I do think we're getting to the point that middlemen don't have much value add. Economics even suggests they don't add value I think. Possibly neutral markets, payments, and logistics should just be a public service.
The fundamental service of performing payment processing doesn't seem complex, but these services do perform valuable work behind the scenes. I don't think it's worth what we ultimately pay for it, but there are a few parts to this worth considering:
1. I would like payment processors to have the resources and capacity to adapt to threats and maintain highly resilient infrastructure. This is expensive and requires a lot of ongoing investment.
2. If payment processing was turned into a public service, the complexity of international integration and necessary relationships, standards, etc. would become a public service burden. I'm not sure that I trust my provincial or federal government to handle this adeptly.
3. There is a lot to this that we're probably unaware of.
I'm not trying to protect banks in the slightest, but it's a baby and bathwater situation. I'm not confident in my country's ability to create its own payment processing platform that I would trust to be a reliable, sustainable, value-generating system operated by public servants. I don't mean value-generating in the profiteering sense, but in the "this is worth operating on public funds because, ultimately, it is more than worth what tax payers put into it".
I think some things are an awesome fit for public services, but a lot of places are probably not equipped to take this kind of task on safely and competently. My country is more likely capable of regulating these institutions, not replacing them internally.
We tried to make a COVID-tracking app and spent $59.5 million, and it was an abject failure. How much would we spend on a broken payment processing platform?
$59.5 million seems like a drop in the bucket compared to the rent that these middlemen are taking. And was the COVID-tracking app an abject failure because it didn't get public adoption or because the technology wasn't fundamentally sound. Because if it failed because of the former, then simply regulating companies to use it (or even just putting it out there as a cheaper option to outcompete Visa) would solve a lot of those adoption problems.
> I'm not confident in my country's ability to create its own payment processing platform
You live in Canada, which already has better options than the U.S., though the sittuation is getting better in the U.S.
For example, Interac is free for most people and very easy to use.
Debit payments often cost merchants less than 10 cents per tap. The local gelato place only takes debit or cash; if you don't have either, they're happy to accept an Interac payment, and do so more often than you'd think.
Part of the problem is that the incentives are misaligned. People want their points systems. Merchants want customers, but they also want lower transaction fees. Most customers have debit cards that would be much cheaper for merchants, but choose to use their credit cards, because they want the "rewards."
While the 3% or so that a bank charges might seem low, if you look at this from a low-margin business, that 3% may actually be much higher percentage of their net profit.
Regulation concerning rewards systems could go a long way towards shifting the system to be much less costly for businesses.
There's not much hope of real change here; Canadian banks are very profitable, and are a cornerstone of our economy. It's very unlikely that politicians will do anything to risk that.
The biggest thing is disputes. I have no problem with an escrow service asking for a cut if I want to use them, cause they have real costs. The creepy thing is how that escrow built into credit cards is forced on every little transaction.
> The creepy thing is how that escrow built into credit cards is forced on every little transaction.
That's essentially what a CC company does though, every transaction they're briding the timing gap between the card holder paying the CC company and the CC company paying the business. That's the core value add and cost they're bearing that they charge for.
They have risks from both sides of the transaction; on the one hand scam merchants who might get chargebacks and on the other customers who never pay off their balances (thought I guess that risk is covered by their interest charges mostly).
this process of giving out your 'secrets' (ccn, exp, ccv, zip) to tens of people a day with no other real authentication is inexcusably insecure. and instead of trying to get on top of the problem for real (like an hsm), we have this very half-assed fraud detection and chargeback mechanism that costly, ineffective, and seems to just bury the real issues behind a facade of concern. its been decades that this has been going on, I remain confused as to what incentives the banks have to continue to prop up this farce.
Any links for this? Since the abusive practices towards their users should already eliminate most of frauds that isn't caused by the actual banks themselves.
Fraud in modern financial systems is kind of.. funny? obvious? Local banks who know who Bob is can't make enough money due to scale, we'll scale that system to a national level with millions of participants. How will we do that? Bob is now customer 11,476,112. Oh no this anonymous number we created cheated us because we didn't know who he was, what do we do? Charge Bob and everyone else for the cost of this, our scaled up business model wouldn't work otherwise. We'll skim 3% off of every financial transaction infinitely, so that after our $100 virtual bill has changed hands 30 times it has disappeared into our coffers.
I have had to fight hard for disputes, even with “premium” credit cards like Amex Platinum. I’m not talking about “not as described” bs, but being asked over and over for the same info to wear me down.
I recently ordered some snacks from another country and after 3 months the vendor stopped responding while never having sent anything. When I asked for a chargeback, my claim was denied because I didn’t have proof they didn’t send anything! I literally had an email from them that said they are backed up and unable to send stuff.
Out of all the banks I’ve done chargebacks through Chase has been the least painful. I think only one time I had a back and forth with them. And that time I had one phone call, sent my evidence, and that was that. The company then tried to charge me again, which I also disputed, never heard from them again.
This was a moving company that insisted I should use their flat rate package and 3 movers rather than the 6 hourly I asked for. It took forever and they tried to charge me extra fees.
Not unlike the experience many Americans have of fighting their own insurance company that they already pay a monthly premium to.
The lengths insurance companies will go just to avoid adding to a deductible are, given the circumstances, rather disgusting.
They don't seem to produce any savings. Are credit card companies much different? Why are their CEOs making millions of dollars? Is it all supposed to be because of innovation in preventing fraud?
As with health insurance companies I too have found in reality their way of dealing with these things leaves much to be desired. The way they treat it seems transparently like health insurance - add minimal value upfront, then wear you down so you never actually get the service or "value" they were supposed to provide in the first place.
That shitty service is the margin padding that multi million dollar salary. Where's the innovation?
So much of the economy seems to be about wrongly extracting money from people, and then only giving it back to the people who have enough free time and persistence to endlessly argue and haggle for it.
Yeah, I've been extremely disappointed with disputes on Amex Platinum.
I literally had a bike rental company in Amsterdam attempt to get me to conspire to report a bike stolen (which had briefly been stolen but was back in my possession), and then when I refused, charged me as if the bike had been stolen!
I reported all this to Amex, and I was never refunded, and to my knowledge, the attempt fraud was never investigated.
I largely agree. What V/MC became is essentially an abdication of a core government function of providing the secure means of economic activity. If the US government can print the currency in “paper” it should also provide the means of communicating that currency electronically.
There is absolutely not reason that the government should have abdicated its core function and allowed a monopoly effectively have a license to print the dollar bills and rent them out for a cut from ever single economic transaction.
Imagine if the government had suggested that in addition to all the other criminal extortions called taxes, when you use dollar bills to purchase something, you have to pay a 3% dollar-bill-usage surcharge every time a bill changes hands.
But it was obfuscated that this constant drain and fraud was being perpetrated because the whole system became extremely financially lucrative to the very people whose responsibility it would have been to stop the crime; so it has continued since. The mob was in control of the police.
it's not offtopic at all. visa and mastercard are middlemen in the transaction between two parties. the comment is about middlemen and suggests they don't add value.
edit: just seeing now you're complaining about things being offtopic multiple times in this submission, without ever adding anything yourself. perhaps you could be part of the change you wish to see?
