Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Forget Google, time to end the Visa-MasterCard duopoly

medium.com

Post reply on HN
Print view View original

51–60 of 547 posts

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

#51

Post by random3 »

Laremere wrote: post #25
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... ).

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 va…

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.

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

#52

Post by Reason077 »

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.

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.

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

#53

Post by ryanwatkins »

xfour wrote: post #3

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…

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?"

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

#54

Post by briffle »

crazygringo wrote: post #45

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…

Imagine if companies charged 2-5% less because they didn't have to fund CC company marketing tools like cashbacks.

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

#55

Post by ian0 »

jariel wrote: post #33
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...

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 a…

>> 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.

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

#56

Post by random3 »

kyrra wrote: post #41
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…

But there's Same Day ACH, right? Also the new RTP Network (https://www.theclearinghouse.org/payment-systems/rtp) seems to get traction.

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

#57

Post by wolco »

jariel wrote: post #44
ComputerGuru wrote: post #37

Earlier quoted context omitted.

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 cent…

Like some kind of virtual coin.

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

#58

Post by pfundstein »

julienb_sea wrote: post #50

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-f…

> 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.

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

#59

Post by biaachmonkie »

crazygringo wrote: post #45

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…

But since the retailers can't offer discounts for cash transactions, people who pay with cash are being over charged and subsidizing those fees.
Post reply on HN