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EU fines Mastercard more than half a billion euros

267 points by denzil_correa 8y ago

dijit 8y ago
The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed. I often wonder how much goes into the pockets of these companies who are essentially providing an easily replaceable service if it were not for the entrenched reality. (IE; to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places) That said, I can't complain too much about VISA; which (Apple Pay and Samsung Pay also uses on the backend, there is no escape in Europe) -- they seem to be processing things fairly well, even if I don't understand how much both parties paying for such a service.
- rfinney 8y ago
  "easily replaceable service" Yeah. It's called "cash" and "checks".
  - seattle_spring 8y ago
    Just like Tesla would be easily replaceable with "horse" and "buggy".
    - miluge 8y ago
      But Tesla doesnt have a monopoly...
      - FiveSquared 8y ago
        But cars do over walking and biking!
  - vvillena 8y ago
    Yeah, in the same way that a washing machine can be replaced by a river and a piece of wood. As the parent comment explains, nearly every electronic money system in Europe uses Visa or Mastercard as a backend, creating a unhealthy duopoly. The free market needs some competition so it can thrive.
    - blattimwind 8y ago
      AIUI the two largely act as a fallback and the relevant interbank network (e.g. Girocard) is used directly if possible.
    - Someone 8y ago
      ”nearly every electronic money system in Europe uses Visa or Mastercard as a backend” I think that’s nearly every credit card system. Many countries have debit card systems that, AFAIK 100% outside of Visa and MasterCard, traditionally work across most banks in the countries, and nowadays work across the Single European Payment Area (28 EU countries plus six others. See https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area).
  - bluejekyll 8y ago
    I’ve always found the difference between cash and credit to be a wash in terms of ease of use. For cash you need to always make sure you stop by an ATM. For credit you have to wait for a receipt after nearly every transaction, and sign (this is changing with chipped cards). But ApplePay is actually more pleasant than both. I can pay with my phone and my watch. It is a faster transaction than both cash and credit, and no need to pull my wallet out. With one big exception! There are a few places in the city that are starting to only accept credit/applepay/etc., but when their terminals go offline, they’re screwed. I saw this exact thing, for some reason they had no backup system to accept cash. I assume this is a rare issue, but still, I couldn’t believe they couldn’t resort to cash.
    - rtkwe 8y ago
      > I saw this exact thing, for some reason they had no backup system to accept cash To accept cash as a back up you have to have all the items in place to accept it all the time basically. You need the register and to have enough cash on hand to cover giving change plus the accounting and tracking at the end of the day to make sure cash hasn't walked. So if a place has the ability to accept cash intermittently they might as well accept it always.
      - dalore 8y ago
        For those that don't handle cash, they could get some sort of insurance to make up for lost business (and any brand damage) if the machines go down.
      - bluejekyll 8y ago
        Yeah, I realized that something along those lines is the issue. It's still surprising when a business can't operate in a situation like this.
    - e12e 8y ago
      At least in Norway most visa debit (and/or credit) cards now come with nfc/"tap" payment up to a certain amount (10-15 usd I think) - with no need for chip&pin for "Small" transactions. Has some issues wrt theft (portable pay terminal with boosted nfc signal/antenna) - but certainly convenient.
  - SketchySeaBeast 8y ago
    "checks" being a clearly inferior option. While they are convenient they are fraught with fraud / bank balance issues, and add risk to the merchant and to the customer. They also take longer than any of the other options to create as well.
- Fre_d 8y ago
  Here in Denmark, the story is a bit different. Many consumers here use a Dankort, which is a national debit card. The fees are low and regulated by the government. It is usually combined with a Visa so that it can be used abroad as well.
  - notimetorelax 8y ago
    It’s similar in Switzerland, almost every shop accepts PostCard
  - kodablah 8y ago
    Are there any consumer benefits, ala rewards, for using this card?
    - thefounder 8y ago
      Who pays for these "consumer benefits"? Something tells me the consumer.
      - Forbo 8y ago
        Yeah, that was my interpretation. It sounds like the "low fees" is the consumer benefit. I'd rather everyone have lower rates than a select few being able to "game the system".
      - kodablah 8y ago
        Sure. The consumers do (at the end of the day), hence the fees. We also pay for the costs borne by them to resolve disputes, handle those that don't pay back, etc. Also hence the fees.
        krn 8y ago
        In Europe, most cards are debit cards, not credit cards. In some countries and places, credit cards are not even accepted because of the possibility of a chargeback and much higher processing fees. In essence, many people here treat Visa / MasterCard as just "electronic cash", and therefore spend only the money they actually have. In my own EU country, only about 1% of private bank customers own a credit card. These are usually the wealthiest people in the country, who have no problems paying the balance back on time. The credit cards themselves provide very few benefits apart from the international health insurance for the entire family, and 0% fee for up to 45 days. The reward programs are almost non-existent. Just like the general idea of spending the money one doesn't have. It might sound like a very conservative society, but people here are a way more relaxed about their personal finances than in the US. Instead of trying to earn reward points, they try to plan their expenses upfront, and focus on staying debt-free as much as they can. That's because most Europeans have stable jobs with stable salaries which can neither grow, nor decline by a lot. Therefore, almost nobody expects to become very rich or very poor, and lives accordingly.