"Value add" is the wrong framework for thinking about these sorts of services. The reason Visa and MasterCard exist is that there's value in relationships. If you want to have your accounting system available in all stores, you have to talk to Visa or MasterCard. Conversely, if you run a store and want to accept payments, you only have to deal with Visa and MasterCard. Sure, "public service", but run by who? Visa and MasterCard are cross border, good luck getting any sort of international coalition of governments to build a payments system in the current political climate.
The United States government already interferes on behalf of Visa and MasterCard to maintain their duopoly across the globe.
Look at the tension between United States and Brazil on this issue with their nationalized payments system.
The fact is the most important relationship Visa and MasterCard have is the one you left unsaid - their relationship with the United States government.
What connection does the 3% have to the ability to do a chargeback? The card company isn't absorbing the loss, they are just pushing it back on the merchant and collect it from them unless the merchant successfully disputes the chargeback.
To a first approximation, the 3% isn't paying for disputes; it's paying for rewards to the customer (essentially a built-in discounting mechanism that gets to discriminate on credit rating), and for profit margin to the payment processor. Disputes are paid for by the merchant, and if you get too many of them you potentially lose the ability to process credit cards.
The vendor pays the 3% not you (through increasingly vendors try to charge this fee to you as well). If you as the consumer had to pay 3% extra every time, do you still agree?
That's if they pass on the cost to the consumer. Some businesses charge the same amount whether paying cash or card, meaning paying with a card is ""free"", or at least not "penalized" over cash.
I can't reply to DaSHacka, but just to point outat least in this country, merchants have to pay to deposit cash. Not to mention the additional cost on their side of handling it, higher insurance cost, etc. etc. Cash isn't free of transaction fees/
I wish they would face litigation for banning the sale of large swaths of content (or even banning the content altogether on sites relying on donations/subscriptions to survive). Paypros have no business being censors.
This misses the mark in the same way people getting mad at Google for updating the "Gulf of Mexico" do.
You're missing the driver. It's not like Google cares or wants to change the name. They more or less have to given the public/private relationship and who is responsible for what. It's not Google's job to name bodies of water, it's not a credit card company's job to censor. And if you actually look, they aren't making that decision because they want to. They are often acting on behalf of the government.
Payment companies are even more enmeshed with the state. They often do these things to simply comply with what the government tells them to do or to get ahead of government telling them what to do. Like with some of the anti-pornography laws being drafted or passed in certain American states.
The private/public distinction really needs to come under more scrutiny here. The credit card duopoly is very much tied in with state power. This has only accelerated post 9/11 as the Treasury's mandate increasingly shifted to "national security".
Payment processors are censors because the government is. Just like Flock the government can't do certain things so it contracts with a third party. They then have an interest in protecting/promoting that party. Flock is a snoop because the police are snoops. If Flock does it and the government merely pays for it well it's not a violation of your rights. Your rights protect you against the government, not against Flock. It's the same legal backdoor. A payment processor doesn't care what you buy, why would they? They make money so long as you keep transacting. It's the government that cares.
This same dynamic happens all over the American economy because the private/public distinction can get increasingly amorphous. Your credit card is as much government spyware as your phone. But understand - the problem is not the companies, it's the majority of your fellow citizens who either don't care or actually do endorse censorship. Unless you have a solution for that trying to blame credit card companies for the problem unfortunately misses the mark.
One mans "censor" is anothers "brand protection". Given that they are currently allowed and expected to decide who gets to use their payment networks, it seems pretty obvious to me that they won't allow extreme content next to their logos. If you made clear rules that specify when they have to extend service, I'm sure they would love to relinquish that responsibility. Visa has no moral objection to what you do, as long as they make money and aren't exposed to political pressure.
Approximately zero people, reasonable or unreasonable, believe that they payment processor has anything to do with the business. You can see this because whenever a business is caught doing something naughty and people try to cancel it, no one ever says "this is all VISAs fault - they're next!"
Let's say you use a Visa card to pay for the services of a prostitute. How should they deal with a chargeback request if you weren't satisfied with services rendered?
Assuming we're talking about performing this transaction in a jurisdiction where prostitution is legal, how is it any different from any other business transaction? I don't think anyone is particularly mad about payment processors refusing to process illegal transactions, it's the refusal to process legal but morally controversial transactions that is problematic.
I think I would push back on the idea that credit and debit cards represent a deadweight loss to the economy. Operating a cash business has its own expenses - theft risk (employee or otherwise), handling time, and (most importantly) you are limiting your customer base to only cash. There's a lot of reasons lots of small businesses are going card only.
For good or bad, a lot of studies have confirmed that cards have overwhelmingly increased consumer spending.
I think the far stronger case is that the industry has no actual incentive to fix the underlying fraud that they are charging merchants to fight. They have done a lot of work to institutionalize the problematic infrastructure and make it almost impossible for startups or outsiders to fix.
Nobody is claiming payment cards adds no value, that'd be absurd. But their cashback programs and other bullshit (see recent itch.io/Steam moral policing story) certainly adds no value.
If I'm reading it correctly, the top comment is arguing that having electronic payments run by for-profit entities adds no value. Not that electronic payments are useless, rather that these should be a state-run service. Which is one way to solve this I guess (not that it will help moral policing stuff much, but at least no more robbing poor Paul to reward rich Peter).
It's not different, many countries already have their own version of it, you just don't hear about them. India's UPI has more users but you don't hear about it.
Maybe we hear about it because, it's right in the US' backyard and the biggest country there is Brazil from which pix comes from. All these payment systems threaten visa and Mastercard but pix is the largest in the US' backyard because the country it comes from, Brazil, is the largest there.
And it's also government run, dun dun dun. The us hates anything that is government run. That's why they hate china and communists and socialism so much.
Agree that PIX bothers the US more because it's directly under US (self assessed) area of influence. But the reason is not some philosophical alignment, but rather deep rooted lobbying practices.
How is it impossible to use? Apparently everyone in India is using it? Apparently only tourists face issues with it?
With visa and Mastercard you pay transaction fees and rent for a card terminal, which are lower or non existent with these homegrown P2P payment systems. Outside western developed countries aka the US and Europe, that's enough to stop using visa and Mastercard.
Impossible for tourists to use yes. You need an Indian bank account and there are services ostensibly for tourists but they still don't work everywhere, for example many vendors will want friend payments instead of business payments because they don't want to pay the surcharge.
UPI used to be good, but they started adding charges after Visa and Mastercard lobbied D.C. probably with huge bribes. And the Indian government is spineless against D.C.
its cheaper but customers lose protection for doing it, and as its illegal (yes, against the law) to offer them a discount for using debit cards, cash, or direct payments they have no reason to.
I think the problem is that merchants hate the card networks and consumers generally like them and there are a lot more consumers than merchants. If you are a politician, which block of voters are you going to side with?
They like the card networks because they are lured by point schemes, effectively money charged to the merchants and then shared back to cardholders. Consumers would flip in a heartbeat if shops were allowed to offer discounts to those not using credit cards.
I used to by all my PC parts from a shop that had a 5% discount for cash purchases. It was the sort of shop that was just a counter with all the merch hidden in the back. I don't know how they kept the CC companies from knowing but maybe 40% of their business was cash purchases (circa 2019).
