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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?

#521

Post by lotsofpulp »

physicsguy wrote: post #447
lotsofpulp wrote: post #165

Earlier quoted context omitted.

> Instant, cost-free transfers between any two accounts, completed faster than you can lift your finger off your smartphone. This is available to most people in the US via Zelle. I have been using it for nearly 10 years I think. https://www.zellepay.com/get-started Ideally, the federal government would have already made it a utility available to all, but for now the functionality is there for those who can get a bank…

To give you the comparable situation - in the UK we have two numbers associated with every bank account (historically one identified the branch of the bank the account was held with, and the other identified the account, but nowadays there’s no real link between a branch anymore). For me to send money to another person or company’s bank account, I just those two numbers, and I can send up to £25k and it will be in th…

Yes, that is much better. I was always envious of my British family’s ability to use teletext and get weather, sports, and even airport arrival/departure info on their TV instantly before the internet was mainstream.

Meanwhile, in the US, I was stuck listening to radio trying to figure out if my school was closed or had a delayed opening on any inclement weather day.

Re: Can the Visa-Mastercard duopoly be broken?

#522

Post by lxgr »

Jensson wrote: post #520
lxgr wrote: post #517

Earlier quoted context omitted.

That‘s not how direct debit works. There is no accountholder involvement with processing direct debits, but they can be easily reversed (although after the fact). There are related payment schemes though that do initiate a push payment (i.e. SEPA credit transfer), giving the accountholder control over the amount and payee, but they are not yet as ubiquitous or usable internationally.

That is exactly how my debit card transactions works. When I buy a game on steam using my debit card I get a popup in my phone asking if I really initiated the payment and lets me decline. The payment page spins until I click ok on it in the phone, since my bank wont accept the transaction otherwise.

The grandparent post was asking about the German payment system, which presumably refers to SEPA Direct Debit, not debit cards.

What you are referring to is called 3DS, and it's a feature of both credit and debit cards. (It's available worldwide, but most commonly used in the EU, since it's mandated for ecommerce card transactions in many circumstances.)

Re: Can the Visa-Mastercard duopoly be broken?

#523

Post by lxgr »

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…

> in Germany, hardly anyone had a credit card, while everyone was using automatic payments and electronic wiretransfers

Neither SEPA direct debit nor SEPA credit transfer offer any means of dispute resolution, though (SEPA direct debit defaults in favor of the payer, credit transfer in that of the payee).

This means that all but the largest retailers (which can afford to do fraud management entirely in-house) still depend on third parties to arbitrate the risk of non-payment (for merchants) and non-delivery (for customers).

> Of the people (in Germany) I know, they also never use charge backs on the cards (I suspect many don't even know that you can do it) and instead rely on the court system to get refunds etc..

This indeed seems to be the case, which is unfortunate e.g. in the case of travel provider insolvencies. The card scheme rules are very clear in this case, but way too many German banks have in the past declined these disputes (claiming that they are "incompatible with German bankruptcy law"). Cards (both credit and debit) do offer more customer protection that almost any other widely accepted online payment method.

Re: Can the Visa-Mastercard duopoly be broken?

#524

Post by lxgr »

wink wrote: post #515
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…

What you write is correct re: Germany but you've left out the part where everyone who wanted to order something on the internet (before widespread PayPal adoption) still got a credit card just for that. And maybe for getting money from international ATMs where our Maestro cards would not work (I know I am mixing up timelines here, the cards were Giro, not Maestro at the time and I don't really know the details)

Fortunately these days are finally over, with more and more banks finally issuing debit cards co-badged with an international and online capable scheme (Mastercard or Visa Debit), rather than just Maestro or V PAY.

Re: Can the Visa-Mastercard duopoly be broken?

#525

Post by lxgr »

novok wrote: post #332
GekkePrutser wrote: post #306

Earlier quoted context omitted.

That seems so much hassle for so little. But in Europe credit cards don't give cashback.

Your going to pay with some sort of payment card, and credit cards are easy to sign up for and less hassle to use with payments than debit cards, which require you to tap in a pin all the time. Also less fraud protection, etc.

> which require you to tap in a pin all the time

I really wish US credit cards would finally switch to PIN as well. We all end up paying for lost/stolen card fraud indirectly, and PINs are extremely effective at preventing that.

The downside would be if banks would use that as an opportunity to shift the liability for all remaining fraud onto cardholders as well, but the same scenario already exists with ATMs and debit cards.