- chrismeller 8y ago
  Only tangentially related, but it’s the same in the US. Sure Discover and Amex exist, but fees for merchants are usually high and adoption is lower. I’ve travelled quite a lot, but everywhere I’ve been there has been the same - Visa, MC, and a local alternative or two that might be popular within the country but don’t extend elsewhere. Is there actually any other network elsewhere in the world that is of a similar scale? I assume China must have something?
  - BrunkBeard 8y ago
    China mostly uses WeChat's payment system and Alibaba's Alipay on mobile devices.
    - janekm 8y ago
      And for the direct equivalent of Visa/MC there's unionpay.
    - yoz-y 8y ago
      Most merchants also prefer to take WeChat and AliPay because there are no fees.
    - ceejayoz 8y ago
      Not sure why you're getting downvoted. NPR had a story on exactly this - China largely skipped credit cards and went straight for the mobile payments. https://www.npr.org/sections/alltechconsidered/2017/06/29/534846403/in-china-a-cashless-trend-is-taking-hold-with-mobile-payments https://www.npr.org/sections/alltechconsidered/2017/06/29/53...
      - rfinney 8y ago
        It's called "protectionism". China did the same thing by banning Google and supporting Baidu.
        ceejayoz 8y ago
        Sort of. In Baidu's case, they're a locally grown replacement. Per the article, local credit systems didn't really take off; a researcher in the article states their belief it's due to different attitudes on debt in China.
- rb808 8y ago
  fees are also much cheaper in Europe. Interchange fees are capped at 0.3%, compared to 2%+ in the US. https://en.wikipedia.org/wiki/Interchange_fee https://en.wikipedia.org/wiki/Interchange_fee
- vmarsy 8y ago
  > The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed. It goes unnoticed to the consumer because it didn't go unnoticed to the lawmakers. The EU caped the fees those companies can charge to merchants to 0.3% for credit card and 0.2% for debit card back in 2015 [1]. In the US it's less ignored because those fees to merchants are on average 10x bigger! (2% on average [2]) [1] http://europa.eu/rapid/press-release_IP-15-4585_en.htm http://europa.eu/rapid/press-release_IP-15-4585_en.htm [2] https://www.hostmerchantservices.com/current-us-interchange-rates/ https://www.hostmerchantservices.com/current-us-interchange-...
  - tomjohnneill 8y ago
    That's not quite true. The interchange fee is the portion of the fee that goes direct to the banks. The payment processing market is a bit more complicated: When you make a transaction: 1) Your bank charges Visa/Mastercard an interchange fee (this is the bit capped at 0.2%/0.3%) 2) Visa/Mastercard charge a payments acquirer a processing fee 3) The payments acquirer charges the merchant a fee - this final fee is likely to be a blend of percentage and fixed fee per transaction. There's no cap imposed here.
    - AnssiH 8y ago
      Indeed. For example, here in Finland the VISA/MasterCard merchant rates for Nets, which I believe to be the largest provider: EU-domestic debit cards 0.31% (max 0.75€), EU-domestic consumer credit cards 0.90%, EU-domestic company credit cards 1.10%, foreign consumer debit cards 1.25%, foreign company credit cards 1.45%, foreign credit cards 1.65%. No per-transaction fees, but card readers have a monthly fee (39-53 EUR/mo). Finnish source: https://www.yrittajat.fi/uutiset/572780-maksupaatteet-hintavertailussa-izettle-nets-vai-verifone https://www.yrittajat.fi/uutiset/572780-maksupaatteet-hintav...
    - CodeMage 8y ago
      Could you explain this a bit for those of us who don't know in depth how this works? For starters, what's a payments acquirer? Also, due to inherent ambiguity in English, I'm not sure whether your point #1 means that my bank imposes an interchange fee on Visa/Mastercard or whether they impose a Visa/Mastercard fee on someone else (and who it would be).
- spdionis 8y ago
  > easily replaceable service > to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places That's basically the definition of hard to replace.
  - MagnumOpus 8y ago
    Technically easy to replace but a hard-to-displace monopoly (duopoly) solely due to network effects. Like Facebook, eBay or WhatsApp in the tech space.
- zaarn 8y ago
  In germany we have Girocard (formerly EC Card) which has about 4 to 5 providers with 40% marketshare and less, to my knowledge atleast.