It's the same reason that I don't use bitcoin for large purchases: I want the ability to have disputes handled if and when something goes awry. With cash, I have no recourse.
I've noticed growing use of similar options in the UK already, like Payit and truelayer (often shown in checkout via "Pay by bank"). Ebay and Whetherspoons are examples of places providing these options.
In Malaysia, we have DuitNow, which is a similar idea. It’s been great. It’s pretty common to go cashless now, even outside the big cities and in rural areas. Just scan the QR code with your bank app, pay, and you’re done. Wish more countries would adopt this.
What seems to be getting lost is that the acquirer, not the payment network, sets the Merchant Discount Rate. The acquirer is also the merchant’s direct payments provider.
Yet the acquirers seem to be always absent from these lawsuits.
It seems like many of these prosecutors/plaintiffs just want to go after the largest organizations in a given industry, almost irrespective of their culpability. It seems to me that most 'consumer protection' lawsuits seem to be more focused on obtaining publicity for the lawyers than actually doing anything useful, but getting a few settlements from larger organizations is a lot easier than actually going after wrong-doers, so it is a somewhat sensible strategy if the goal is to 'win' as much money as possible.
But isn't most of the fees a result of the interchange rate, set by visa? The fact that stripe or whatever charges a fee on top, which contributes to the overall rate hardly seems relevant, unless you think all the payment processors are colluding to set their markups higher.
It has been awhile since I dealt with credit card networks, but the parent comment confuses me as well. Before, most of the fees go to the issuer, the network takes about the same as the acquirer (roughly):
Network gets swipe fees, and a percentage of the interchange
Issuers get majority of interchange, and carrying interest and fees
Acquirer gets the markup plus whatever admin/maintenance fees
I don't think payment processors like Stripe are colluding, they just have a difficult task. Card and bank payments are very complicated and regulation-heavy. I do get the feeling that credit cards and banks are colluding.
I hope more things like this comes to light, as we have seen how mastercard and visa in union has moved censorship among things around the world, which by the way is illegal, but due to their monopoly could still carry out and they did.
So the hope is that new or one of the other brokers step up and hopefully their ethics are better.
Amex does this as well and it’s a mixture of internal opinions of executives, board, major shareholders, as well as the US federal government just telling them (see operation chokepoint for just one variation), as well as chargeback and fraud rates in some industries just validating personally held opinions
Broadly, the interlocking restraints set and maintained by the defendants have forced merchants that accept any Visa and Mastercard credit card to accept all such cards, regardless of cost, thereby eliminating any incentive for issuing banks to compete by lowering their fees, the suit says. The lawsuit claims the challenged restraints have also prevented merchants from being able to steer customers to lower-cost payment options—for instance, by surcharging based on a customer’s use of a particular card. These and other restraints have prevented competition among issuing banks and other credit card networks, allowing the financial giants to raise their fees every year “without consequence,” the case alleges.
Reminds me of how the cardholder agreements used to all prohibit adding a credit card surcharge to cover the fees. Some of the fees go back to the customer as rewards, so customers especially had no reason to use cash. Now that practice is illegal, and many places are 3-5% cheaper with cash, which is in line with the fees and usually much larger than credit card rewards.
Is that practice illegal? I've never gotten a discount for using cash or debit.
That is the crux of the problem though. By adding fees and then contractually forbidding merchants from passing those fees on to credit card customers, it is forcing non card users to pay for card users fees since the fees are embedded in prices. Plus they're even giving card users kickbacks in the form of points. So non credit card users end up paying more credit card fees than credit card users which is nonsense.
That sounds a lot like they want to be able to say which banks cards they want to accept (the "forced merchants that accept any Visa and Mastercard credit card to accept all such cards" part).
It's most likely primarily about different credit card "brands" like Visa infinite, signature etc. These have different benefits for customers (like cashback and points) and higher fees for merchants.
A lot of small restaurants are cash-only because of all this nonsense.
A friend of mine owns a restaurant that is pretty remote so lower business. He told me he doesn't take credit cards because he would be paying them a percentage for everything.
It is kind of like the mafia to a small guy like him.
I think he does do a few phone apps.
A waitress at another cash-only restaurant told me, worse than customers who hear they won't take credit cards are the apple pay folks. "They really get annoyed when they don't get their apple pay"
Franchises don't care. They can raise prices monthly or even dynamic price if they want to.
Kind of sucks for society because lots of the best/greatest restaurants are not franchises.
um, the same system we have today but with less rent extraction
and don't pretend like it's not possible, it's obviously possible: take the system and lower the fee to something proportional to the price of providing the service
if credit card rewards programs have to go to make it economically viable -- awesome, that would be a second win.
Okay, so which side is in the majority? The people who have credit card debt or the people who are using rewards programs in a way that doesn't put them in an objectively worse position? Let's help whichever side is larger.
The current status quo is a result of free association. If people prefer to have credit card debt or use rewards programs poorly then I have no issue with continuing in this manner.
The fees are larger than the rewards. Most business people pay with credit card is competitive. Retail and restaurants absolutely do pass savings on to customers because of how high competition is.
I totally agree. I propose the opposite of what this lawsuit is fighting: let's merge Visa and Mastercard. Throw in AmEx while you're at it. Since the concepts of competition, interoperability and standards are too foreign to people and having too many types of payment processors is confusing, we need to have a single payment processor. That way we can grumble at only a single party when they jack up processing fees for editing database rows or straight up debank us. Efficiency!
That's how we do it in the US. We let industries consolidate and merge until they can raise prices with abandon, then chip back away at it with lawsuits.
FedNow charges $0.045 per transaction and runs 24/7 and payments are instant. A better solution would be bank cards that used the FedNow network already in place which would send money directly to the merchant, bypassing visa/mastercard entirely.
I've been using Same Day ACH in all my businesses for over a decade and the transaction fees are about $0.30/transaction and the dispute window is 60 days for PPD (personal checking accounts) and 3 days for CCD (commercial check accounts) and you get the money the same day. It beats paying visa/mastercard percentage fees and the 120 day dispute windows where people can literally get their money back four months later for work that was already performed. By using Same Day ACH, we get the money from the customer faster, save potentially millions of dollars in fees, and reduce dispute windows from four months to 3 days (for B2B sales)
Wouldn't high fees be competitive? A lot of incentive to compete there. Anticompetitive would be setting the fees too low to compete with.
I guess the point being there is probably a better reason for the high fees than the company trying to be anticompetitive, Or perhaps better said as a better reason for being anti competitive than high fees. Monopolistic lock in? Regulatory Capture? The problem is, that this blames the government instead of the company.
You've got it backwards, their anti-competitive practices is what allows them to charge such high fees:
> A class action lawsuit alleges Visa, Mastercard and some of America's largest banks have conspired to artificially inflate merchants' credit card transaction fees.
If they didn't conspire together and actually competed then they wouldn't be able to charge such high fees as they would surely try to undercut each other.
IMO They (Visa et al) have been desperately clinging to the outside of their speeding gravy train for way too long, and it's only a matter of time before they run out of track underneath them, so they're trying every trick in the book to keep things running.
