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Can the Visa-Mastercard duopoly be broken?

economist.com

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Re: Can the Visa-Mastercard duopoly be broken?

#141

Post by jasonwatkinspdx »

arcticbull wrote: post #77
philip1209 wrote: post #49

Fraud protection of credit cards is the root of modern e-commerce. In some ways, Visa and Mastercard are the privatized court systems of the internet. If I end up on a random, self-hosted ecommerce site and decide to make a purchase - what guarantee do I have that the item will show up or be as-described? If I bought something through a bank transfer, reversing that purchase would be incredibly difficult. And, suing…

The fees are 3% only in the US and the bulk of that is returned to buyers as cash back or loyalty points, and to offset the cost of loan origination and warranties. The EU has capped debit interchange at .2% and credit at .3%, Australia in the low 1s if I recall correctly. They just don’t really have rewards.

It's worth noting there's some real economic disparity in just who can get rewards cards with significant incentives in the US.

Re: Can the Visa-Mastercard duopoly be broken?

#142

Post by aidenn0 »

frant-hartm wrote: post #82
aidenn0 wrote: post #40

Earlier quoted context omitted.

IIRC it's only for non-cash payments that you can't charge a different amount for; cash discounts are allowed across the board.

In the EU (whole EEA actually) the merchants are not allowed to charge a different amount for cash and personal cards (debit or credit cards). They can charge the transaction fee they pay for business (company) cards and they need to inform the consumer in advance.

In the US, there are legally few limitations as long as you inform the customer. However all of the major credit cards have "most favored nation" clauses in their service agreements that prohibit charging any less for competing payment systems.

As a side note, many government services aren't allowed to eat the transaction cost, so they actually do pass the cost to the consumer (e.g. when I pay my annual car registration, an ACH (electronic check) payment is the same as paying cash in person, but a credit card has an additional fee tacked on.

Re: Can the Visa-Mastercard duopoly be broken?

#144

Post by philip1209 »

JumpCrisscross wrote: post #134
philip1209 wrote: post #49

Fraud protection of credit cards is the root of modern e-commerce. In some ways, Visa and Mastercard are the privatized court systems of the internet. If I end up on a random, self-hosted ecommerce site and decide to make a purchase - what guarantee do I have that the item will show up or be as-described? If I bought something through a bank transfer, reversing that purchase would be incredibly difficult. And, suing…

> I'm sure online merchants are happy to keep paying their ~3% fees as long as sales continue There might be an opening in subscriptions. Those merchants know their customers, and may be willing to take on fraud risk for material bump in revenue.

I think the opportunity is for platforms that can manage risk. Consumers are more likely to give direct bank account access to platforms that they trust. For example, Apple's App Store is well-positioned to run subscriptions over ACH, and they have the consumer trust to get some adoptoin.

But, then you're trading one evil for another - because Apple will want their cut, too.

At the end of the day - it's a battle between value centers and cost centers. Businesses would generally rather make more money than save money.

Re: Can the Visa-Mastercard duopoly be broken?

#145

Post by JumpCrisscross »

nixass wrote: post #121
cycomanic wrote: post #103

Earlier quoted context omitted.

As your post illustrates credit cards are really a solution developped for the deficiencies in the US banking system which have been exported to the rest of the world due to the dominance of the US market. 20 years when I was still living in Germany, hardly anyone had a credit card, while everyone was using automatic payments and electronic wiretransfers. I was very surprised when later (about 13 years ago) a US frie…

Why would I use credit card at all? Sure it does help when traveling but not much use for it otherwise

> Why would I use credit card at all?

Float. If I charge $10k to a card, I get an interest-free loan until the balance has to be paid off. In a zero-rate environment that's meaningless. But even at the 30-day's 2.22% [1], that's almost twenty bucks. I'm probably paying about 1% more for the CC fees, but I can use my card that gives me 1.5% back on everything.

[1] https://home.treasury.gov/resource-center/data-chart-center/...

Re: Can the Visa-Mastercard duopoly be broken?

#146

Post by PaulDavisThe1st »

julienb_sea wrote: post #136
cycomanic wrote: post #103

Earlier quoted context omitted.

As your post illustrates credit cards are really a solution developped for the deficiencies in the US banking system which have been exported to the rest of the world due to the dominance of the US market. 20 years when I was still living in Germany, hardly anyone had a credit card, while everyone was using automatic payments and electronic wiretransfers. I was very surprised when later (about 13 years ago) a US frie…

The benefit of credit cards is no one can literally drain your bank account via fraudulent access to a payment card directly tied to your bank (i.e. debit card in US nomenclature). This is a clear benefit regardless of location. Courts are slow and not scalable, and you don't want to be in a scenario where your bank has been drained right before you need to make important payments.

This does not negate the parent post at all. You're just describing another deficiency of the US banking system.

Re: Can the Visa-Mastercard duopoly be broken?

#148

Post by arcticbull »

jasonwatkinspdx wrote: post #141
arcticbull wrote: post #77

Earlier quoted context omitted.

The fees are 3% only in the US and the bulk of that is returned to buyers as cash back or loyalty points, and to offset the cost of loan origination and warranties. The EU has capped debit interchange at .2% and credit at .3%, Australia in the low 1s if I recall correctly. They just don’t really have rewards.

It's worth noting there's some real economic disparity in just who can get rewards cards with significant incentives in the US.

Yep, but also, those vanilla no-rewards Visa cards only have interchange rates as low as like 1.5% whereas those high-end cards like an Amex Platinum can cost as much as 3.5%. [1]

[1] https://www.bankrate.com/finance/credit-cards/why-american-e...

Re: Can the Visa-Mastercard duopoly be broken?

#149

Post by xboxnolifes »

nixass wrote: post #121
cycomanic wrote: post #103

Earlier quoted context omitted.

As your post illustrates credit cards are really a solution developped for the deficiencies in the US banking system which have been exported to the rest of the world due to the dominance of the US market. 20 years when I was still living in Germany, hardly anyone had a credit card, while everyone was using automatic payments and electronic wiretransfers. I was very surprised when later (about 13 years ago) a US frie…

Why would I use credit card at all? Sure it does help when traveling but not much use for it otherwise

Why would I not use a credit card? It's essentially a better debit card in every scenario, except for when paying with a credit card has an additional fee.

Re: Can the Visa-Mastercard duopoly be broken?

#150

Post by PaulDavisThe1st »

cycomanic wrote: post #103
philip1209 wrote: post #49

Fraud protection of credit cards is the root of modern e-commerce. In some ways, Visa and Mastercard are the privatized court systems of the internet. If I end up on a random, self-hosted ecommerce site and decide to make a purchase - what guarantee do I have that the item will show up or be as-described? If I bought something through a bank transfer, reversing that purchase would be incredibly difficult. And, suing…

As your post illustrates credit cards are really a solution developped for the deficiencies in the US banking system which have been exported to the rest of the world due to the dominance of the US market. 20 years when I was still living in Germany, hardly anyone had a credit card, while everyone was using automatic payments and electronic wiretransfers. I was very surprised when later (about 13 years ago) a US frie…

This, absolutely. It is totally embarrassing to watch my UK family or EU friends interact with their banking systems and compare it with the US.

To be fair, things are improving a little bit. But we're still so very far behind the EU banking system. Instant, cost-free transfers between any two accounts, completed faster than you can lift your finger off your smartphone.

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