- njarboe 8y ago
  A lot goes into their pockets. VISA is the 20th largest company in the world by market cap and MasterCard is 43rd, and they are still growing quickly.
- hocuspocus 8y ago
  In a lot of European countries, payment cards use the domestic payment scheme and are co-branded Visa/MasterCard (or V-pay/Maestro).
- agumonkey 8y ago
  Are they abusing the market ?
- microcolonel 8y ago
  > easily replaceable service For all my disagreements with major payment processors, I must say that there is a lot more than meets the eye in these networks. Having visited the fraud detection apparatus of a couple payment networks, I am thoroughly impressed. Most of them were doing machine learning at an industrial scale at least eight years ago.
- blattimwind 8y ago
  That's probably got a lot to do with credit cards being vastly less popular in Europe. Paying with plastic/card usually means using a debit card (many names, largely the same). Additionally in most parts of Europe paying cash is far more common than in the US.
- porpoisely 8y ago
  I worry that Visa/Mastercard will use their duopolistic position in credit/debit/etc payment processing to gather more data and spy on consumers. I suspect Visa/Mastercard collects even more valuable data than google or facebook and they've already indicated they want to me more of a technology/ML/AI company. With data being ever more valuable and a small group near monopolistic companies in position to siphon most of it, it's going to be difficult to lead a private life.
  - YjSe2GMQ 8y ago
    Google is already on top of that data: https://www.bloomberg.com/news/articles/2018-08-30/google-and-mastercard-cut-a-secret-ad-deal-to-track-retail-sales https://www.bloomberg.com/news/articles/2018-08-30/google-an...
goalieca 8y ago
Europe seems to be on a roll lately but is brexit going to change that? Is GDPR and all these other consumer focused regulations lessened by losing that market?
- kuhhk 8y ago
  Why would Brexit affect the EU's GDPR legislation that already exists? Perhaps it could change in Britain, but it would still exist in the EU, where the legislation was approved and is currently being enforced.
  - M2Ys4U 8y ago
    The ICO won't be a member of the EDPB post-Brexit which will definitely have an impact, but not a catastrophic one. The bigger problem is that the UK won't be able to be certified as having adequate protection due to the Snooper's Charter (or, rather, any adequacy decision will be almost instantly sent for judicial review).
    - noir_lord 8y ago
      Yep. I think our politicians have forgotten how much we got away with by doing it after we joined.
  - goalieca 8y ago
    I live in a smaller country (canada) that doesn't have the same market strength and resources as the bigger markets. I was just wondering about the consequences of losing 70 million people and the worlds fifth largest economy would have on all these efforts. I thought my question was fair so i don't understand the downvoting.
    - moccachino 8y ago
      I think it's because politics aren't supposed to be discussed here and Brexit is such a radioactive topic like Trump that any mention of it will make everyone uneasy.
kuschku 8y ago
It's sad that this duopoly is controlling so much of the market, especially that merchants can't make customers pay the fees (in which case mastercard and visa would quickly lose their market share). Especially considering that many european countries such as Germany had (and have) independent systems with often orders of magnitudes lower fees, faster transaction times and more safety and security. I'd rather see girocard become a monopoly on the european market than to see this mastercard/visa monopoly continue.
- koolba 8y ago
  > ... especially that merchants can't make customers pay the fees ... Why not? Is that due to contract terms that prevent you from charging more for card transactions vs other payment methods? I vaguely remember clauses like that were recently thrown out in the USA. I’d imagine the EU would be even more consumer friendly.
  - throwawaymath 8y ago
    Anecdotally, I see lots of small businesses in the US which explicitly charge slightly more for credit card transactions. This is extremely common at gas stations and coffee shops, for example.
    - tzs 8y ago
      Sometimes that is actually the business charging slightly less for cash transactions rather than charging slightly more for credit card transactions. What's the difference? If the business advertises both a cash price and a credit card price, then there is effectively no difference I believe whether you characterize it is a discount for cash or a surcharge for credit cards. However, if you only advertise one price, then its a surcharge if that is the cash price and you add extra for credit cards at the register. If the one price is the credit card price, and you take off some for cash at the register, then it is a cash discount. Doing a cash discount was a common trick at gas stations to work around terms in their contracts that said they would not have credit card surcharges. There was a lawsuit against such contract terms by merchants who wanted to do a surcharge, and in a settlement in 2013 Visa and Mastercard agreed to allow them (with some restrictions, like no more than 4%, must be a sign disclosing them at the point of sale, had to be included on the receipt, and had to apply to all cards), reducing the need for such tricks in many areas. There are some states that have laws prohibiting credit card surcharges, so the cash discount trick may still be in use there. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. These have been challenged on Free Speech grounds. The Supreme Court has said that they are (well, New York's version, but others are similar) is a regulation of speech, but did not rule whether it was an unconstitutional regulation (the lower courts had not reached that issue) [1]. I don't happen to know what happened to that case after that. [1] https://www.supremecourt.gov/opinions/16pdf/15-1391_g31i.pdf https://www.supremecourt.gov/opinions/16pdf/15-1391_g31i.pdf
chrismeller 8y ago
> The Commission, which monitors competition, said that Mastercard's rules prior to 2015 forced retailers to pay certain bank fees in the country they are located rather than let them shop around. Meanwhile I can’t get a debit card from my bank that defaults to a language I speak at POS terminals because that’s not the official language of the country I opened it in. The logic and connection being that is the country in which I signed the terms of service and agreed to x, y, and z (one of those being the language and another being fees). So I, as a consumer, am stuck with the terms of the country I reside in, but the bank, as a merchant, shouldn’t be?