Any new competitor could spell the end for them, so making it astronomically difficult to onboard enough people is so far working out for them.
Exactly. Courts will ask why they can charge high fees and not lose customers. The answer will be that they are anticompetitive or behaving as a cartel or monopoly would.
>Wouldn't high fees be competitive? A lot of incentive to compete there. Anticompetitive would be setting the fees too low to compete with.
Canada has a debit card network called Interac. Last I checked, the transaction fee was typically a flat $0.10 CAD (~$0.075 USD). There are shops that do debit or cash only, but it's not the norm (typically restaurants and niches with high chargeback risks). I am curious what keeps credit card acceptance high in Canada, despite a very widespread mature card network. I assume part of it is that consumer debt increases spending volume overall, but that can't be the primary reason I feel.
I think it's a combination of two things. Historically, credit card companies agreements with retailers disallowed them from passing on fees to customers, so effectively anyone paying with cash or debit was subsidizing the fees of credit card customers. Those agreements were made illegal in 2022, but retailers seem to be reluctant to actually start charging credit card users so far.
Then, credit card companies take some of their profits and give them back to customers in the form of reward programs.
So we all end up paying more for nothing, but the incentives make it a difficult collective action problem. I don't know why retailers don't take advantage of their right to pass fees through to customers. That would solve the problem. I guess it would make some stupid people angry. And maybe there is some other pressure the credit card companies are using.
I mildly investigated this as it is clear merchants want to get out from under the thumb of CC companies, so they would probably be a helpful ally.
However, starting up a credit card company from scratch is, extremely capital intensive, extremely bureaucratically heavy, and all the helpful finance players are in bed with or are the institutions you would be upending.
Merchants would probably help, but inevitably would take ownership and steer the ship into their harbor (not consumers). A system where merchants own the payment system would probably be even worse.
The way these deals are structured (including things like requiring a merchant to accept all cards), the business accepting the card cannot use price (or anything else, really) to signal to the person picking which card to use. The incentives are all from the issuer to the consumer in the form of various kickbacks.
This means that the issuer can manipulate the consumer into doing things bad for the business, and the business has no way to respond to the very high fees it is charged.
>The problem is, that this blames the government instead of the company.
Both are true though right? The company needs to be held accountable for price collusion by the government. Government not acting due to lobbying (i.e. bribes).
"We have a case pending right now in the Ninth Circuit. It was a privacy lawsuit against Google. A journalist, not a trial lawyer, determined that you could turn off tracking in Google Maps and it was not supposed to share your data, and then learned that Google was sharing it anyway, whether you turned it off on your phone or turned it off in the app. State attorneys general came in, fined Google a bunch of money, and forced Google to stop. And simultaneously there is a follow-on class action built on the journalists’ research, and that has settled.
The settlement is that Google creates a fund of sixty-two million dollars. The lawyers get nineteen million and the class gets zero. The rest is a big slush fund for a set of left-wing groups. Nothing requires the recipients to be left-wing other than that being what the attorneys chose to present to the court. They do it partly because some of these organizations are clients of the law firm, some of them have lead partners of the firm sitting on their boards, some of them are the attorneys’ alma maters, and some of them are just left-leaning outfits that are promising to do left-wing things. The class is two hundred million people. Maybe a hundred fifty million of them would not like what is being done in their name with their money.
And the judge decides who gets paid. This judge was very excited about getting to stop being a judge and start being a grant administrator with a big pot of philanthropy. We said, why are these unrelated organizations, which are not even unrelated, they are affiliated with class counsel, getting the class’s money? If the plaintiffs’ lawyers want to support the ACLU, it should come out of their pockets and not the class’s pockets. It is perfectly feasible to distribute that money to the class. Much smaller settlements get distributed to similar class sizes all the time. You can complain that if you divided it evenly among every single class member it would be a tiny amount and not worth paying out, but you do not have to do it that way, and most class actions are not done that way. Most class actions settle for less than a dollar per class member. You create a claims process, let class members sign up if they want the money, and divide it that way."
I do think we're getting to the point that middlemen don't have much value add. Economics even suggests they don't add value I think. Possibly neutral markets, payments, and logistics should just be a public service.
The fundamental service of performing payment processing doesn't seem complex, but these services do perform valuable work behind the scenes. I don't think it's worth what we ultimately pay for it, but there are a few parts to this worth considering:
1. I would like payment processors to have the resources and capacity to adapt to threats and maintain highly resilient infrastructure. This is expensive and requires a lot of ongoing investment.
2. If payment processing was turned into a public service, the complexity of international integration and necessary relationships, standards, etc. would become a public service burden. I'm not sure that I trust my provincial or federal government to handle this adeptly.
3. There is a lot to this that we're probably unaware of.
I'm not trying to protect banks in the slightest, but it's a baby and bathwater situation. I'm not confident in my country's ability to create its own payment processing platform that I would trust to be a reliable, sustainable, value-generating system operated by public servants. I don't mean value-generating in the profiteering sense, but in the "this is worth operating on public funds because, ultimately, it is more than worth what tax payers put into it".
I think some things are an awesome fit for public services, but a lot of places are probably not equipped to take this kind of task on safely and competently. My country is more likely capable of regulating these institutions, not replacing them internally.
We tried to make a COVID-tracking app and spent $59.5 million, and it was an abject failure. How much would we spend on a broken payment processing platform?
$59.5 million seems like a drop in the bucket compared to the rent that these middlemen are taking. And was the COVID-tracking app an abject failure because it didn't get public adoption or because the technology wasn't fundamentally sound. Because if it failed because of the former, then simply regulating companies to use it (or even just putting it out there as a cheaper option to outcompete Visa) would solve a lot of those adoption problems.
> I'm not confident in my country's ability to create its own payment processing platform
You live in Canada, which already has better options than the U.S., though the sittuation is getting better in the U.S.
For example, Interac is free for most people and very easy to use.
Debit payments often cost merchants less than 10 cents per tap. The local gelato place only takes debit or cash; if you don't have either, they're happy to accept an Interac payment, and do so more often than you'd think.
Part of the problem is that the incentives are misaligned. People want their points systems. Merchants want customers, but they also want lower transaction fees. Most customers have debit cards that would be much cheaper for merchants, but choose to use their credit cards, because they want the "rewards."
While the 3% or so that a bank charges might seem low, if you look at this from a low-margin business, that 3% may actually be much higher percentage of their net profit.
Regulation concerning rewards systems could go a long way towards shifting the system to be much less costly for businesses.
There's not much hope of real change here; Canadian banks are very profitable, and are a cornerstone of our economy. It's very unlikely that politicians will do anything to risk that.
The biggest thing is disputes. I have no problem with an escrow service asking for a cut if I want to use them, cause they have real costs. The creepy thing is how that escrow built into credit cards is forced on every little transaction.
> The creepy thing is how that escrow built into credit cards is forced on every little transaction.
That's essentially what a CC company does though, every transaction they're briding the timing gap between the card holder paying the CC company and the CC company paying the business. That's the core value add and cost they're bearing that they charge for.
They have risks from both sides of the transaction; on the one hand scam merchants who might get chargebacks and on the other customers who never pay off their balances (thought I guess that risk is covered by their interest charges mostly).
