5 ms·

The way I see it, this is describing the system exactly as much as it needs to make its case that 'banking system is bad and expensive, use our stuff'. Covering

by hibikir 10y ago

The way I see it, this is describing the system exactly as much as it needs to make its case that 'banking system is bad and expensive, use our stuff'. Covering security, or the lower fees in Europe (thanks mostly to the security features), goes against the narrative. An interesting tidbit: An extra reason US fees are so high are premium credit cards choke full of rewards: Not every card has the same fees, and the highest fees come from cards that are handing you extra rewards, that are paid pretty much directly by the merchant. It's just that banks know that the better the rewards the more people will use the credit card, and the easier it is to take the business away from cheaper cards, as nobody charges you more at the register for using a Chase Sapphire Preferred instead of a debit card. Security features also make US cards extra expensive, as the best you have is Chip and signature, and that doesn't cover online. If we demanded 2FA in every transaction, including online, fraud would go very close to zero, and with it, fees. With more modest rewards and better security, interchange fees could shrink by over a percentage point: Banks just don't do this because there's little to no competitive pressure.

cmurf 10y ago
Well if we really believed in the free market and consumer protection, there'd be a law requiring the total transaction cost be printed on the sales slip. Whether the merchant pays it or passes it onto the consumer would be up to the merchant, but the amount would appear on the slip so the consumer sees these costs and who is paying for it. What we really have is mercantilism, where the issuer by contract disallows full information to be conveyed to the consumer without the consumer's consent, and this is in effect protected by law by the fact it isn't illegal. You could also call it an example of chrony capitalism.
- JoBrad 10y ago
  I'm not sure I follow you. Are you suggesting that we should require merchants to print a breakout of all of the upstream fees on your receipt?
  - cmurf 10y ago
    Yes. And as a precondition that this information is exposed by the issuer when the authorization is created so the POS can provide the correct information. Right now this is obscured, the merchant doesn't know what fees applied to which cards until their monthly closing statement.
    - JoBrad 10y ago
      That's a lot of info to have to expose in a very short period of time. It also would involve integrating payment/contract info into systems that probably have no knowledge of it, today. How many APIs do you know of that access contract payment details every time they are accessed?
- JoshTriplett 10y ago
  > Well if we really believed in the free market and consumer protection, there'd be a law requiring the total transaction cost be printed on the sales slip. So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? Leaving aside any other aspects of that proposal, whether positive or negative, it doesn't seem reasonable to describe it as "free market".
  - fauigerzigerk 10y ago
    >So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? The information that has to be expressly stated as part of a contract is not some minor detail. It is at the very core of enabling free markets in the first place. Some seem to think of free markets as a sort of natural phenomenon and of regulations as a distortion. But that isn't true at all. Contracts, property rights and the responsibilities of all participants in a trade are concepts of law. Without them you would have to rely on implicit cultural conventions and resolve disputes by means of duels and vendettas.
  - nothrabannosir 10y ago
    Free market doesn't mean freedom from regulation, it means freedom to compete. When lack of regulation enables a (set of) actors to make competition harder, you can make a market "freeer" by introducing regulation. Making it explicit to customers with debit cards that they're subsidising the rewards of other customers will [edit: "could"!] incentivise them to demand lower fees, for example. This is a free market at its best.
