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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

#81

Post by jariel »

ian0 wrote: post #55
jariel wrote: post #33

Earlier quoted context omitted.

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…

Banks are a cabal, that they needed VISA/MC was merely a need to 'standardise' a transactional network.

The evidence that they are an oligarchy lies in their power to set prices. Which points right to the definition of what a monopoly is.

If such systems were truly competitive, and we had say, 5 completely different systems that were truly competitive, the price would not be a total of 2.5%. The price would be set by the market, not the providers of the service and it would be much, much lower than 2.5%.

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

#82

Post by StillBored »

biaachmonkie wrote: post #59
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.

Well, after trying to negotiate cash discounts ~25 years ago on a couple fairly significant purchases for me (furniture) I gave up and joined them... By carrying a discover card, which at the time was just about the only cash back card in existence (the only one I knew about).

So, I still favor the discover (despite now being part of Morgan Stanly?) for most purchases, but when its rejected I fall back on a MC with a cashback program.

That program pays for my computer hardware...

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

#83

Post by arachnid92 »

dathinab wrote: post #47
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…

I just want to present a counterpoint to your claim that in the EU, CCs matter less: there are countries in the EU like Sweden where cash is virtually non-existent. Basically everything is card-based here, I've even seen panhandlers who accept electronic payments in Stockholm.

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

#84

Post by manquer »

briffle wrote: post #54
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.

There are payment standards like UPI in India and mobile number based banking , which offer transactions for very less or no cost ( mostly debit driven )

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

#85

Post by hn_throwaway_99 »

biaachmonkie wrote: post #59
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.

That really depends on where you live. It seems pretty confusing because (a) federal law made surcharges for using a card legal under a 2013 settlement with Visa and MC, and (b) there have been a bunch of federal court cases, including a 2017 Supreme Court case, that invalidated some state laws that prohibited surcharges.

Interestingly, even now that many merchants are allowed to offer a discount for using cash, most don't because they've likely figured out (a) if they lose just 1 sale in 30 it's likely a net negative for them, plus (b) people are likely to spend more, especially on impulse purchases, when using a card, and (c) there is just a sense that it can be annoying to customers to have to pay more for using a card, taking away from customer goodwill.

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

#86

Post by sdenton4 »

cpsempek wrote: post #77
pradn wrote: post #72

Earlier quoted context omitted.

CC rewards seem like a indirect regressive tax. Wealthier consumers who can afford to pay on time and have better credit ratings are subsidized by poor consumers who actually use the "credit" part of "credit card".

I'm ignorant to CC companies' financials. But I would have thought their revenues are driven by transaction fees, which end up ultimately getting passed down to the buyer through higher prices. Would be interested to learn more though about CC economics. It would indeed be sad if CC rewards operated like a regressive tax, as you say.

If you have poor credit, you get a crappy credit card: low limit, high interest rates, no rewards.

If you've got great credit, you get a high limit, slightly-less-astronomical rates, and all the rewards.

The cost of the rewards is (as I understand it) mainly carried by the transaction fees, spread out over all purchases everywhere. So you have pointless price increases for people who /don't/ use credit cards (like me) or have poor credit, and the benefits of that 'tax' going to users with good credit (ie, rich people). So, yeah, it's a wealth transfer to people with better credit.

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

#87

Post by PeterisP »

random3 wrote: post #61
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...

Well they "do not" in the same sense inflation is "not" a tax on anyone holding cash, right? One way or another every fee must be absorbed by someone that pays.

No, it's that the wrong "they" is used.

Interchange goes to issuing banks, not Visa/Mastercard, and that's a big part of why the system is so stable as any competing scheme with a lower interchange will not be offered to customers because it won't be as profitable for the issuers. And, if needed, they can use the whole interchange amount for marketing and cashbacks to make any new scheme uncompetitive, because if it has lower interchange, then it can't match that without losing money.

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

#88

Post by sdenton4 »

alt_f4 wrote: post #80
pradn wrote: post #72

Earlier quoted context omitted.

CC rewards seem like a indirect regressive tax. Wealthier consumers who can afford to pay on time and have better credit ratings are subsidized by poor consumers who actually use the "credit" part of "credit card".

It's not though. No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation.

It's not optional, though.

I still have to pay the higher transaction costs even without a credit card, because the credit card companies require that vendors have the same prices for card or cash, resulting in higher prices for everyone.

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

#89

Post by hn_throwaway_99 »

anamexis wrote: post #76
biaachmonkie wrote: post #59

Earlier quoted context omitted.

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

Retailers can offer discounts for cash transactions, per the Durbin Amendment to the Dodd-Frank bill of 2010. https://en.wikipedia.org/wiki/Durbin_amendment

It depends on where you live. 10 states have laws that prohibit or restrict discounts for cash transactions: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Some of those restrictions have been invalidated by federal courts, but I was somewhat confused about which states were affected.

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

#90

Post by omosubi »

alt_f4 wrote: post #80
pradn wrote: post #72

Earlier quoted context omitted.

CC rewards seem like a indirect regressive tax. Wealthier consumers who can afford to pay on time and have better credit ratings are subsidized by poor consumers who actually use the "credit" part of "credit card".

It's not though. No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation.

How would you pay for things online, many of which are not available in person? Or stores/airplanes/services that don't accept cash?
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