Forget Google, time to end the Visa-MasterCard duopoly • Hacker News Board

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

#151

Post by matthewdgreen » Tue, Jun 30, 2020, 1:27 AM UTC

DevKoala wrote: post #105

sdenton4 wrote: post #86

Earlier quoted context omitted.

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…

I had poor credit at a point in time. I "bought" a credit card to build my credit by putting a deposit. After 1 year of on-time payments I was able to graduate to a credit card with cash back. The system didn't feel punitive to me, and honestly, I had poor credit in the first place because I was irresponsible while in college.

You just described a scenario in which you were systematically bilked for at least a year —- paying full retail prices, which presumably paid for full transaction fees, which in turn did not pay you any rewards —- so you could graduate to the privilege of being allowed to purchase a consumer line of credit that reduced the level of punishment to something merely appropriate.

There are relatively few businesses in the world that can rip someone off for a year, then allow them to pay a more reasonable fee in exchange for guaranteed business, and still have the consumer claim that the system “doesn’t feel punitive.” The whole thing is kind of brilliant.

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

#152

Post by jhloa2 » Tue, Jun 30, 2020, 1:31 AM UTC

akira2501 wrote: post #148

matthewdgreen wrote: post #146

Earlier quoted context omitted.

Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card companies, by dint of their crushing market power over small retailers, can force stores to charge identical cash and credit prices. I suppose a well-functioning competitive market would fix this problem, but weirdly enough Amex and Discover don’t seem interes…

> I’m paying for those 2-5% rewards Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor. > I suppose a well-functioning competitive market You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is…

Anecdotally, I have never once seen those discounts limited to cash transactions in the United States

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

#153

Post by wil421 » Tue, Jun 30, 2020, 1:34 AM UTC

simias wrote: post #115

arachnid92 wrote: post #83

Earlier quoted context omitted.

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.

Paying by card is common, paying using a Credit Card not necessarily. I'm French and I'm semi-ashamed to admit that when at a store abroad the clerk asked me "debit or credit?" for payment I had to ask him to explain to me what this quaint exotic incantation meant. When I finally understood how that system worked I also finally understood this weird trope in American movies where a character has a half a dozen credit…

Debit card (bank card) transactions in the US require a PIN. Credit cards require a signature but most gas stations require a zip code.

It would be nice if the US had PINs like Europe does for credit cards.

I make around $1500-$2000 a year in cash back from my credit cards and $195 in fees. 6% back for groceries, 3% for gas, 3% on online shopping, and 3% for restaurants. All my household utilities and bills are run through my Delta card to collect miles and a $200 yearly voucher.

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

#154

Post by matthewdgreen » Tue, Jun 30, 2020, 1:35 AM UTC

akira2501 wrote: post #148

matthewdgreen wrote: post #146

Earlier quoted context omitted.

Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card companies, by dint of their crushing market power over small retailers, can force stores to charge identical cash and credit prices. I suppose a well-functioning competitive market would fix this problem, but weirdly enough Amex and Discover don’t seem interes…

> I’m paying for those 2-5% rewards Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor. > I suppose a well-functioning competitive market You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is…

In a properly competitive market the merchant doesn’t really get to keep it. Presumably they set their prices to a value that is X% higher than where they would normally set their prices without the need to pay transaction fees. If exactly half their business is paid in cash/debit and half in credit, then X might be set to something like half of the excess CC transaction fee. Then the credit card customers get to split up all of those rewards amongst themselves, and the cash/debit customers get nothing.

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

#155

Post by protomyth » Tue, Jun 30, 2020, 1:38 AM UTC

acomjean wrote: post #113

jariel wrote: post #44

Earlier quoted context omitted.

"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…

>Get 2% if you use cash instead of VISA" Some gas stations where I live have a "credit" price and a lower "cash" price.

I've also seen a number of gas stations in ND that have a $10 minimum for cards. This also carried over to some grocery stores.

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

#156

Post by fragmede » Tue, Jun 30, 2020, 1:39 AM UTC

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…

The outside disrupter was supposed to be Apple Pay, but that didn't work and now Apple just issues credit cards (through Goldman Sachs). Visa/MC has such a monopoly stranglehold that getting kicked off their Network is tantamount to going broke. There are esoteric options aka Bitcoin, money order, check, but if being able to accept credit cards makes this drastically more difficult. (Ask the legal cannabis industry how it's going.) More modern attempts at disruption - Zelle/PayPal/Venmo are totally at the mercy of the banks. Who are quite happy with the status quo.

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

#157

Post by gruez » Tue, Jun 30, 2020, 1:40 AM UTC

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 US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.

And that's a bad thing, because it's essentially the poor subsidizing the rich. People who aren't able to get credit cards (or the "good" cash back credit cards) tend to be worse off financially than people who do.

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

#158

Post by fragmede » Tue, Jun 30, 2020, 1:41 AM UTC

arachnid92 wrote: post #83

dathinab wrote: post #47

Earlier quoted context omitted.

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.

It's a bit balkanized, with Swish taking the place of Venmo in Sweden, and other local variations elsewhere.

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

#159

Post by ThrowawayR2 » Tue, Jun 30, 2020, 1:41 AM UTC

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.

> "No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation."

Tell that to the increasing number of shops that no longer accept cash.

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

#160

Post by analyte123 » Tue, Jun 30, 2020, 1:42 AM UTC

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…

The article (particularly the linked tweet) somewhat addresses your point: Amex and Discover may offer a superficial degree of competition for consumers, but banks have to obey Mastercard and Visa's rules even when it comes to offering bank accounts to merchants, otherwise they (and therefore all their other account holders) can't participate in the 80% of card transactions that are on the Mastercard and Visa networks.

If you're a bank who wants their business customers to receive payment via Mastercard, you are not allowed to give a bank account to or otherwise handle payments for anyone on the MATCH list, otherwise Mastercard will shut off your bank's access to their network completely, probably putting you out of business. There is little transparency about how entities end up on this MATCH list. The article does not propose an exact regulation, but the end goal would be that a single company can't arbitrarily shut people out of most of the financial system.