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Here's the deal: Chip-and-PIN is slow to function because it is a two decade old technology. Modern "tap my phone to pay" (Apple/Android Pay) is a lot more secu
by abalone 10y ago
Here's the deal: Chip-and-PIN is slow to function because it is a two decade old technology. Modern "tap my phone to pay" (Apple/Android Pay) is a lot more secure thanks to tokenization and mandatory PIN/fingerprint use. It is the future, but it's not yet at 100% penetration. Banks can't issue you a new phone when you sign up for an account. So merchants and card networks are squabbling over how to evolve the baseline method of physical cards that will still be around for awhile.
There is no reason to think that the 2-3% tax is going away anytime soon once you understand the network dynamics. The key element that almost everyone overlooks, even people on HN building alternative payment systems, is that that tax mostly gets refunded to consumers via reward programs. It does not just go into Visa or the banks' coffers. They certainly take a healthy slice of it at scale but they key point is, they have aligned themselves with consumer interests. Reward programs keep consumers loyal to the "high tax" system, because the tax mainly goes to them.
This can be demonstrated very simply by comparing credit and debit usage rates. There is already a "low tax" payment method that has near 100% adoption in every consumer pocket and merchant register. It's called debit cards. They work exactly the same as credit cards at the register -- you can even sign for them (and it's no more expensive than PIN thanks to the Durbin amendment). Yet consumers still widely use credit cards. Why? Because no rewards. It's mostly merchants who would benefit from lower interchange fees, at least in the short run.
So this is why Apple Pay et al did not try to build a lower-fee system. It would have misaligned them with consumers. This might shed some light on why Bitcoin never had much of a chance as an alternative consumer payment method.
- snuxoll 10y agoTap-to-pay and chip cards all use the same standard, EMV. Most of the problems with chip cards in the US are because of incredibly slow terminals or applications on the smart card themselves. Since the terminals are much faster dealing with tap-to-pay I'm guessing their either just take forever to initialize the smart card, or it's the latter issue (application on the card itself). I'm curious as to the experience of people taking EMV cards from the US to Europe, is it any faster than in the states on the same terminal hardware?
- Veratyr 10y agoI've taken US credit cards to Europe (and soon Australia) and yes, they're noticeably faster there, even with the insert + PIN process.
- snuxoll 10y agoSo that leaves the bottleneck on either the merchant bank, the US card networks, the payment terminal or the retailers internet connection. Still a crapshoot to figure out where the latency comes from, but at least it's not the cards or the issuing banks.
- Veratyr 10y agoMy assumption is that it's the payment terminals. The US tends to have far more dated/low end terminals than I've seen elsewhere. I have a feeling that since retailers are forced to upgrade, they choose the cheapest, most terrible option they can.
- niftich 10y agoI'm not so sure most of the fault lies with the terminals. In April 2016, Visa announced a software/firmware update to card terminals to speed up the awkward waits affecting chip cards [1]. But to your point I found chip terminal manufactuer that claims to have optimized the communications between the chip and the terminal [2]. [1] http://investor.visa.com/news/news-details/2016/Visa-Speeds-Up-Checkout-Times/default.aspx http://investor.visa.com/news/news-details/2016/Visa-Speeds-... [2] https://cayan.com/insights/emv-doesn-t-have-to-slow-down-the-cx https://cayan.com/insights/emv-doesn-t-have-to-slow-down-the...
- dclowd9901 10y ago> The key element that almost everyone overlooks, even people on HN building alternative payment systems, is that that tax mostly gets refunded to consumers via reward programs. NNNNnno. 1) the price on everything is inflated 3% for what amounts to an archaic and insecure way to process transactions 2) It's not opt-in: that is, with few rare cases, I gain nothing, and in fact, must spend more money to not participate and 3) Even if I do participate, all I can hope for is, at best, 1.5% or so cash back. You might say, "Oh, well that's a fee for convenience and security. OK, then what the hell is that fee I pay for the card every year? It's bullshit. Get rid of it. Make consumer credit illegal. People are too stupid, greedy and short sighted to consume it well.
- abalone 10y agoNone of those points actually refute the simple fact that most of the interchange fee gets refunded to consumers. As for the theory that prices are inflated by interchange, there are two problems with it. One, reward card users don't experience inflation because most of the interchange is refunded to them. Two, when Australia regulated down interchange, it didn't actually result in lower prices. > what the hell is that fee I pay for the card every year? Most cards in the U.S. don't have annual fees. The ones that do usually offer enhanced benefits like richer reward programs.
- op00to 10y agoRewards are nice, but I use credit because I'd much prefer to use the float on other people's money. If my credit card is owned, I'm not out the money while the bank figures out what's going on. With debit, that money is gone until the investigation is complete.