As I understand it, most of the fees associated with US credit cards don’t actually go to the parties that are on the hook for disputes.
PayPal does this well with friends & family transfers.
Zelle is like this too. Though everything seems to be reversible in some way, not cause of disputes but because of unauthorized charges.
Not just disputes. Also absorbing some significant part of the cost of fraud.
this process of giving out your 'secrets' (ccn, exp, ccv, zip) to tens of people a day with no other real authentication is inexcusably insecure. and instead of trying to get on top of the problem for real (like an hsm), we have this very half-assed fraud detection and chargeback mechanism that costly, ineffective, and seems to just bury the real issues behind a facade of concern. its been decades that this has been going on, I remain confused as to what incentives the banks have to continue to prop up this farce.
Any links for this? Since the abusive practices towards their users should already eliminate most of frauds that isn't caused by the actual banks themselves.
> the cost of fraud
Fraud in modern financial systems is kind of.. funny? obvious? Local banks who know who Bob is can't make enough money due to scale, we'll scale that system to a national level with millions of participants. How will we do that? Bob is now customer 11,476,112. Oh no this anonymous number we created cheated us because we didn't know who he was, what do we do? Charge Bob and everyone else for the cost of this, our scaled up business model wouldn't work otherwise. We'll skim 3% off of every financial transaction infinitely, so that after our $100 virtual bill has changed hands 30 times it has disappeared into our coffers.
I have had to fight hard for disputes, even with “premium” credit cards like Amex Platinum. I’m not talking about “not as described” bs, but being asked over and over for the same info to wear me down.
I recently ordered some snacks from another country and after 3 months the vendor stopped responding while never having sent anything. When I asked for a chargeback, my claim was denied because I didn’t have proof they didn’t send anything! I literally had an email from them that said they are backed up and unable to send stuff.
Out of all the banks I’ve done chargebacks through Chase has been the least painful. I think only one time I had a back and forth with them. And that time I had one phone call, sent my evidence, and that was that. The company then tried to charge me again, which I also disputed, never heard from them again.
This was a moving company that insisted I should use their flat rate package and 3 movers rather than the 6 hourly I asked for. It took forever and they tried to charge me extra fees.
I've had a foreign chargeback go into the void too. I don't get the feeling chargebacks are a thing in Italy, so chalked it up to that.
Not unlike the experience many Americans have of fighting their own insurance company that they already pay a monthly premium to.
The lengths insurance companies will go just to avoid adding to a deductible are, given the circumstances, rather disgusting.
They don't seem to produce any savings. Are credit card companies much different? Why are their CEOs making millions of dollars? Is it all supposed to be because of innovation in preventing fraud?
As with health insurance companies I too have found in reality their way of dealing with these things leaves much to be desired. The way they treat it seems transparently like health insurance - add minimal value upfront, then wear you down so you never actually get the service or "value" they were supposed to provide in the first place.
That shitty service is the margin padding that multi million dollar salary. Where's the innovation?
So much of the economy seems to be about wrongly extracting money from people, and then only giving it back to the people who have enough free time and persistence to endlessly argue and haggle for it.
Yeah, I've been extremely disappointed with disputes on Amex Platinum.
I literally had a bike rental company in Amsterdam attempt to get me to conspire to report a bike stolen (which had briefly been stolen but was back in my possession), and then when I refused, charged me as if the bike had been stolen!
I reported all this to Amex, and I was never refunded, and to my knowledge, the attempt fraud was never investigated.
I largely agree. What V/MC became is essentially an abdication of a core government function of providing the secure means of economic activity. If the US government can print the currency in “paper” it should also provide the means of communicating that currency electronically.
There is absolutely not reason that the government should have abdicated its core function and allowed a monopoly effectively have a license to print the dollar bills and rent them out for a cut from ever single economic transaction.
Imagine if the government had suggested that in addition to all the other criminal extortions called taxes, when you use dollar bills to purchase something, you have to pay a 3% dollar-bill-usage surcharge every time a bill changes hands.
But it was obfuscated that this constant drain and fraud was being perpetrated because the whole system became extremely financially lucrative to the very people whose responsibility it would have been to stop the crime; so it has continued since. The mob was in control of the police.
> Possibly neutral markets, payments, and logistics should just be a public service.
Yes let’s give the economy to the people that run the DMV.
As AI compute will be within 15 years.
So take the cost of electricity + compute and add 3% markup for the US and 0.3% for everywhere else, and there you have the actual cost of AI.
Just like HN that the top comment is completely off topic and totally misses the point.
it's not offtopic at all. visa and mastercard are middlemen in the transaction between two parties. the comment is about middlemen and suggests they don't add value.
edit: just seeing now you're complaining about things being offtopic multiple times in this submission, without ever adding anything yourself. perhaps you could be part of the change you wish to see?
"Value add" is the wrong framework for thinking about these sorts of services. The reason Visa and MasterCard exist is that there's value in relationships. If you want to have your accounting system available in all stores, you have to talk to Visa or MasterCard. Conversely, if you run a store and want to accept payments, you only have to deal with Visa and MasterCard. Sure, "public service", but run by who? Visa and MasterCard are cross border, good luck getting any sort of international coalition of governments to build a payments system in the current political climate.
The United States government already interferes on behalf of Visa and MasterCard to maintain their duopoly across the globe.
Look at the tension between United States and Brazil on this issue with their nationalized payments system.
The fact is the most important relationship Visa and MasterCard have is the one you left unsaid - their relationship with the United States government.
It doesn’t have to cover everything. Put international to one side, just make a system for domestic payments. Like much of Europe has.
SEPA?
3% is 100% worth it to me to be able to do a chargeback when a vendor fails to deliver what they promised.
What connection does the 3% have to the ability to do a chargeback? The card company isn't absorbing the loss, they are just pushing it back on the merchant and collect it from them unless the merchant successfully disputes the chargeback.
To a first approximation, the 3% isn't paying for disputes; it's paying for rewards to the customer (essentially a built-in discounting mechanism that gets to discriminate on credit rating), and for profit margin to the payment processor. Disputes are paid for by the merchant, and if you get too many of them you potentially lose the ability to process credit cards.
Credit cards in many regions outside the US can do chargebacks at 1/6th that cost or less.
The vendor pays the 3% not you (through increasingly vendors try to charge this fee to you as well). If you as the consumer had to pay 3% extra every time, do you still agree?
Where do you think the vendor gets the 3% to pay the network?
If I bake cakes to sell them, and have to pay 3% to a network for each purchase, then that 3% is in the price of the cakes.
That's if they pass on the cost to the consumer. Some businesses charge the same amount whether paying cash or card, meaning paying with a card is ""free"", or at least not "penalized" over cash.
I can't reply to DaSHacka, but just to point outat least in this country, merchants have to pay to deposit cash. Not to mention the additional cost on their side of handling it, higher insurance cost, etc. etc. Cash isn't free of transaction fees/
All fees and taxes and tariffs end up being a direct cost to the consumer
not every transaction is risky enough to need chargebacks. it should be unbundled.
I wish they would face litigation for banning the sale of large swaths of content (or even banning the content altogether on sites relying on donations/subscriptions to survive). Paypros have no business being censors.
