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Forget Google, time to end the Visa-MasterCard duopoly

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Re: Forget Google, time to end the Visa-MasterCard duopoly

#41

Post by kyrra »

random3 wrote: post #2

Cards still account for less than 18% of US payments (source https://go.plaid.com/rs/495-WRE-561/images/Plaid-Modern-guid... ).

(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.

Re: Forget Google, time to end the Visa-MasterCard duopoly

#42

Post by Nasrudith »

jedberg wrote: post #30
tiffanyh wrote: post #20

I am reading so much incorrect information in this thread it’s maddening. 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...

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 basical…

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)

Re: Forget Google, time to end the Visa-MasterCard duopoly

#43

Post by jedberg »

x87678r wrote: post #13

Amex/Discover cards exist too, you should use them!

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.

Re: Forget Google, time to end the Visa-MasterCard duopoly

#44

Post by jariel »

ComputerGuru wrote: post #37
jedberg wrote: post #30

Earlier quoted context omitted.

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 basical…

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.

"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.

[1] https://www.pymnts.com/visa/2018/non-compliant-cash-discount...

Re: Forget Google, time to end the Visa-MasterCard duopoly

#45

Post by crazygringo »

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.

Re: Forget Google, time to end the Visa-MasterCard duopoly

#46

Post by monkeycantype »

sonicggg wrote: post #36
rvz wrote: post #34

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 beginn…

The terminology issue just shows us that people have got way too much spare time during the pandemic.

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.

Re: Forget Google, time to end the Visa-MasterCard duopoly

#47

Post by dathinab »

tiffanyh wrote: post #20

I am reading so much incorrect information in this thread it’s maddening. 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...

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.

Re: Forget Google, time to end the Visa-MasterCard duopoly

#50

Post by julienb_sea »

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.

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