  - losvedir 10y ago
    > So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? Yes. I don't think "free market" is incredibly well defined but the concept it evokes to me (as someone with a degree in economics), is a market approaching perfect competition[0], which is well defined. A perfectly competitive market has a number of requirements, things like low barriers to entry, lots of buyers and sellers, no externalities, and so on. A government policy that intervenes to try to aid perfect competition (e.g. some anti-trust legislation) could still be called a "free market", I think. That said, I realize some people seem to define it to mean "free" from all government interventions, but they don't have a monopoly (heh) on the use of the word. [0] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition
- abalone 10y ago
  No longer. Merchants can elect to publish and pass fees to customers. Durbin amendment legalized it. Didn't change anything though. Pretty much no one does it for competitive reasons.
elastic_church 10y ago
JP Morgan Chase pays their reward costs out of pocket.
- gaadd33 10y ago
  Really? Do you know where you can find that information? I'm surprised that Chase does it given the amount they could recoup from their rewards programs.
  - elastic_church 10y ago
    https://www.bloomberg.com/news/articles/2016-12-06/dimon-says-new-card-cuts-profit-by-up-to-300-million-in-quarter https://www.bloomberg.com/news/articles/2016-12-06/dimon-say...
    - gaadd33 10y ago
      Unless I'm reading it wrong it's because of the signup bonus that's worth $1500 in travel not because they charge the lowest card rate and eat the rewards cost
    - wheelerwj 10y ago
      That doesn't say what you think it says. Every business has expenses that eat into profit. Saying that Chase pays for that out of its own pocket is like saying uber pays for drivers out of its own pocket.
- wheelerwj 10y ago
  lol, out of the customers pocket maybe. But since income is income, its all the same thing. Either Chase has lower fees than most banks or it doesnt. The mony all comes from the same place.
murukesh_s 10y ago
2FA I guess you mean 2 factor authentication? I guess the cost burden is overestimated. India has made it mandatory for all POS and even online transactions to have 2FA, like Visa's 3D secure service for online and ATM pin for POS. Other providers also have it implemented. It must be not very expensive to make the same service in other parts of the world. Wondering why they are not doing it. In India, RBI had released stricter guidelines for that after initial spike in card fraud during the online business boom. Not sure of how much percentage it helped to reduce the fraud, but it's a safe feeling that even if your card is lost or it's details are stolen, you are not robbed of your money in the bank. [Edit] And if you are wondering how companies can store the creditcard data for automated payments like Uber, they cant .Uber have tied up with payment wallets to make payments seamless or you have option to pay by cash. For business there is an option for interbank automated transfer but that require you explicitly singing agreements.
- tehlike 10y ago
  Every friction you introduce means less transactions made. Friction probably introduces more transaction volume than it reduces fraud. Also there might certain us customs that might make certain things hard, like tips. I am not entirely sure if this is true though.
- tonyztan 10y ago
  You make some good points, but with regards to the security of money in the bank, credit card customers in the U.S. are typically not liable for fraudulent transactions. By law liability is limited to $50, and Visa and MasterCard rules make liability effectively zero.
  - shabda 10y ago
    US customers are paying in form of higher transaction fees which merchants are obviously pushing to the customers.

