Can the Visa-Mastercard duopoly be broken? • Hacker News Board

Re: Can the Visa-Mastercard duopoly be broken?

#171

Post by Jensson » Wed, Aug 17, 2022, 11:04 PM UTC

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.

3% of your credit card spend is a steep cost to pay for that security though, they can't clean out all your money if you don't tie all of it to the debit card, just put a months worth there at a time and you are better off with debit unless you get your debit card stolen every year or so.

It isn't more work than credit either, instead of paying it off every month you fill it up every month.

And for fraud protection, 3% is only worth it if every 30'th purchase is fraud in some way. Personally I've never lost my card and never fallen for fraud, so it would just be 3% of my money thrown away for nothing.

Re: Can the Visa-Mastercard duopoly be broken?

#172

Post by arcticbull » Wed, Aug 17, 2022, 11:04 PM UTC

holistio wrote: post #97

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.

Nobody really has rewards. We don't have them in Europe, and some people in the USA think they have them. What they have is crazy high credit card fees and the need to juggle a bunch around to get a few things credit card companies decided to buy for you en masse. When I buy a $5 latte, I give Visa $0.01. When you do the same, you pay $0.15. Come the hell on. "REWARDS". Smh.

Citi Double Cash is a 2% cash-back no annual fee card.

Interchange benefits merchants too - there's real costs associated with holding cash, and average cart sizes are significantly bigger for credit cards. They also miss out on fewer sales.

You may not value rewards programs but customers, card issuers and certainly those who operate those programs do. They're massive business. Frequently the only profitable part of a US domestic airline is its frequent flyer program - which gets the bulk of its money from credit card reward programs.

Credit card companies have even provided debtor in possession financing for airlines in the US by pre-purchasing multi-billion dollar blocks of frequent flyer miles. Here's when Amex did it for Delta in 2011. [1]

[1] https://www.eastvalleytribune.com/money/american-express-rea...

Re: Can the Visa-Mastercard duopoly be broken?

#173

Post by leesalminen » Wed, Aug 17, 2022, 11:04 PM UTC

geph2021 wrote: post #106

jrvarela56 wrote: post #84

Earlier quoted context omitted.

This. My company does payment processing for small merchants and all the complexity of credit cards is rooted in this dynamic. - Consumers can pay stuff on credit - Consumers can 'chargeback' if they feel something went wrong These two mechanisms are the lubricant that provides a +% in online commerce greater than the % charged for processing payments.

Yep. Also one of the reasons crypto will never work (as-is) for online, digital currency/payments. Customers don't want irreversible transactions.

I think it depends on the scenario. If you’re buying $0.50 worth of bananas at a farmer's market, then maybe irreversibility doesn’t matter. Could be even a $20 lunch bill, I've never done a chargeback at a restaurant before.

Re: Can the Visa-Mastercard duopoly be broken?

#174

Post by tossl568 » Wed, Aug 17, 2022, 11:04 PM UTC

odrekf wrote: post #153

tossl568 wrote: post #116

Earlier quoted context omitted.

It's Bitcoin by every metric you can name: users, trust, fees, hashrate, price, market cap, security, exchange support, merchant acceptance, codebase quality, developer talent. Regardless of your subjective opinion of whether it's the same as it's own whitepaper based on whatever nonsense you've read from Roger Ver or whoever. BCH still has transaction mallebility because it was born out of greed of miners who did't…

Can you show me where in the whitepaper it mentions your metrics? I didn't see anything about say, price in there. I did see a lot of mentions about it being cash though (also cheap to use, beat credit cards, no intermediaries, etc). Also SPV wallets (point 8). Nothing about LN. In any case, BCH simply works 100% of the time, it's instant, extremely reliable and cheap to use, and it's actually being used as cash in t…

If you're going to take a group of scammer's twisted, false interpretation of a v0.0.1 Bitcoin whitepaper as the absolute final Gospel truth and something which you put faith in regarding your money then you're going to have a really bad time.

> it's actually being used as cash in the real world (unlike BTC)

Simply not true, on both counts. Sorry.

Re: Can the Visa-Mastercard duopoly be broken?

#175

Post by _carbyau_ » Wed, Aug 17, 2022, 11:04 PM UTC

jen729w wrote: post #90

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.

Yeah typically around 1.5% in Australia. Which is often passed on to the consumer at the point of sale. We do have a non-Visa/MC payment system here in 'eftpos', which is ubiquitous. AFAIK this is exclusively debit not credit, but this isn't my area, I'm just a consumer. https://www.eftposaustralia.com.au

EFTPOS got kicked to the curb when paywave-with-no-pin started. And then the pandemic reinforced that idea for a lot of people.

I don't know when I last used EFTPOS.

Re: Can the Visa-Mastercard duopoly be broken?

#176

Post by 4ad » Wed, Aug 17, 2022, 11:05 PM UTC

csomar wrote: post #129

pkaye wrote: post #102

Earlier quoted context omitted.

I presume instant payments don't have the chargeback feature of credit card? That is the main benefit I care about credit cards.

My guess is charge backs are probably a US/Canada thing. Many countries have credit cards without the protections. It happens to work in the US because there is a credit score system, high volumes and most people play by the rules.

You are right that in practice it's a US/Canada thing, but it's available everywhere. Customers simply don't know about it, banks don't advertise it and if you try to take advantage of it it's very likely you'll stumble upon a clerk who genuinely thinks that "it's impossible". But it is certainly possible and universally available. Consumers should simply know their rights and refuse to be pushed over by banks.

Personally I have made use of "impossible" chargebacks in Romania, Austria, and Germany. Of course the process was obtuse and frustrating compared to the US.

Re: Can the Visa-Mastercard duopoly be broken?