This misses the mark in the same way people getting mad at Google for updating the "Gulf of Mexico" do.
You're missing the driver. It's not like Google cares or wants to change the name. They more or less have to given the public/private relationship and who is responsible for what. It's not Google's job to name bodies of water, it's not a credit card company's job to censor. And if you actually look, they aren't making that decision because they want to. They are often acting on behalf of the government.
Payment companies are even more enmeshed with the state. They often do these things to simply comply with what the government tells them to do or to get ahead of government telling them what to do. Like with some of the anti-pornography laws being drafted or passed in certain American states.
The private/public distinction really needs to come under more scrutiny here. The credit card duopoly is very much tied in with state power. This has only accelerated post 9/11 as the Treasury's mandate increasingly shifted to "national security".
Payment processors are censors because the government is. Just like Flock the government can't do certain things so it contracts with a third party. They then have an interest in protecting/promoting that party. Flock is a snoop because the police are snoops. If Flock does it and the government merely pays for it well it's not a violation of your rights. Your rights protect you against the government, not against Flock. It's the same legal backdoor. A payment processor doesn't care what you buy, why would they? They make money so long as you keep transacting. It's the government that cares.
This same dynamic happens all over the American economy because the private/public distinction can get increasingly amorphous. Your credit card is as much government spyware as your phone. But understand - the problem is not the companies, it's the majority of your fellow citizens who either don't care or actually do endorse censorship. Unless you have a solution for that trying to blame credit card companies for the problem unfortunately misses the mark.
They aren't even my fellow citizens, I'm from Europe and mostly buying content from Japan. Yet those American companies still keep getting in the way.
patio11 wrote an in-depth post about how the Southern Poverty Law Center abused their ownership of a list that every payment processor used to decide which hates groups to de-bank: https://www.bitsaboutmoney.com/archive/nonprofit-indicted-ba...
LOL.
https://theconversation.com/white-supremacists-spin-a-justic...
While smaller, PayPal does this far more often FWIW.
I wish people on HN would stick to the subject.
IIRC it was religious bodies targeting / lobbying / infiltrating them as a way to push their censorship beliefs? Perhaps someone else knows better
One mans "censor" is anothers "brand protection". Given that they are currently allowed and expected to decide who gets to use their payment networks, it seems pretty obvious to me that they won't allow extreme content next to their logos. If you made clear rules that specify when they have to extend service, I'm sure they would love to relinquish that responsibility. Visa has no moral objection to what you do, as long as they make money and aren't exposed to political pressure.
Approximately zero people, reasonable or unreasonable, believe that they payment processor has anything to do with the business. You can see this because whenever a business is caught doing something naughty and people try to cancel it, no one ever says "this is all VISAs fault - they're next!"
Let's say you use a Visa card to pay for the services of a prostitute. How should they deal with a chargeback request if you weren't satisfied with services rendered?
Assuming we're talking about performing this transaction in a jurisdiction where prostitution is legal, how is it any different from any other business transaction? I don't think anyone is particularly mad about payment processors refusing to process illegal transactions, it's the refusal to process legal but morally controversial transactions that is problematic.
If I pay a masseuse, and I try to do a charge back because I wasn't satisfied with services rendered, what happens?
I think I would push back on the idea that credit and debit cards represent a deadweight loss to the economy. Operating a cash business has its own expenses - theft risk (employee or otherwise), handling time, and (most importantly) you are limiting your customer base to only cash. There's a lot of reasons lots of small businesses are going card only.
For good or bad, a lot of studies have confirmed that cards have overwhelmingly increased consumer spending.
I think the far stronger case is that the industry has no actual incentive to fix the underlying fraud that they are charging merchants to fight. They have done a lot of work to institutionalize the problematic infrastructure and make it almost impossible for startups or outsiders to fix.
Nobody is claiming payment cards adds no value, that'd be absurd. But their cashback programs and other bullshit (see recent itch.io/Steam moral policing story) certainly adds no value.
The top comment here does, but it's stupid and off topic.
If I'm reading it correctly, the top comment is arguing that having electronic payments run by for-profit entities adds no value. Not that electronic payments are useless, rather that these should be a state-run service. Which is one way to solve this I guess (not that it will help moral policing stuff much, but at least no more robbing poor Paul to reward rich Peter).
> I think I would push back on the idea that credit and debit cards represent a deadweight loss to the economy
It’s the anticompetitive actions causing the deadweight loss, not the digital nature of transactions.
I think a lot of this is starting to bubble up to the surface after PIX made headlines[1]
[1] https://whatispix.com
Indian UPI is also apparently annoying Visa and Mastercard so its introducing a small charge on transactions greater than 2000 INR/20 USD.
Sorry, how is PIX different than a plethora of similar P2P and p2b solutions already present in Europe?
It's not different, many countries already have their own version of it, you just don't hear about them. India's UPI has more users but you don't hear about it.
Maybe we hear about it because, it's right in the US' backyard and the biggest country there is Brazil from which pix comes from. All these payment systems threaten visa and Mastercard but pix is the largest in the US' backyard because the country it comes from, Brazil, is the largest there.
And it's also government run, dun dun dun. The us hates anything that is government run. That's why they hate china and communists and socialism so much.
Agree that PIX bothers the US more because it's directly under US (self assessed) area of influence. But the reason is not some philosophical alignment, but rather deep rooted lobbying practices.
Evidence of high levels of power political pressure - US latest 25% tariff pressure came out explicitly around this topic - https://www.reuters.com/business/finance/brazil-us-clash-ove...
Right, but PIX on their website says they're expanding to Europe, which makes me wonder what do they have to offer on this heavily saturated market.
India's UPI is practically impossible to use even for tourists in India. It's not serving the same role as Visa and MasterCard.
How is it impossible to use? Apparently everyone in India is using it? Apparently only tourists face issues with it?
With visa and Mastercard you pay transaction fees and rent for a card terminal, which are lower or non existent with these homegrown P2P payment systems. Outside western developed countries aka the US and Europe, that's enough to stop using visa and Mastercard.
Impossible for tourists to use yes. You need an Indian bank account and there are services ostensibly for tourists but they still don't work everywhere, for example many vendors will want friend payments instead of business payments because they don't want to pay the surcharge.
Tourist UPI only permits P2M payments, and most normal transactions (as well as refunds) are conducted P2P.
UPI used to be good, but they started adding charges after Visa and Mastercard lobbied D.C. probably with huge bribes. And the Indian government is spineless against D.C.
Surely the UK can also pull this off given how quick faster payments is. I'm always surprised at how we just stuck with Visa
It is the difference between Credit and Debit cards.
I could see Debit Cards being replaced by direct transfers.
The issue is what happens if who you pay too does not provide the srvice or just runs off with the money.
Under UK Law the customer can deal with the Credit Card issuer and get their money back with a direct payment it is npot always possible.
For debit cards I think the issue will refund if fraudelent but might take a battle. With direct payments the customer has a much harder job.
Yes, and it exists - its called "pay by bank".
its cheaper but customers lose protection for doing it, and as its illegal (yes, against the law) to offer them a discount for using debit cards, cash, or direct payments they have no reason to.