- jhrmnn 8y ago
  That's a false analogy. No one forces you to stay with your bank. If you are an EU citizen, you can open an account in any other EU country. Mastercard was forcing merchants to only use banks within their respective countries.
  - chrismeller 8y ago
    In point of fact my bank is German, but because I’m in Estonia I’m regulated (in their mind) by the Estonian TOS I signed.
    - jhrmnn 8y ago
      Which is necessary because each EU country still has its own local laws, which the local T&C must abide. If you travelled to Germany and opened a bank account at a local branch, you’d get German T&C.
- simonh 8y ago
  As a consumer you are free to open another account with any bank anywhere in Europe. The merchants should have the same freedom.
  - chrismeller 8y ago
    *Any bank that will accept you as a client. In Estonia, at least, they will demand some sort of “tie to Estonia”. That could be residence or a business, but you’re not getting an account otherwise.
stevespang 8y ago
I assume that MC is a US owned/headquartered business so this act by the Europeans is part of the strategy to get back some of the money the US prosecutors / US Gov't have sucked out of Volkswagen, Deutsche Bank, etc. for actual, real crimes they have committed.
randomacct3847 8y ago
I have to say the best thing about credit cards in the U.S. is the massive point bonuses you get for signing up for cards. I have gamed the credit card bonus system for ~6 years and pay for 90%+ of my personal travel including international business and first class flights and high end hotels with points earned from opening multiple cards each year with almost no impact to my credit score (760+). Combined with the fact that points are not taxable it is probably the single most lucrative “side hustle” I have that requires almost no work.
- ceejayoz 8y ago
  All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices. You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.
  - ams6110 8y ago
    That's all true, but as a consumer I think a percent or two is worth the conveniences that cards offer. I pay for virtually everything with cards. I rarely even carry cash. Cash is bulky, dirty, inconvenient to get, and has absolutely no loss protection. I pay my balance in full every month, so I don't pay finance charges. If you can't do that, then don't use cards. They will eat you alive. Understand that most of the benefits/points that are offered are paid for by people who carry a balance. If you can manage them and keep the balances paid, the points are just icing on the cake. I rarely pay for hotels anymore, for example.
    - AceJohnny2 8y ago
      > If you can't do that, then don't use cards. They will eat you alive. I like to think as credit cards as tax on the poor to feed the rich.
      - AlexTWithBeard 8y ago
        I would call it a tax on those with poor financial planning skills.
kodablah 8y ago
> The fine would have been higher, but Brussels reduced the amount by 10 percent to thank Mastercard for cooperating. I am unable to find a link to the ruling in the article, does anyone have it? Curious how this number was arrived at.
- Someone 8y ago
  Press release: http://europa.eu/rapid/press-release_IP-19-582_en.htm http://europa.eu/rapid/press-release_IP-19-582_en.htm. It says: ”Mastercard cooperated with the Commission by acknowledging the facts and the infringements of EU competition rules. The Commission granted Mastercard a 10% fine reduction in return for this cooperation. Further information on this type of cooperation can be found on the Commission's Competition website” with a link to https://europa.eu/!XC69Qb https://europa.eu/!XC69Qb. Basically, you get a fine reduction if you promise not to appeal to the fine.
  - repolfx 8y ago
    That seems problematic. It appears to be equivalent to financial punishment for appealing a ruling. And in the EU competition law is enforced via the rule of essentially one woman and her department - competition laws are so vague that she effectively has the power to levy huge fines at will, unchecked by anything except the right to appeal, because she doesn't have to prove anything in court to begin with. If the Commission is now able to levy such massive fines and lower them if you promise not to appeal, in a binding way, then they can simply make whatever sum they pull out of thin air 10% higher, give a 10% "reduction" for cooperation, and that's effectively a second fine for appealing the first.
pixelpp 8y ago
The EU laying down the law!
xwvvvvwx 8y ago
This is why we need crypto.
