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

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

#21

Post by BoorishBears »

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 love how tech margins are so insane we think going from 3% to 1% isn't that much, meanwhile entire industries built on the margins that fit in said gap...

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

#22

Post by preommr »

Not surprising, the issue of extra charges for credit cards has been a recent issue in Canada.

I know the whole world is struggling with inflation and rising costs, but it feels like Canada is getting particularly screwed. Our housing prices are out of control, rents sky high, price of food way up when things like dairy are already high because of protectionism and sold by companies that have been caught price fixing things like bread, price of telecommunications a special kind of crazy, our infrastructure stretched to the limit, our roads maxed out... It's bad.

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

#23

Post by AmericanChopper »

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…

> Credit card rewards are a regressive tax on the poor

Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus on that single element of the system you could just as reasonably say that credit cards are a progressive tax on the rich.

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

#24

Post by RheingoldRiver »

For anyone reading this thread and not knowing what the terms being tossed around mean, but curious, there was recently a thread here [0] with some resources that you can check out to understand the space a bit. I devoured two of the three books [1], [2] in about 4 days total, they're really easy to get through, definitely recommend.

[0] https://news.ycombinator.com/item?id=35714145

[1] https://www.amazon.com/Field-Guide-Global-Payments/dp/057829...

[2] https://www.amazon.com/Anatomy-Swipe-Making-Money-Move/dp/16...

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

#25

Post by KRAKRISMOTT »

arcticbull wrote: post #17
KRAKRISMOTT wrote: post #13

Earlier quoted context omitted.

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.

They are low level infra companies that exist because of regulatory capture. I am referring to companies like X1 and to some extent Ramp. The high level fintechs driving consumer innovation like electronic wallets, interesting rebate card models, better banking UXes all require interchange fees. This is also why most consumer fintechs start in the US and UK first before expanding elsewhere.

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

#26

Post by jonhohle »

AmericanChopper wrote: post #23
e63f67dd-065b wrote: post #12

Earlier quoted context omitted.

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…

> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus…

Do you mean high debtors? A good number of high spenders rinse all of their transactions through credit cards to collect the rewards and then pay them off every month. I haven’t paid a fee in at least 18 years, and typically collect several hundred dollars a year in rewards on spending I would do anyway.

When local vendors give me a cash discount, it’s typically 3%, better than most rewards programs, and I take that.

The few cards that offer 5% in other categories have to be getting that from interest payments or promotional retail agreements as opposed to transaction fees. Hitting one of those on a high spending category is like hitting the lottery!

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

#27

Post by woodruffw »

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 absolutely love the heavy lifting “as little as” is doing here.

My understanding is that grocery store margins are typically between 1% and 3%, so even "small" shifts in the interchange rate can have massive impacts on their bottom line.

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

#28

Post by anonymouskimmer »

AmericanChopper wrote: post #23
e63f67dd-065b wrote: post #12

Earlier quoted context omitted.

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…

> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus…

I think you misread the point GP was making. The poor-poor don't have credit cards. They have cash and debit cards. They pay the same as we do at most[1] merchants, despite credit card transactions nominally costing the merchant more money than cash or debit transactions. Most merchants budget the cost of credit card fees into their regular prices that all people pay regardless of method of payment.

[1] - https://www.thebalancemoney.com/credit-card-surcharges-31542...

TLDR: The existence of credit cards is basically an automatic 2-3% inflation on prices. As a fraction of income, this hurts the poor the worst. The better off get this 2% back as rewards. Cash payers get nothing back.

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

#29

Post by gostsamo »

AmericanChopper wrote: post #23
e63f67dd-065b wrote: post #12

Earlier quoted context omitted.

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…

> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus…

Actually, what you say is that the middle class pays for the cashbacks of the top spenders and for the defaults of the most poor. Unless somehow you get the cashback and you are still the one paying for the credit risk of others?

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

#30

Post by wanttocomment »

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…

Studies show you buy more with a credit card than cash. You think you're saving 1-3% but you would easily save that with slightly more conservative spending.

It's also worth mentioning the real business is analyzing the consumer data you give them for pennies.

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