I think the problem is that merchants hate the card networks and consumers generally like them and there are a lot more consumers than merchants. If you are a politician, which block of voters are you going to side with?
They like the card networks because they are lured by point schemes, effectively money charged to the merchants and then shared back to cardholders. Consumers would flip in a heartbeat if shops were allowed to offer discounts to those not using credit cards.
I used to by all my PC parts from a shop that had a 5% discount for cash purchases. It was the sort of shop that was just a counter with all the merch hidden in the back. I don't know how they kept the CC companies from knowing but maybe 40% of their business was cash purchases (circa 2019).
CC companies allow this surcharge/discount for CC/cash now. Have for several years. I think it was caused by a class action suit.
> Consumers would flip in a heartbeat if shops were allowed to offer discounts to those not using credit cards.
We must be very different consumers.
Also, many places already do effectively this, they charge a surcharge for using a card.
Not in the UK, or the EU, as its actually illegal (as in against the law, as well as the contract with the provider).
> as well as the contract with the provider
It used to be here in the US, but there was enough violations that they stopped putting it in the terms.
But, looking into this, it looks like some states have made it illegal. I'm curious how well that's enforced.
Yeah, there are folks who use more card benefits than they pay in annual fees, to whom this might not be appealing.
For those on the other side of the balance, maybe it would be.
Either way, I can't imagine many shops doing it, even if the economics makes sense. They'd rather the immediate and direct pad to the bottom line.
It's the same reason that I don't use bitcoin for large purchases: I want the ability to have disputes handled if and when something goes awry. With cash, I have no recourse.
Merchants don't hate the card networks. That's a minority in my experience, who are penny wise and pound foolish.
I've noticed growing use of similar options in the UK already, like Payit and truelayer (often shown in checkout via "Pay by bank"). Ebay and Whetherspoons are examples of places providing these options.
In Malaysia, we have DuitNow, which is a similar idea. It’s been great. It’s pretty common to go cashless now, even outside the big cities and in rural areas. Just scan the QR code with your bank app, pay, and you’re done. Wish more countries would adopt this.
Thanks for posting. Interesting, I will try to read more this stuff.
What seems to be getting lost is that the acquirer, not the payment network, sets the Merchant Discount Rate. The acquirer is also the merchant’s direct payments provider.
Yet the acquirers seem to be always absent from these lawsuits.
It seems like many of these prosecutors/plaintiffs just want to go after the largest organizations in a given industry, almost irrespective of their culpability. It seems to me that most 'consumer protection' lawsuits seem to be more focused on obtaining publicity for the lawyers than actually doing anything useful, but getting a few settlements from larger organizations is a lot easier than actually going after wrong-doers, so it is a somewhat sensible strategy if the goal is to 'win' as much money as possible.
But isn't most of the fees a result of the interchange rate, set by visa? The fact that stripe or whatever charges a fee on top, which contributes to the overall rate hardly seems relevant, unless you think all the payment processors are colluding to set their markups higher.
Let's use Stripe as an example, there fee is 2.9% + 30 cents.
That 30 cents - is what's often ignored but makes up a disproportionate amount of the fee.
On a $30 transaction, paying 30 cents is equivalent to a 1% fee.
So Stripe on a $30 transaction is effectively 3.9% in fees (on a $30 transaction).
Interchange (which goes to the issuer), would only be approx 1.75% (of the 3.9% fee charged by Stripe).
It has been awhile since I dealt with credit card networks, but the parent comment confuses me as well. Before, most of the fees go to the issuer, the network takes about the same as the acquirer (roughly):
Network gets swipe fees, and a percentage of the interchange Issuers get majority of interchange, and carrying interest and fees Acquirer gets the markup plus whatever admin/maintenance fees
Here's what I found for a reference: https://cmspi.com/back-to-basics-card-network-models-and-glo... which tracks with my experience.
I'm open to be corrected though.
I don't think payment processors like Stripe are colluding, they just have a difficult task. Card and bank payments are very complicated and regulation-heavy. I do get the feeling that credit cards and banks are colluding.
I hope more things like this comes to light, as we have seen how mastercard and visa in union has moved censorship among things around the world, which by the way is illegal, but due to their monopoly could still carry out and they did.
So the hope is that new or one of the other brokers step up and hopefully their ethics are better.
Illegal where?
Amex does this as well and it’s a mixture of internal opinions of executives, board, major shareholders, as well as the US federal government just telling them (see operation chokepoint for just one variation), as well as chargeback and fraud rates in some industries just validating personally held opinions
What's the intended outcome?
If you break up the Visa and Mastercard cartels, does this San Diego pizzeria then have to decide what cards to accept on a bank-by-bank basis?
The opposite of what's being alleged. From TFA:
Broadly, the interlocking restraints set and maintained by the defendants have forced merchants that accept any Visa and Mastercard credit card to accept all such cards, regardless of cost, thereby eliminating any incentive for issuing banks to compete by lowering their fees, the suit says. The lawsuit claims the challenged restraints have also prevented merchants from being able to steer customers to lower-cost payment options—for instance, by surcharging based on a customer’s use of a particular card. These and other restraints have prevented competition among issuing banks and other credit card networks, allowing the financial giants to raise their fees every year “without consequence,” the case alleges.
Reminds me of how the cardholder agreements used to all prohibit adding a credit card surcharge to cover the fees. Some of the fees go back to the customer as rewards, so customers especially had no reason to use cash. Now that practice is illegal, and many places are 3-5% cheaper with cash, which is in line with the fees and usually much larger than credit card rewards.
Is that practice illegal? I've never gotten a discount for using cash or debit.
That is the crux of the problem though. By adding fees and then contractually forbidding merchants from passing those fees on to credit card customers, it is forcing non card users to pay for card users fees since the fees are embedded in prices. Plus they're even giving card users kickbacks in the form of points. So non credit card users end up paying more credit card fees than credit card users which is nonsense.
That sounds a lot like they want to be able to say which banks cards they want to accept (the "forced merchants that accept any Visa and Mastercard credit card to accept all such cards" part).
It's most likely primarily about different credit card "brands" like Visa infinite, signature etc. These have different benefits for customers (like cashback and points) and higher fees for merchants.
A lot of small restaurants are cash-only because of all this nonsense.
A friend of mine owns a restaurant that is pretty remote so lower business. He told me he doesn't take credit cards because he would be paying them a percentage for everything.
It is kind of like the mafia to a small guy like him.
I think he does do a few phone apps.
A waitress at another cash-only restaurant told me, worse than customers who hear they won't take credit cards are the apple pay folks. "They really get annoyed when they don't get their apple pay"
Franchises don't care. They can raise prices monthly or even dynamic price if they want to.
Kind of sucks for society because lots of the best/greatest restaurants are not franchises.
>A lot of small restaurants are cash-only because of all this nonsense.
A lot? Not sure about that.
>I think he does do a few phone apps.
Not if he's cash only he's not.
Legislation to cap fees.
The European Union caps consumer card interchange fees at 0.2% for debit cards and 0.3% for credit cards
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
And the US already capped debit card fees back in 2010:
https://en.wikipedia.org/wiki/Durbin_amendment
This is explicitly about credit card fees.
Can the courts cap fees? I thought that would have to be something congress does.
