-called duopoly.
Is this a result from the community or the algorithm?
HN seems to have changed a lot in the last few years.
Anyone familiar with the intricacies of these operations know how amenable they are to being debundled into discrete components and provided via an Ethereum-like protocol?
So, why? The article doesn't seem to answer that question. What prevents shops from supporting alternative payment systems?
I have pretty much stopped using cash altogether and use cards mainly in those outlets which don't have upi.
Those protocols are substantially more open than Visa/MasterCard, and introducing a competition shouldn't require hardware changes for the POS.
This is addressed in the article but the title doesn't reflect this accurately.
TLDR; Clickbait title :sad face:
It's bad idea to forget "issue 1" and focusing on "issue 2".
Both issues are major.
No, thank you.
In the EU the just use bank cards. And since there's regulations the fees are lows and everyone can use it everywhere.
If everything has to be accepted everywhere, then there's no differentiation
No commentary on the larger picture here or Amex/Discover, just pointing out your other examples don't exactly fit your point fully.
Why? Because monopolies are bad, and we don't like them, no matter if they provide value to people, if they are not built around government regulations that stop competition from happening.
I hate headlines like these.
Can't say I give a damn about Visa and MasterCard.
Every medical service requires paying a physician. And it's no trivial amount, its a huge expense. Further, any numbers on physicians salaries are horribly skewed because they don't consider specialists "physicians".
Maybe we are better off with VISA.
How about NO! How about we go after all three of them? Google should not be left off the hook. This is just whataboutism by Google's PR.
Anyway, Google's employees are all over this thread.