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What do Visa and Mastercard do? An intro to card networks

tautology.town

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Re: What do Visa and Mastercard do? An intro to card networks

#131

Post by maelito »

idoubtit wrote: post #123
maelito wrote: post #72

Well I don't really know what they do, but what I know is that Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €. All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way r…

> Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €. Are you sure of these values? Because that's different from what I was told, which was that CB was cheaper for transactions of more than 10 €, because their fees were fixed, not rates like Visa and Mastercard. From what I've just read (not counting the possible extra tax by the bank of the seller…

> Are you sure of these values?

Yes perfectly sure, just checked. I'm not saying these are visa fees vs CB fees. Lots of actors in the chain. But that's what I'm paying for each card type.

Re: What do Visa and Mastercard do? An intro to card networks

#132

Post by SpicyLemonZest »

toomuchtodo wrote: post #30
diegocg wrote: post #26

Earlier quoted context omitted.

So the article shows how visa and mastercard are, by far, not the ones taking the largest fee, and the solution is to get rid of them? Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc. How is the central bank going to offer the same variety of products descri…

Central bank instant payment system. The US has FedNow, and has had it for almost 3 years. It costs a few pennies to move up to $10M per XML message. Brazil's Pix costs ~$10M/year to run: https://whatispix.com/ This is much cheaper than the entire credit card ecosystem skimming ~3% off of the economy. Efficiency! FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments) Walmart is cur…

> Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.

Please tell your user that this SLA is much too high for many purposes. A cafe or such would lose a ton of money if every transaction took 20 seconds longer to conduct.

Re: What do Visa and Mastercard do? An intro to card networks

#133

Post by karlosvomacka »

ianhawes wrote: post #58
losvedir wrote: post #44

I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation. Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3…

There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.

For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.

Re: What do Visa and Mastercard do? An intro to card networks

#134

Post by simonmales »

gwbas1c wrote: post #129
montenegrohugo wrote: post #112

Some light self-promotion but also longer term thoughts: A large part of the promise of crypto and stablecoins was to displace Visa and Mastercard rent-seeking. This didn't seem to happen. Most modern neobanks, our own included ( https://peanut.me ), actually seem to EMBRACE Visa and Mastercard. Almost all offer an actual Fiat card within their app, instead of boldly saying "No, pay with crypto, the future of money!"…

The problem is that bitcoin (and similar) are so computationally intense to run, that the transaction cost is much higher than Visa's. Furthermore, a currency needs a government (or similar kind of body) to manage its stability, by printing (and buying) money. Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin.

True on the main chain of Bitcoin. Bitcoin payments on the lightning network are not computationally intense.

Re: What do Visa and Mastercard do? An intro to card networks

#135

Post by toomuchtodo »

SpicyLemonZest wrote: post #132
toomuchtodo wrote: post #30

Earlier quoted context omitted.

Central bank instant payment system. The US has FedNow, and has had it for almost 3 years. It costs a few pennies to move up to $10M per XML message. Brazil's Pix costs ~$10M/year to run: https://whatispix.com/ This is much cheaper than the entire credit card ecosystem skimming ~3% off of the economy. Efficiency! FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments) Walmart is cur…

> Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA. Please tell your user that this SLA is much too high for many purposes. A cafe or such would lose a ton of money if every transaction took 20 seconds longer to conduct.

Works fine based on the evidence. It’s a maximum SLA, not every transaction. The economics are too compelling to ignore. Fast enough.

Re: What do Visa and Mastercard do? An intro to card networks

#136

Post by ryall »

jimbob45 wrote: post #84
ianhawes wrote: post #58

Earlier quoted context omitted.

There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.

You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.

Weird take, credit card debt is much more of a risk to that demographic than debit cards ever will be

Re: What do Visa and Mastercard do? An intro to card networks

#138

Post by dietr1ch »

1970-01-01 wrote: post #20

>The merchant pays 2.5% The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.

Some businesses pass you the credit card fees if they offer other payment methods. You'll even hear about a discount around VAT/2 if you pay with cash sometimes.

I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.

Re: What do Visa and Mastercard do? An intro to card networks

#139

Post by losvedir »

ianhawes wrote: post #58
losvedir wrote: post #44

I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation. Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3…

There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.

Debit cards aren't that, in practice, because as you say they typically get the same 3% fee whenever I've asked. Toast and other point of sale networks just charge it based on the network and not the card type.

But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.

Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.

That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.

Re: What do Visa and Mastercard do? An intro to card networks

#140

Post by avianlyric »

karlosvomacka wrote: post #133
ianhawes wrote: post #58

Earlier quoted context omitted.

There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.

For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.

The EU caps all card interchange fees at 0.3% for credit cards and 0.2% for debit, which is an order of magnitude lower than some of the fees in the US.

That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.

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