Right. All the courts can do is use the high fees as evidence of monopoly.
um, the same system we have today but with less rent extraction
and don't pretend like it's not possible, it's obviously possible: take the system and lower the fee to something proportional to the price of providing the service
if credit card rewards programs have to go to make it economically viable -- awesome, that would be a second win.
I like rewards programs and disagree that it would be a win. Your suggestion puts me in an objectively worse position.
Okay, so which side is in the majority? The people who have credit card debt or the people who are using rewards programs in a way that doesn't put them in an objectively worse position? Let's help whichever side is larger.
Why would we help whichever side is larger?
The current status quo is a result of free association. If people prefer to have credit card debt or use rewards programs poorly then I have no issue with continuing in this manner.
same. pick a card w good rewards, pay the statement balance to $0 every month, reap some benefits while strengthening your credit score.
The fees are larger than the rewards. Most business people pay with credit card is competitive. Retail and restaurants absolutely do pass savings on to customers because of how high competition is.
\s
I totally agree. I propose the opposite of what this lawsuit is fighting: let's merge Visa and Mastercard. Throw in AmEx while you're at it. Since the concepts of competition, interoperability and standards are too foreign to people and having too many types of payment processors is confusing, we need to have a single payment processor. That way we can grumble at only a single party when they jack up processing fees for editing database rows or straight up debank us. Efficiency!
\s
That's how we do it in the US. We let industries consolidate and merge until they can raise prices with abandon, then chip back away at it with lawsuits.
FedNow charges $0.045 per transaction and runs 24/7 and payments are instant. A better solution would be bank cards that used the FedNow network already in place which would send money directly to the merchant, bypassing visa/mastercard entirely.
I've been using Same Day ACH in all my businesses for over a decade and the transaction fees are about $0.30/transaction and the dispute window is 60 days for PPD (personal checking accounts) and 3 days for CCD (commercial check accounts) and you get the money the same day. It beats paying visa/mastercard percentage fees and the 120 day dispute windows where people can literally get their money back four months later for work that was already performed. By using Same Day ACH, we get the money from the customer faster, save potentially millions of dollars in fees, and reduce dispute windows from four months to 3 days (for B2B sales)
Wouldn't high fees be competitive? A lot of incentive to compete there. Anticompetitive would be setting the fees too low to compete with.
I guess the point being there is probably a better reason for the high fees than the company trying to be anticompetitive, Or perhaps better said as a better reason for being anti competitive than high fees. Monopolistic lock in? Regulatory Capture? The problem is, that this blames the government instead of the company.
You've got it backwards, their anti-competitive practices is what allows them to charge such high fees:
> A class action lawsuit alleges Visa, Mastercard and some of America's largest banks have conspired to artificially inflate merchants' credit card transaction fees.
If they didn't conspire together and actually competed then they wouldn't be able to charge such high fees as they would surely try to undercut each other.
IMO They (Visa et al) have been desperately clinging to the outside of their speeding gravy train for way too long, and it's only a matter of time before they run out of track underneath them, so they're trying every trick in the book to keep things running.
Any new competitor could spell the end for them, so making it astronomically difficult to onboard enough people is so far working out for them.
Exactly. Courts will ask why they can charge high fees and not lose customers. The answer will be that they are anticompetitive or behaving as a cartel or monopoly would.
>Wouldn't high fees be competitive? A lot of incentive to compete there. Anticompetitive would be setting the fees too low to compete with.
Canada has a debit card network called Interac. Last I checked, the transaction fee was typically a flat $0.10 CAD (~$0.075 USD). There are shops that do debit or cash only, but it's not the norm (typically restaurants and niches with high chargeback risks). I am curious what keeps credit card acceptance high in Canada, despite a very widespread mature card network. I assume part of it is that consumer debt increases spending volume overall, but that can't be the primary reason I feel.
I think it's a combination of two things. Historically, credit card companies agreements with retailers disallowed them from passing on fees to customers, so effectively anyone paying with cash or debit was subsidizing the fees of credit card customers. Those agreements were made illegal in 2022, but retailers seem to be reluctant to actually start charging credit card users so far.
Then, credit card companies take some of their profits and give them back to customers in the form of reward programs.
So we all end up paying more for nothing, but the incentives make it a difficult collective action problem. I don't know why retailers don't take advantage of their right to pass fees through to customers. That would solve the problem. I guess it would make some stupid people angry. And maybe there is some other pressure the credit card companies are using.
I mildly investigated this as it is clear merchants want to get out from under the thumb of CC companies, so they would probably be a helpful ally.
However, starting up a credit card company from scratch is, extremely capital intensive, extremely bureaucratically heavy, and all the helpful finance players are in bed with or are the institutions you would be upending.
Merchants would probably help, but inevitably would take ownership and steer the ship into their harbor (not consumers). A system where merchants own the payment system would probably be even worse.
The way these deals are structured (including things like requiring a merchant to accept all cards), the business accepting the card cannot use price (or anything else, really) to signal to the person picking which card to use. The incentives are all from the issuer to the consumer in the form of various kickbacks.
This means that the issuer can manipulate the consumer into doing things bad for the business, and the business has no way to respond to the very high fees it is charged.
>The problem is, that this blames the government instead of the company.
Both are true though right? The company needs to be held accountable for price collusion by the government. Government not acting due to lobbying (i.e. bribes).
Finally
Slight digression. This podcast/article is a good explanation of why people who partake in a class action rarely see any of the settlement money:
https://oliverbatemandoesthework.substack.com/p/the-work-of-...
"We have a case pending right now in the Ninth Circuit. It was a privacy lawsuit against Google. A journalist, not a trial lawyer, determined that you could turn off tracking in Google Maps and it was not supposed to share your data, and then learned that Google was sharing it anyway, whether you turned it off on your phone or turned it off in the app. State attorneys general came in, fined Google a bunch of money, and forced Google to stop. And simultaneously there is a follow-on class action built on the journalists’ research, and that has settled.
The settlement is that Google creates a fund of sixty-two million dollars. The lawyers get nineteen million and the class gets zero. The rest is a big slush fund for a set of left-wing groups. Nothing requires the recipients to be left-wing other than that being what the attorneys chose to present to the court. They do it partly because some of these organizations are clients of the law firm, some of them have lead partners of the firm sitting on their boards, some of them are the attorneys’ alma maters, and some of them are just left-leaning outfits that are promising to do left-wing things. The class is two hundred million people. Maybe a hundred fifty million of them would not like what is being done in their name with their money.
And the judge decides who gets paid. This judge was very excited about getting to stop being a judge and start being a grant administrator with a big pot of philanthropy. We said, why are these unrelated organizations, which are not even unrelated, they are affiliated with class counsel, getting the class’s money? If the plaintiffs’ lawyers want to support the ACLU, it should come out of their pockets and not the class’s pockets. It is perfectly feasible to distribute that money to the class. Much smaller settlements get distributed to similar class sizes all the time. You can complain that if you divided it evenly among every single class member it would be a tiny amount and not worth paying out, but you do not have to do it that way, and most class actions are not done that way. Most class actions settle for less than a dollar per class member. You create a claims process, let class members sign up if they want the money, and divide it that way."
I think it’s a good idea .wonderful