- purerandomness 8y ago
  How would crypto-currencies change the situation?
  - xutopia 8y ago
    Decentralization.
    - purerandomness 8y ago
      The market has shown that cryptocurrency infrastructure tends to centralize in the same way.
  - xwvvvvwx 8y ago
    because a commonly owned and permissionless value transfer layer has no control over the actions of the businesses and individuals who use it.
- moosey 8y ago
  We already have crypto. Now we await utopia, apparently.
thefounder 8y ago
Hopefully crypto payments/stablecoins will get more traction so we can get ride of these mono/dupolies.
- freedomben 8y ago
  This was my thought too. It amazes me that people don't see crypto currencies as the answer here, and one that solves a number of other problems at the same time.
  - thefounder 8y ago
    I believe the main reason is the association of bitcoin and its flaws(i.e volatility) with crypto payments. The payment processors don't seem very eager to support stable coins either as it's harder for them to inflate the fees/conversion to fiat.
- acdha 8y ago
  For that to happen, they'd need to match the current system on cost, performance, safety, and availability. There are a ton of people — e.g. almost every small business — who would like alternatives but for a legal business there are too many cases where their costs (either direct or support) would go up enough not to be worth it.
- AlexTWithBeard 8y ago
  How would they help here?
- deevolution 8y ago
  still lots of progress needs to be made from a usability standpoint.
wslh 8y ago
I don't know the entry barrier details, but are governments working on standards to put your own payment system based on a defined API and following standard regulations?
briandear 8y ago
> On this basis, the Commission concluded that Mastercard's rules prevented retailers from benefiting from lower fees and restricted competition between banks cross border, in breach of EU anti-trust rules The following will be extremely unpopular here, however, it's a bit interesting that the EU is, in the case of private businesses, interested in preventing "restricted competition," however, when it comes to taxes, the EU continually criticizes Ireland for low corporate taxes. Essentially the EU is opposed to tax competition. The EU parliament has accused Ireland of being a tax haven and damaging the economies of its neighbors. While now, Mastercard is being accused of harming the EU economy by preventing competition. Mastercard gets fined for preventing competition (a correct decision in my opinion,) while strangely, Ireland also gets condemned for attempting to have lower taxes. Ireland, Hungary, and Bulgaria are promoting competition and they're in "trouble" while Mastercard is restricting competition and they're in "trouble" with the EU as well. So the EU Parliament is effectively acting like Mastercard by attempting to prevent tax competition which would lower prices for consumers far more than anything Mastercard could come up with. If the EU actually cared about competition and lower prices for consumers, then they'd let members set tax rates to whatever they want, but instead they want to "harmonize" tax rates -- essentially destroying the competitive advantage of lower tax locales. The countries that are harmed the most by tax competition are the ones that have highest taxes and public obligations -- yet Ireland, Hungary, and Bulgaria are supposed to raise their taxes to compensate for the fiscal decisions of France, Spain, or Italy? "The EU’s tax commissioner Pierre Moscovici said in November that the Commission was considering using extraordinary powers to strip EU states of their veto power on tax matters to break resistance over blocked legislation."[1] So the EU tax commissioner wants to essentially force EU member states to comply with a "harmonization" of tax rates, despite some members opposing such a move and now the EU is fining Mastercard for attempting to "harmonize" interchange fees? That's hypocrisy, assuming the reason for the EU fine is to protect competition and/or lower prices for consumers. The difference is that businesses can more easily stop accepting Mastercard than they can change governments. It's worth noting that Pierre Moscovici is French and France has some signifiant headwinds in terms of regulatory and taxation attractiveness for companies. Punishing Ireland, Hungary, Bulgaria and other countries with significantly lower taxes serves to benefit high tax countries such as France. So good for the EU for punishing Mastercard -- let's hope that they now turn to punish themselves for attempting to prevent competition with taxes. To be clear, I'm not anti-tax, I'm anti-tax harmonization and the reason is that tax harmonization essentially subsidizes bad fiscal policy. So countries like Ireland lose a competitive advantage simply because Spain can't balance its checkbook. [1] https://www.reuters.com/article/us-hungary-ireland-taxation/hungary-ireland-oppose-eu-wide-tax-harmonization-efforts-idUSKBN1ET1ZY https://www.reuters.com/article/us-hungary-ireland-taxation/...

267 points by denzil_correa 8y ago

The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed. I often wonder how much goes into the pockets of these companies who are essentially providing an easily replaceable service if it were not for the entrenched reality. (IE; to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places) That said, I can't complain too much about VISA; which (Apple Pay and Samsung Pay also uses on the backend, there is no escape in Europe) -- they seem to be processing things fairly well, even if I don't understand how much both parties paying for such a service.