> Also less fraud protection

Practically, not really. Most banks go above and beyond the legal requirements for limiting fraud liability for unauthorized debit charges and offer zero liability as well. The same chargeback framework that exists for debit also applies to most credit transactions.

Re: Can the Visa-Mastercard duopoly be broken?

#526

Post by Spooky23 »

Jensson wrote: post #216
snazz wrote: post #198

Earlier quoted context omitted.

Out of curiosity, how do European banks avoid this issue? If my debit card or ACH info is compromised and someone drains my checking account, is there a way to use the stolen funds before the bank/court finishes their investigation?

The law says that the bank needs to give back your money immediately, at least in my country. If it turns out that it was your fault you don't get to keep the money, but you will have money to pay bills with during the investigation. Laws and security adapts to whatever medium people tend to use, so common problems tend to have solutions. The laws in Europe are made to make debit card transactions and security reason…

US law does the same thing. But you need to deal with it.

My credit card was compromised and AMEX has a problem. My debit card is compromised and I have several problems.

Re: Can the Visa-Mastercard duopoly be broken?

#527

Post by lxgr »

JumpCrisscross wrote: post #368
GekkePrutser wrote: post #357

Earlier quoted context omitted.

Here in Europe it's the complete opposite. They're hard to sign up for (banks don't like giving them) and you get registered for the loan which means you will have a harder time getting a mortgage or car loan. The more loans you already have the harder it gets. I heard in the US it works the opposite way. And the pin is required here on both (and rightly so IMO to protect against skimming). Only for minor contactless…

> pin is required here on both (and rightly so IMO to protect against skimming). Only for minor contactless payments it isn't. Across Italy, France, Britain, the Netherlands and Portugal, over the last thirty days, I never had to provide a PIN over contactless. This was true for minor purchases to €5,000+.

Is this a US issued card by any chance? The issuing country/bank determines whether a PIN can/must be used.

Mobile wallet based payments also don't need one, usually (since authentication already happens on the customer's device).

Re: Can the Visa-Mastercard duopoly be broken?

#528

Post by lxgr »

xur17 wrote: post #333
RHSeeger wrote: post #275

Earlier quoted context omitted.

1. Most places don't charge extra for a credit card payment. 2. Most cards have a cash-back arrangement, where you earn credits for what you spend. Together, that means you're generally not paying anywhere even close to 3%.

They don't charge extra for credit card payments, but they pay the fee on the majority of their payments, so it's baked into their margin. The cash-back arrangement reduces this by ~1% in effect.

> The cash-back arrangement reduces this by ~1% in effect.

For people with good credit, as the article mentions. It's effectively yet another tax on the poor.

Re: Can the Visa-Mastercard duopoly be broken?

#529

Post by lxgr »

jjav wrote: post #458
Jensson wrote: post #171

Earlier quoted context omitted.

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% of your credit card spend is a steep cost to pay for that security though You're not paying anything for the protections the credit card offers. Or more precisely, you are but we all are, even if you pay cash or with a debit card, since the vendor prices the items accordingly and there's no cash discount. (There are exceptions, but very rare in the US.) And most credit cards give you cash back so it's actually c…

> And most credit cards give you cash back so it's actually cheaper.

Do you really think that banks and card networks work for free?

Even if you use the best rewards card and never pay a cent of interest or fees to your bank, you can bet that the program on aggregate is running a profit for the issuer, or they would not be offering it in the first place.

In effect, your rewards have to be either paid by the merchant (i.e. you, in the end, in the form of higher prices for goods and services), or by other cardholders in the form of interest, fees, using a suboptimal card/rewards category combination etc.

Re: Can the Visa-Mastercard duopoly be broken?

#530

Post by mcv »

lxgr wrote: post #512
mcv wrote: post #489

Earlier quoted context omitted.

Dutch banks used to work like that too, by "incasso", and in fact still do to some extent. But any incasso that hasn't been directly authorised by you with the bank can be undone (and apparently at an additional fee to the company that originated it; they really don't like it when that happens). So that's actually very similar to how credit cards work, but without the additional fee. These days you can easily manage…

The problem is that since direct debits are so easily reversible, in Germany they are not seen as a final form of payment (until the charge return time limit expires) as there is no form of dispute arbitration involved. Merchants will usually not ship goods or provide services for a direct debit alone.

In Netherland incasso is mostly used for recurring membership fees, not the purchase of goods. Those are generally done through a direct, authorised transaction, which isn't so easily reversible.
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