by hibikir 10y ago

cmurf 10y ago

Well if we really believed in the free market and consumer protection, there'd be a law requiring the total transaction cost be printed on the sales slip. Whether the merchant pays it or passes it onto the consumer would be up to the merchant, but the amount would appear on the slip so the consumer sees these costs and who is paying for it. What we really have is mercantilism, where the issuer by contract disallows full information to be conveyed to the consumer without the consumer's consent, and this is in effect protected by law by the fact it isn't illegal. You could also call it an example of chrony capitalism.

JoBrad 10y ago
I'm not sure I follow you. Are you suggesting that we should require merchants to print a breakout of all of the upstream fees on your receipt?
- cmurf 10y ago
  Yes. And as a precondition that this information is exposed by the issuer when the authorization is created so the POS can provide the correct information. Right now this is obscured, the merchant doesn't know what fees applied to which cards until their monthly closing statement.
  - JoBrad 10y ago
    That's a lot of info to have to expose in a very short period of time. It also would involve integrating payment/contract info into systems that probably have no knowledge of it, today. How many APIs do you know of that access contract payment details every time they are accessed?
JoshTriplett 10y ago
> Well if we really believed in the free market and consumer protection, there'd be a law requiring the total transaction cost be printed on the sales slip. So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? Leaving aside any other aspects of that proposal, whether positive or negative, it doesn't seem reasonable to describe it as "free market".
- fauigerzigerk 10y ago
  >So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? The information that has to be expressly stated as part of a contract is not some minor detail. It is at the very core of enabling free markets in the first place. Some seem to think of free markets as a sort of natural phenomenon and of regulations as a distortion. But that isn't true at all. Contracts, property rights and the responsibilities of all participants in a trade are concepts of law. Without them you would have to rely on implicit cultural conventions and resolve disputes by means of duels and vendettas.
- nothrabannosir 10y ago
  Free market doesn't mean freedom from regulation, it means freedom to compete. When lack of regulation enables a (set of) actors to make competition harder, you can make a market "freeer" by introducing regulation. Making it explicit to customers with debit cards that they're subsidising the rewards of other customers will [edit: "could"!] incentivise them to demand lower fees, for example. This is a free market at its best.
- losvedir 10y ago
  > So "if we really believed in the free market", we should regulate the details of how a private transaction can take place? Yes. I don't think "free market" is incredibly well defined but the concept it evokes to me (as someone with a degree in economics), is a market approaching perfect competition[0], which is well defined. A perfectly competitive market has a number of requirements, things like low barriers to entry, lots of buyers and sellers, no externalities, and so on. A government policy that intervenes to try to aid perfect competition (e.g. some anti-trust legislation) could still be called a "free market", I think. That said, I realize some people seem to define it to mean "free" from all government interventions, but they don't have a monopoly (heh) on the use of the word. [0] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition
abalone 10y ago
No longer. Merchants can elect to publish and pass fees to customers. Durbin amendment legalized it. Didn't change anything though. Pretty much no one does it for competitive reasons.

elastic_church 10y ago

JP Morgan Chase pays their reward costs out of pocket.

gaadd33 10y ago
Really? Do you know where you can find that information? I'm surprised that Chase does it given the amount they could recoup from their rewards programs.
- elastic_church 10y ago
  https://www.bloomberg.com/news/articles/2016-12-06/dimon-says-new-card-cuts-profit-by-up-to-300-million-in-quarter https://www.bloomberg.com/news/articles/2016-12-06/dimon-say...
  - gaadd33 10y ago
    Unless I'm reading it wrong it's because of the signup bonus that's worth $1500 in travel not because they charge the lowest card rate and eat the rewards cost
  - wheelerwj 10y ago
    That doesn't say what you think it says. Every business has expenses that eat into profit. Saying that Chase pays for that out of its own pocket is like saying uber pays for drivers out of its own pocket.
wheelerwj 10y ago
lol, out of the customers pocket maybe. But since income is income, its all the same thing. Either Chase has lower fees than most banks or it doesnt. The mony all comes from the same place.

murukesh_s 10y ago

2FA I guess you mean 2 factor authentication? I guess the cost burden is overestimated. India has made it mandatory for all POS and even online transactions to have 2FA, like Visa's 3D secure service for online and ATM pin for POS. Other providers also have it implemented. It must be not very expensive to make the same service in other parts of the world. Wondering why they are not doing it. In India, RBI had released stricter guidelines for that after initial spike in card fraud during the online business boom. Not sure of how much percentage it helped to reduce the fraud, but it's a safe feeling that even if your card is lost or it's details are stolen, you are not robbed of your money in the bank. [Edit] And if you are wondering how companies can store the creditcard data for automated payments like Uber, they cant .Uber have tied up with payment wallets to make payments seamless or you have option to pay by cash. For business there is an option for interbank automated transfer but that require you explicitly singing agreements.

tehlike 10y ago
Every friction you introduce means less transactions made. Friction probably introduces more transaction volume than it reduces fraud. Also there might certain us customs that might make certain things hard, like tips. I am not entirely sure if this is true though.
tonyztan 10y ago
You make some good points, but with regards to the security of money in the bank, credit card customers in the U.S. are typically not liable for fraudulent transactions. By law liability is limited to $50, and Visa and MasterCard rules make liability effectively zero.
- shabda 10y ago
  US customers are paying in form of higher transaction fees which merchants are obviously pushing to the customers.