rfinney 8y ago
"easily replaceable service" Yeah. It's called "cash" and "checks".
- seattle_spring 8y ago
  Just like Tesla would be easily replaceable with "horse" and "buggy".
  - miluge 8y ago
    But Tesla doesnt have a monopoly...
    - FiveSquared 8y ago
      But cars do over walking and biking!
- vvillena 8y ago
  Yeah, in the same way that a washing machine can be replaced by a river and a piece of wood. As the parent comment explains, nearly every electronic money system in Europe uses Visa or Mastercard as a backend, creating a unhealthy duopoly. The free market needs some competition so it can thrive.
  - blattimwind 8y ago
    AIUI the two largely act as a fallback and the relevant interbank network (e.g. Girocard) is used directly if possible.
  - Someone 8y ago
    ”nearly every electronic money system in Europe uses Visa or Mastercard as a backend” I think that’s nearly every credit card system. Many countries have debit card systems that, AFAIK 100% outside of Visa and MasterCard, traditionally work across most banks in the countries, and nowadays work across the Single European Payment Area (28 EU countries plus six others. See https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area).
- bluejekyll 8y ago
  I’ve always found the difference between cash and credit to be a wash in terms of ease of use. For cash you need to always make sure you stop by an ATM. For credit you have to wait for a receipt after nearly every transaction, and sign (this is changing with chipped cards). But ApplePay is actually more pleasant than both. I can pay with my phone and my watch. It is a faster transaction than both cash and credit, and no need to pull my wallet out. With one big exception! There are a few places in the city that are starting to only accept credit/applepay/etc., but when their terminals go offline, they’re screwed. I saw this exact thing, for some reason they had no backup system to accept cash. I assume this is a rare issue, but still, I couldn’t believe they couldn’t resort to cash.
  - rtkwe 8y ago
    > I saw this exact thing, for some reason they had no backup system to accept cash To accept cash as a back up you have to have all the items in place to accept it all the time basically. You need the register and to have enough cash on hand to cover giving change plus the accounting and tracking at the end of the day to make sure cash hasn't walked. So if a place has the ability to accept cash intermittently they might as well accept it always.
    - dalore 8y ago
      For those that don't handle cash, they could get some sort of insurance to make up for lost business (and any brand damage) if the machines go down.
    - bluejekyll 8y ago
      Yeah, I realized that something along those lines is the issue. It's still surprising when a business can't operate in a situation like this.
  - e12e 8y ago
    At least in Norway most visa debit (and/or credit) cards now come with nfc/"tap" payment up to a certain amount (10-15 usd I think) - with no need for chip&pin for "Small" transactions. Has some issues wrt theft (portable pay terminal with boosted nfc signal/antenna) - but certainly convenient.
- SketchySeaBeast 8y ago
  "checks" being a clearly inferior option. While they are convenient they are fraught with fraud / bank balance issues, and add risk to the merchant and to the customer. They also take longer than any of the other options to create as well.
Fre_d 8y ago
Here in Denmark, the story is a bit different. Many consumers here use a Dankort, which is a national debit card. The fees are low and regulated by the government. It is usually combined with a Visa so that it can be used abroad as well.
- notimetorelax 8y ago
  It’s similar in Switzerland, almost every shop accepts PostCard
- kodablah 8y ago
  Are there any consumer benefits, ala rewards, for using this card?
  - thefounder 8y ago
    Who pays for these "consumer benefits"? Something tells me the consumer.
    - Forbo 8y ago
      Yeah, that was my interpretation. It sounds like the "low fees" is the consumer benefit. I'd rather everyone have lower rates than a select few being able to "game the system".
    - kodablah 8y ago
      Sure. The consumers do (at the end of the day), hence the fees. We also pay for the costs borne by them to resolve disputes, handle those that don't pay back, etc. Also hence the fees.
      - krn 8y ago
        In Europe, most cards are debit cards, not credit cards. In some countries and places, credit cards are not even accepted because of the possibility of a chargeback and much higher processing fees. In essence, many people here treat Visa / MasterCard as just "electronic cash", and therefore spend only the money they actually have. In my own EU country, only about 1% of private bank customers own a credit card. These are usually the wealthiest people in the country, who have no problems paying the balance back on time. The credit cards themselves provide very few benefits apart from the international health insurance for the entire family, and 0% fee for up to 45 days. The reward programs are almost non-existent. Just like the general idea of spending the money one doesn't have. It might sound like a very conservative society, but people here are a way more relaxed about their personal finances than in the US. Instead of trying to earn reward points, they try to plan their expenses upfront, and focus on staying debt-free as much as they can. That's because most Europeans have stable jobs with stable salaries which can neither grow, nor decline by a lot. Therefore, almost nobody expects to become very rich or very poor, and lives accordingly.
chrismeller 8y ago
Only tangentially related, but it’s the same in the US. Sure Discover and Amex exist, but fees for merchants are usually high and adoption is lower. I’ve travelled quite a lot, but everywhere I’ve been there has been the same - Visa, MC, and a local alternative or two that might be popular within the country but don’t extend elsewhere. Is there actually any other network elsewhere in the world that is of a similar scale? I assume China must have something?