#177

Post by skimo8 » Wed, Aug 17, 2022, 11:05 PM UTC

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

I use it for cash back. It helps to significantly offset sales tax for me.

Yes, the money is always coming from somewhere and arguably products might be cheaper without credit cards. However, it’s the game we’re in, so why leave money on the table?

Re: Can the Visa-Mastercard duopoly be broken?

#178

Post by hn_throwaway_99 » Wed, Aug 17, 2022, 11:05 PM UTC

Enginerrrd wrote: post #96

hn_throwaway_99 wrote: post #58

Earlier quoted context omitted.

> Is it because some banks still depend on mainframes doing batch processing? Pretty much all banks use mainframes to do batch processing. "SFTP runs the world". I got heavy into fintech a couple years ago, and at first I thought "This is all insane." I was coming from a SaaS world where it's easy to think about transactional guarantees with API calls. I finally "got it" when I realized that pretty much all of our fi…

>I'm no fan of crypto, but the one place where I can see real utility for blockchain is as a backend settlement service for banks. So... what does the crypto provide there that a simple authenticated communication protocol with a few redundant centralized servers doesn't?

There are large benefits to not relying on a few redundant centralized servers in that case. We have "clearing houses" now, and in most cases they shouldn't be necessary. If you had something like a "permissioned blockchain", any financial institution could easily validate that everything was settled, in real time.

Re: Can the Visa-Mastercard duopoly be broken?

#179

Post by odrekf » Wed, Aug 17, 2022, 11:05 PM UTC

tossl568 wrote: post #124

rvz wrote: post #85

Earlier quoted context omitted.

None of the mentioned coins / solutions: Bitcoin, Bitcoin Cash, Lightning Network, Ethereum, Layer 2 solutions are even close to being a credible alternative to the Visa-Mastercard duopoly. (Also, Lightning is not Bitcoin) No business wants to use a volatile asset that loses its value when a person or institution refunds and immediately sells hundreds of thousands of Bitcoin(s) and takes the whole market down with it…

Every lightning channel update is a valid Bitcoin transaction that can be broadcast at any time by either party for final settlement. Lightning is absolutely Bitcoin. You can use the lightning network as very cheap fiat rails if you don't want to deal with Bitcoin or it's volatility. Look at LN/Taro.

>Lightning is absolutely Bitcoin

A separate network is not Bitcoin. And Bitcoin doesn't require intermediaries. The only network that fits Bitcoin's definition is BCH.

Re: Can the Visa-Mastercard duopoly be broken?

#180

Post by Arainach » Wed, Aug 17, 2022, 11:05 PM UTC

holistio wrote: post #97

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.

Nobody really has rewards. We don't have them in Europe, and some people in the USA think they have them. What they have is crazy high credit card fees and the need to juggle a bunch around to get a few things credit card companies decided to buy for you en masse. When I buy a $5 latte, I give Visa $0.01. When you do the same, you pay $0.15. Come the hell on. "REWARDS". Smh.

As others have called out, the rewards are real. Let's look at a fairly premium offering, the Chase Sapphire Reserve:

Its annual fee is a seemingly ridiculously-high $550.

However, it automatically offers reimbursement for the first $300 in "travel". The definition of travel is very broad - we're not just talking airplane tickets, this can be taxis, parking lots, trains, buses, highway tolls, hotels, and many other things. And I do mean automatic - I don't even need to log in and select which charges, it just happens.

As such, the annual fee is really $250.

Still too high? Let's say you ignore other specialized perks (reimbursement for TSA Precheck/Global Entry, premium memberships such as Doordash (through 2024) and Lyft (in the past, expired now). Let's ignore real perks such as PRIMARY rental car coverage that means you can decline the pricey loss/damage waiver when renting vehicles and Chase takes care of any claims before your insurance - there have been years when I made most of that $250 back from that single perk alone. Let's just look at cash back.

At an absolute minimum, you're getting 1% back on everything. 1% means 1 Ultimate Reward point, or UR. At an absolute minimum, you can redeem 100UR for $1.00 in straight up cash/statement credit. The actual value is higher (we'll get to that later) but we'll start with this baseline.

You get 3% when dining or travelling (with the same broad definition of "travel" above that probably covers some of your commute to work if you take transit, pay to park, or pay tolls). If you pay attention and use Chase's portals for various travel purchases you can earn 5-10% back (to be honest I'm lazy and almost never bother).

So we're already at the point where depending on your lifestyle, if you put 15-20K on credit cards each year (that's less than $2000 per month) you're probably breaking even - assuming the absolute lowest valuation of points. But why do that? It's trivial to redeem the points at 1.5x for travel by booking through Chase - that is, if you use their portal you can book a $150 hotel room for 10000 UR points. So now we're at 1.5% on everything or 4.5% on travel, and needing to spend only more like $12000-16000 per year to come out even. During the pandemic they made it even easier and let you get reimbursed for various purchases such as restaraunts at that same rate, so even when I wasn't travelling I was getting that full benefit.

If you want to minmax and are flexible on your destination/time, you can transfer UR to various airline/hotel portals and get higher values: https://thepointsguy.com/guide/sweet-spots-chase-ultimate-re...

Did I mention that when you sign up, if you spend enough in the first few months you get a bonus of enough UR to more than make up for the first year or two of fees?

I've had a CSR for quite a few years now (back when I signed up the bonus was 100000UR) and have redeemed the points I've earned each year for more than the annual fee. That is, every year I've had this card I've profited to the tune of hundreds of dollars.

In response to other complaints about spending requirements, the Chase Freedom line earns UR points (without the 3X dining multiplier or the ability to redeem at 1.5X on travel) with no annual fee and no deposit requirement.