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Visa and Mastercard agree to lower average credit card interchange fee below 1%

ca.news.yahoo.com

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Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#11

Post by viraptor »

Waterluvian wrote: post #4

> That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. I absolutely love the heavy lifting “as little as” is doing here. > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard. That’s revenue, not profit. S…

> needs to be casual or failing to get the lower rate.

Or in a positive version - it may be just starting up, so every $ matters.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#12

Post by e63f67dd-065b »

arcticbull wrote: post #6

Visa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and…

These numbers are not public, but the grapevine is that visa/mastercard keeps about a third of all interchange.

Credit card rewards are a regressive tax on the poor -- literally, only those like us here on HN with good credit can get 2% cashback on everything, the rest who pay with debit/cash effectively subsidise our 2% discount. I enjoy my 2% cashback, but really would rather see a world where, like the EU, interchange got slashed to 30bps and it all went away.

Take a look around the rest of the world -- Alipay in China is 55bps, TNG is Malaysia is 50, Pix in Brazil (I can't find concrete numbers, but seems to be around 22bps), etc. 2-300 bps is outrageous, we should demand better.

I don't know what's the solution here. I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here -- force each card to be available over multiple networks and for them to bid the interchange per transaction? Durbin amendment style caps? I don't know. But I do know that the status quo cannot stand.

Edit: see the classic Boston Fed paper https://www.bostonfed.org/publications/public-policy-discuss... for a more through explanation of my point

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#13

Post by KRAKRISMOTT »

arcticbull wrote: post #6

Visa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and…

A bunch of fintechs are going to die :(

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#14

Post by lyrrad »

Looks like this is an agreement between Visa/Mastercard and banks with the Canadian Federal government to lower credit card transaction fees for small businesses.

The government's press release is here: https://www.canada.ca/en/department-finance/news/2023/05/gov...

Applies to annual charges below $300K/$175K CAD for Visa/Mastercard.

They still will charge higher fees to large businesses. "As part of these new agreements with Visa and Mastercard, Canada’s large banks have agreed to protect Canadians’ reward points."

Notably, this seems to be a partial extension to a 2018 agreement with Visa, Mastercard and Amex to lower fees to 1.40% for five years for "small and medium sized businesses": https://www.canada.ca/en/department-finance/news/2018/08/new... The prior agreement was for medium businesses with credit sales under $5 million CAD and small businesses with sales under $1 million CAD.

The 2018 agreement claimed that it would save businesses "$250 million [CAD] per year", while the 2023 agreement claims "$1 billion [CAD] over five years". Since less companies are covered in the 2023 agreement, I assume rates will be going up for some businesses that no longer qualify under the voluntary agreement.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#15

Post by arcticbull »

e63f67dd-065b wrote: post #12
arcticbull wrote: post #6

Visa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and…

These numbers are not public, but the grapevine is that visa/mastercard keeps about a third of all interchange. Credit card rewards are a regressive tax on the poor -- literally, only those like us here on HN with good credit can get 2% cashback on everything, the rest who pay with debit/cash effectively subsidise our 2% discount. I enjoy my 2% cashback, but really would rather see a world where, like the EU, interch…

I think the EU model - and as you say the Durbin model - is completely reasonable.

I will say the Durbin exemption for banks with under $10B in assets is pretty silly.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#16

Post by lajupechere »

KRAKRISMOTT wrote: post #13
arcticbull wrote: post #6

Visa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and…

A bunch of fintechs are going to die :(

A bunch of fintechs are going to die :)

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#17

Post by arcticbull »

KRAKRISMOTT wrote: post #13
arcticbull wrote: post #6

Visa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and…

A bunch of fintechs are going to die :(

Fintechs seem to do just fine in Europe, so I would suggest this is a pretty myopic take. Have you seen Adyen (Dutch, $ADYEY)? PayPal? Like it or not those companies provide value to their merchants so they're able to charge for their services. That isn't going to change with lower interchange.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#19

Post by umeshunni »

Waterluvian wrote: post #4

> That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. I absolutely love the heavy lifting “as little as” is doing here. > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard. That’s revenue, not profit. S…

I bet this is mostly so that very small business who might have switched to Venmo or some other P2P payment system (Interac in Canada?) stay with Visa/MC
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