- BrunkBeard 8y ago
  China mostly uses WeChat's payment system and Alibaba's Alipay on mobile devices.
  - janekm 8y ago
    And for the direct equivalent of Visa/MC there's unionpay.
  - yoz-y 8y ago
    Most merchants also prefer to take WeChat and AliPay because there are no fees.
  - ceejayoz 8y ago
    Not sure why you're getting downvoted. NPR had a story on exactly this - China largely skipped credit cards and went straight for the mobile payments. https://www.npr.org/sections/alltechconsidered/2017/06/29/534846403/in-china-a-cashless-trend-is-taking-hold-with-mobile-payments https://www.npr.org/sections/alltechconsidered/2017/06/29/53...
    - rfinney 8y ago
      It's called "protectionism". China did the same thing by banning Google and supporting Baidu.
      - ceejayoz 8y ago
        Sort of. In Baidu's case, they're a locally grown replacement. Per the article, local credit systems didn't really take off; a researcher in the article states their belief it's due to different attitudes on debt in China.
rb808 8y ago
fees are also much cheaper in Europe. Interchange fees are capped at 0.3%, compared to 2%+ in the US. https://en.wikipedia.org/wiki/Interchange_fee https://en.wikipedia.org/wiki/Interchange_fee
vmarsy 8y ago
> The card payment industry duopoly (in europe at least) is a really weird one that seems to go mostly unnoticed. It goes unnoticed to the consumer because it didn't go unnoticed to the lawmakers. The EU caped the fees those companies can charge to merchants to 0.3% for credit card and 0.2% for debit card back in 2015 [1]. In the US it's less ignored because those fees to merchants are on average 10x bigger! (2% on average [2]) [1] http://europa.eu/rapid/press-release_IP-15-4585_en.htm http://europa.eu/rapid/press-release_IP-15-4585_en.htm [2] https://www.hostmerchantservices.com/current-us-interchange-rates/ https://www.hostmerchantservices.com/current-us-interchange-...
- tomjohnneill 8y ago
  That's not quite true. The interchange fee is the portion of the fee that goes direct to the banks. The payment processing market is a bit more complicated: When you make a transaction: 1) Your bank charges Visa/Mastercard an interchange fee (this is the bit capped at 0.2%/0.3%) 2) Visa/Mastercard charge a payments acquirer a processing fee 3) The payments acquirer charges the merchant a fee - this final fee is likely to be a blend of percentage and fixed fee per transaction. There's no cap imposed here.
  - AnssiH 8y ago
    Indeed. For example, here in Finland the VISA/MasterCard merchant rates for Nets, which I believe to be the largest provider: EU-domestic debit cards 0.31% (max 0.75€), EU-domestic consumer credit cards 0.90%, EU-domestic company credit cards 1.10%, foreign consumer debit cards 1.25%, foreign company credit cards 1.45%, foreign credit cards 1.65%. No per-transaction fees, but card readers have a monthly fee (39-53 EUR/mo). Finnish source: https://www.yrittajat.fi/uutiset/572780-maksupaatteet-hintavertailussa-izettle-nets-vai-verifone https://www.yrittajat.fi/uutiset/572780-maksupaatteet-hintav...
  - CodeMage 8y ago
    Could you explain this a bit for those of us who don't know in depth how this works? For starters, what's a payments acquirer? Also, due to inherent ambiguity in English, I'm not sure whether your point #1 means that my bank imposes an interchange fee on Visa/Mastercard or whether they impose a Visa/Mastercard fee on someone else (and who it would be).
spdionis 8y ago
> easily replaceable service > to compete you'd need an entirely new card system that would be incompatible with the others, and thus your card would be unusable in most places That's basically the definition of hard to replace.
