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So how do we fix this? In the days when we had interest rates it was possible to make money on transactions by taking the money one day and paying the invoice

So how do we fix this? In the days when we had interest rates it was possible to make money on transactions by taking the money one day and paying the invoice on the next day. Overnight the money would earn interest. This would be profit to cover the transaction. So a bank could make money moving cheques around for people, taking two weeks to clear back in the days when everything was manual. So with electronic payment there is no human inspecting signatures and doing data entry. So why the merchant fees? In a free market a competitor that just makes money on interest should be winning here.

cbhl 9y ago
AFAICT, interest rates are too low (near zero) for banks to make a profit on interest margins alone. You could have a non-profit do the interchange, like the Interac network in Canada, but that would be difficult to coordinate without consolidating all the banks. (Canada has, like, only half a dozen.)
- Theodores 9y ago
  Actually this is solved in the eurozone with that payment method, name forgotten... It is a fundamental bit of what the Euro is about being able to transfer money without the fees.
  - k-mcgrady 9y ago
    >> name forgotten SEPA?
ams6110 9y ago
> why the merchant fees? Convenience. Handling cash is risky and expensive. You have to pay someone to count it, take it to the bank, where it has to be counted again, etc. That is time that has a cost. There is risk of loss or theft. That can be insured but there is a cost for that too. If you have to have an armored courier transport it, that has a cost. Bottom line, the merchant fees are probably not much more than, and in some cases less than the costs of handling cash.