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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%

#131

Post by rjmunro »

polotics wrote: post #89
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…

You are talking about fractions of a percent, for transactions where banks in aggregate take some risk, while Google and Apple keep their 30.000/100.000 ransom on all transactions...

This is a bank to bank fee. The merchant's bank will charge the merchant a higher fee than this. The banks take no risk here because normally they any fraud get's paid by the merchant through charge back. The only risk is that the merchant goes away completely, but banks have to deal with that possibility all the time.

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

#132

Post by herbst »

55555 wrote: post #57
ramraj07 wrote: post #41

Earlier quoted context omitted.

Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee,…

FedNow is launching soon. It won't support chargebacks or reversals, which merchants would love, so they may offer it as a payment method (if this is possible). Consumers will then be able to save a few % at the expense losing their ability to contest the transaction. Unless credit card agreements mandate the price be the same regardless of payment method, or something.

That sounds great. We all know how secure credit cards are and that nobody ever gets fraudulent charges.

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

#133

Post by jkaplowitz »

ivan_gammel wrote: post #43
mdasen wrote: post #31

Earlier quoted context omitted.

> I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here Instead of capping prices, you could simply require any fees to be paid by the cardholder. Combine that with a standard for payment processing so that lots of companies could compete for payment processing and fees would drop really fast. If someone is using a POS terminal like Toast or Square, it should be trivial…

You won’t sell this idea in Europe. Here the price tag for anything is the full amount you pay - including all commissions and taxes. People use debit cards, the paid amount is immediately deducted from bank account. If customers are forced to calculate how much they actually will spend on each transaction, they will instantly switch back to cash.

The price tag in Europe already has at least one exception in some countries like Germany: bottles and cans subject to the deposit system usually have the deposit added on top of the listed price. Of course, one can recover the deposit by returning the bottle or can to a suitable store, but at the point of sale it is usually added on top of the listed. (The price listing often acknowledges this addition explicitly, with text like "zzgl. 0,25€ Pfand".)

But yeah, I guess that doesn't differ by payment method, so it wouldn't affect the choice of payment method. And it's not a percentage, so it's easier mental math.

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

#134

Post by herbst »

nailer wrote: post #111
bombcar wrote: post #65

Earlier quoted context omitted.

I suspect fednow is why visa and MC are moving now to reduce fees. I can’t wait.

I suspect it’s fast cryptocurrency networks. There’s L1s where you can pay on your phone and the transaction goes through in a second and a whole bunch of payment startups.

With 3d secure and SMS verification I would argue that any standard crypto payment is faster than credit card as has been for a while. At least online.

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

#135

Post by eru »

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…

Yes, I'd like to see a world without silly credit card cashbacks, too. And ideally they'd slay that beast by removing regulations, not by piling more on top.

> 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.

Perhaps make it easier for new payment providers to enter the market? Here in Asia we have lots of alternatives popping up (like Grab pay). And merchants are happy to support them, because they typically charge lower fees than Visa and Mastercard.

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

#136

Post by eru »

ivan_gammel wrote: post #43
mdasen wrote: post #31

Earlier quoted context omitted.

> I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here Instead of capping prices, you could simply require any fees to be paid by the cardholder. Combine that with a standard for payment processing so that lots of companies could compete for payment processing and fees would drop really fast. If someone is using a POS terminal like Toast or Square, it should be trivial…

You won’t sell this idea in Europe. Here the price tag for anything is the full amount you pay - including all commissions and taxes. People use debit cards, the paid amount is immediately deducted from bank account. If customers are forced to calculate how much they actually will spend on each transaction, they will instantly switch back to cash.

Aldi already does a credit card surcharge in some countries.

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

#137

Post by eru »

Reason077 wrote: post #127
e63f67dd-065b wrote: post #49

Earlier quoted context omitted.

As a sidenote I hate that sales tax is not shown on the price tags here in the US. I strongly believe that you should be able to walk out of the store paying the price shown on the price tag -- not a cent more. This obviously clashes with the obvious solution of making credit card surcharges a thing and letting consumers deal with it. I genuinely don't know what's the best solution here -- I think the EU did a good j…

Competition drives prices down in a fair market, but the credit card business is an oligopoly - with huge regulatory and structural barriers to entry. That is, despite Visa and MasterCard’s enormous profits, there is little chance of new players entering the market and increasing competition. Regulation is warranted in monopoly/oligopoly situations. Either by changing the rules to favour/promote increased competition…

Here in Asia we have alternatives to Visa and Mastercard popping up.

Merchants are typically happy to take them, because their fees are lower.

> Regulation is warranted in monopoly/oligopoly situations. Either by changing the rules to favour/promote increased competition, or, as the EU has done here, by capping the fees which they can charge.

I suspect you might want to look into lightening regulations, so that upstart competitors have an easier time entering the market. Instead of piling on ever more regulations that only those who are big enough to afford an army of lawyers and accountants and lobbyists can manage.

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

#138

Post by carlosjobim »

adrr wrote: post #35
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…

Cash is more expensive to take as a payment method than interchange unless you’re cheating on taxes.

This is mostly a myth. If your business has high revenue, that is a lot of money in fees to CC processors. Of course if you prefer CCs then you can invent a bunch of imaginary costs for handling cash.

This idea of businesses that are handling cash are cheating on taxes is about as right as saying men with moustaches are burglars.

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

#139

Post by arcticbull »

nailer wrote: post #118
AmericanChopper wrote: post #37

Earlier quoted context omitted.

> The existence of credit cards is basically an automatic 2-3% inflation on prices. If you want to draw this conclusion you’d have to calculate the cost of the alternative. What would the impact on prices be if there were no electronic payments? What would the impact on prices be if every bank had to implement its own electronic payment system with every merchant? The credit card system integrates a huge portion of t…

It’s a flat fee of 0.000025 and takes about a second for payments to go through on current gen blockchain L1s, many of which have retail Point of Sale systems.

You are failing to price in counter-party risk, exchange rate risk, and myriad other risks. Not to mention the cost of having a whole separate point of sale for a currency nobody has - or the fees for converting it back into a currency you can pay your suppliers and taxes with. Or the cost associated with reporting.

You can pay a very similar flat 1/3 of a cent fee for an instant FedNow payment with none of those risks or costs starting in July.

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

#140

Post by eru »

rjmunro wrote: post #131
polotics wrote: post #89

Earlier quoted context omitted.

You are talking about fractions of a percent, for transactions where banks in aggregate take some risk, while Google and Apple keep their 30.000/100.000 ransom on all transactions...

This is a bank to bank fee. The merchant's bank will charge the merchant a higher fee than this. The banks take no risk here because normally they any fraud get's paid by the merchant through charge back. The only risk is that the merchant goes away completely, but banks have to deal with that possibility all the time.

The payout to the merchant is delayed, isn't it? So if they go away, they don't get paid anyway?
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