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

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

#381

Post by Shog9 »

enaaem wrote: post #355
smelendez wrote: post #262

Earlier quoted context omitted.

I use credit for the purchase protection (I believe many debit cards have this as well but it’s easier when you haven’t yet paid the charge, and seems better enshrined in law for credit), for the rewards (which including signup bonuses can be huge), for the float period, and for security — if somebody fraudulently uses a credit card versus a debit card, there’s no actual money missing while the situation gets resolve…

Every time I had issues with fraud it was with a cc. The fraud protection is just bandage for an inherently unsafe system that you are paying for yourself. That being said, I do get that for US individuals it is completely rational to use cc's. I would do that too. If you are paying 3% Visa/MC tax anyway, then you might as well use their perks.

What smelendez is alluding to is the matter of who is liable while fraud is being resolved.

In the US, a charge on your bank card results in at least a hold on your bank account - money you can't spend on anything else until the hold is lifted. Worst-case, there can be significant fees associated with this (overdraft, declined payments, etc.).

For most of us, that's a much bigger problem than a debt we may or may not end up paying interest on.

From personal experience, getting a credit card company to quickly resolve fraud cases is also much easier than getting a bank to do the same, even when it's ultimately the same institution.

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

#382

Post by socalgal2 »

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…

They wouldn't be charged 3-5% if Visa and Mastercard weren't a duopoly. In countries where they aren't there are 10-20 competitors that charge way way less.

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

#383

Post by carlosjobim »

holgerschurig wrote: post #280
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…

If we look at this in a non US-centric view, then many other areas have solved this, partially since decades. For example, in Germany we used to have a bank card, "EC Karte", it is now called "Girocard". So, if you are a shop and accept Girocard, you pay 0.2% of the transaction plus a fix 0.05 - 0.10 €. And in Germany virtually everyone has a Girocard, it's part of getting a bank account. The cards are free to the cu…

Many small business owners are idiots and obsess over tiny sums while being blind to large costs. And they loose far more customers by not accepting payment methods than they save in fees. In your own example it's only €41 per month that they save by turning away who knows how many customers.

Another example is small B&Bs who happily pay 15% or more to third parties like booking.com, but think it's outrageous to pay 2-3% in card fees to accept bookings on their own website.

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

#384

Post by samus »

adrian_b wrote: post #321
skybrian wrote: post #234

Earlier quoted context omitted.

Assuming they pay their credit card bill themselves, it's effectively a volume discount for big spenders (though that "volume" goes to multiple vendors). The argument that the money "comes from" other customers is sort of like claiming that when you "save money" by buying things on sale, the money comes from other customers who paid full price. Actually you aren't "saving money" at all; you're spending money. Similar…

> Actually you aren't "saving money" at all; you're spending money. You are spending money, but you are spending far less money than the poor spend when paying for exactly the same products or services. If I want to buy a few server CPUs or a few server computers or a few "datacenter" GPUs, I have to pay at least 2 or 3 times more than billionaires pay for them. The same if I want to buy any other kinds of components…

Discounts on volume deals are yet another thing since a higher volume helps the business exceed the break-even threshold faster. Also, volume deals have a favorable management effort to income ratio compared to single transactions.

Huge numbers reduce manufacturing costs, but only because they justify investments that are uneconomical at lower volumes. The business would still go bankrupt if they don't read breakeven.

Economies of scale are a real thing and not just because of monopolies wanting to deny new incumbents.

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

#385

Post by samus »

klrefg wrote: post #263
karlosvomacka wrote: post #133

Earlier quoted context omitted.

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.

How do any of they rent cars when they travel? I think that still requires a credit pretty much anywhere in Europe. I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.

I got by fine with a debit card. But of course it can be inconvenient since they usually lock quite a large charge as a deposit, which gets released when everything turns out fine.

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

#386

Post by KellyCriterion »

coredog64 wrote: post #373
KellyCriterion wrote: post #328

Earlier quoted context omitted.

half an our - every day. I know of a large restaurant chain with some "bigger" branches: They often have to count two or three times with different people to be sure, that the amount is correct. Every evening. Then you have transport companies which pick up the cach (or refill ATM) - you pay there for every time they stop, and you pay a tiny fraction per bill processed etc. (though, most restaurants do not use these…

You just triggered my PTSD. Worked in a gas station in college and changing over the till was a PITA -- I had to account for every cent, could be written up over 50 cents (too much or too little) and it was always this crazy dance to change over when we were busy since it messed with the counts.

Sorry! :-)

I know: It is just hell! There is a gas station near my location, which closes the door from 23.45 to 24.00 for just doing this and handing over to the group.

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

#387

Post by anthomtb »

utopiah wrote: post #380
TheGoodBarn wrote: post #77

If anyone is interested in this topic from a historical standpoint, the Acquired episode on Visa is phenomenal: https://www.acquired.fm/episodes/visa

Damn, nearly 4hrs long, better be phenomenal. Thanks for the link!

That’s the usual length of Acquired podcasts. Those guys go deep. It’s one of my favorites.

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

#388

Post by masom »

numpad0 wrote: post #186
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.

Debit cards still go through the same credit card infrastructure. The practical difference at this point is whether the card company backend defer payment until collection date for the benefit of customers, or don't wait and just call APIs on the spot. There's a whole "internet" of credit card infra that lets you pay using those numbers on the card like they are phone numbers. Stripe don't do handle their own payment…

Not necessarily, in Canada there's a separate network/infrastucture named [Interact](https://www.interac.ca/en/). All the banks are on it and most merchants have terminals that supports it.

It had chip and pin ahead of credit cards, and has lower fees. That's what powers our e-transfers, no need for venmo or other systems.

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

#389

Post by carlosjobim »

gatestone wrote: post #305

I find this interesting as a technology, as a business process, and above all as a system for managing trust on a global scale across different jurisdictions. In a sense, the credit card system accomplishes something that even the UN, international law, Interpol and military mights cannot do: it enables individuals to enter into trustworthy global agreements with minimal effort and risk, and at very low transaction c…

It's simply incredible, when you look at it soberly - just as so many other things. But unfortunately many people have their minds in a spiritual prison and only know how to complain, without having any kind of perspective on the world.

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

#390

Post by ThunderSizzle »

alwaysmrno wrote: post #370
ThunderSizzle wrote: post #332

Earlier quoted context omitted.

What happens if you don't have a phone that supports the App, or if you forgot your phone or lost it (aka stolen)? How are you allowed to function if the App is missing?

"What if there's no electricity!!!" "What if there's no roads!!!" What if's can be used to kill a conversation or discussion because they are impossible to argue. "If there's no Electricity i'll just use my diesel generator to power the store. WhAt if YoU ForgoTT to FueL IT?!". There is no discussion to be had because one side is not interested in it. What you should be asking is What is plausible. IS it plausible th…

Strawman, but you raise a good point. Credit card terminals can still work in certain disaster situations more reliably than trying to get everyone to not lose their phones and keeping them charged and wasting precious energy on a transaction.

A credit card doesn't require electricity, and even the classical process of carbon copying can work without power or internet to the pos (though that has its own problems - but we're talking "disasters")

Regardless, a person not having a smart phone should not be grounds of exclusion from society. It's too vulnerable of a device for it to be a single point of failure. It already is too critical of a device even for those that have one, that losing it is already a very big burden. Even just switching to a new phone via the migration process on Android can still be a burden.

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