- MagnumOpus 8y ago
  Technically easy to replace but a hard-to-displace monopoly (duopoly) solely due to network effects. Like Facebook, eBay or WhatsApp in the tech space.
zaarn 8y ago
In germany we have Girocard (formerly EC Card) which has about 4 to 5 providers with 40% marketshare and less, to my knowledge atleast.
njarboe 8y ago
A lot goes into their pockets. VISA is the 20th largest company in the world by market cap and MasterCard is 43rd, and they are still growing quickly.
hocuspocus 8y ago
In a lot of European countries, payment cards use the domestic payment scheme and are co-branded Visa/MasterCard (or V-pay/Maestro).
agumonkey 8y ago
Are they abusing the market ?
microcolonel 8y ago
> easily replaceable service For all my disagreements with major payment processors, I must say that there is a lot more than meets the eye in these networks. Having visited the fraud detection apparatus of a couple payment networks, I am thoroughly impressed. Most of them were doing machine learning at an industrial scale at least eight years ago.
blattimwind 8y ago
That's probably got a lot to do with credit cards being vastly less popular in Europe. Paying with plastic/card usually means using a debit card (many names, largely the same). Additionally in most parts of Europe paying cash is far more common than in the US.
porpoisely 8y ago
I worry that Visa/Mastercard will use their duopolistic position in credit/debit/etc payment processing to gather more data and spy on consumers. I suspect Visa/Mastercard collects even more valuable data than google or facebook and they've already indicated they want to me more of a technology/ML/AI company. With data being ever more valuable and a small group near monopolistic companies in position to siphon most of it, it's going to be difficult to lead a private life.
- YjSe2GMQ 8y ago
  Google is already on top of that data: https://www.bloomberg.com/news/articles/2018-08-30/google-and-mastercard-cut-a-secret-ad-deal-to-track-retail-sales https://www.bloomberg.com/news/articles/2018-08-30/google-an...

goalieca 8y ago

Europe seems to be on a roll lately but is brexit going to change that? Is GDPR and all these other consumer focused regulations lessened by losing that market?

kuhhk 8y ago
Why would Brexit affect the EU's GDPR legislation that already exists? Perhaps it could change in Britain, but it would still exist in the EU, where the legislation was approved and is currently being enforced.
- M2Ys4U 8y ago
  The ICO won't be a member of the EDPB post-Brexit which will definitely have an impact, but not a catastrophic one. The bigger problem is that the UK won't be able to be certified as having adequate protection due to the Snooper's Charter (or, rather, any adequacy decision will be almost instantly sent for judicial review).
  - noir_lord 8y ago
    Yep. I think our politicians have forgotten how much we got away with by doing it after we joined.
- goalieca 8y ago
  I live in a smaller country (canada) that doesn't have the same market strength and resources as the bigger markets. I was just wondering about the consequences of losing 70 million people and the worlds fifth largest economy would have on all these efforts. I thought my question was fair so i don't understand the downvoting.
  - moccachino 8y ago
    I think it's because politics aren't supposed to be discussed here and Brexit is such a radioactive topic like Trump that any mention of it will make everyone uneasy.

kuschku 8y ago

It's sad that this duopoly is controlling so much of the market, especially that merchants can't make customers pay the fees (in which case mastercard and visa would quickly lose their market share). Especially considering that many european countries such as Germany had (and have) independent systems with often orders of magnitudes lower fees, faster transaction times and more safety and security. I'd rather see girocard become a monopoly on the european market than to see this mastercard/visa monopoly continue.

koolba 8y ago
> ... especially that merchants can't make customers pay the fees ... Why not? Is that due to contract terms that prevent you from charging more for card transactions vs other payment methods? I vaguely remember clauses like that were recently thrown out in the USA. I’d imagine the EU would be even more consumer friendly.
- throwawaymath 8y ago
  Anecdotally, I see lots of small businesses in the US which explicitly charge slightly more for credit card transactions. This is extremely common at gas stations and coffee shops, for example.
  - tzs 8y ago
    Sometimes that is actually the business charging slightly less for cash transactions rather than charging slightly more for credit card transactions. What's the difference? If the business advertises both a cash price and a credit card price, then there is effectively no difference I believe whether you characterize it is a discount for cash or a surcharge for credit cards. However, if you only advertise one price, then its a surcharge if that is the cash price and you add extra for credit cards at the register. If the one price is the credit card price, and you take off some for cash at the register, then it is a cash discount. Doing a cash discount was a common trick at gas stations to work around terms in their contracts that said they would not have credit card surcharges. There was a lawsuit against such contract terms by merchants who wanted to do a surcharge, and in a settlement in 2013 Visa and Mastercard agreed to allow them (with some restrictions, like no more than 4%, must be a sign disclosing them at the point of sale, had to be included on the receipt, and had to apply to all cards), reducing the need for such tricks in many areas. There are some states that have laws prohibiting credit card surcharges, so the cash discount trick may still be in use there. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. These have been challenged on Free Speech grounds. The Supreme Court has said that they are (well, New York's version, but others are similar) is a regulation of speech, but did not rule whether it was an unconstitutional regulation (the lower courts had not reached that issue) [1]. I don't happen to know what happened to that case after that. [1] https://www.supremecourt.gov/opinions/16pdf/15-1391_g31i.pdf https://www.supremecourt.gov/opinions/16pdf/15-1391_g31i.pdf

chrismeller 8y ago

> The Commission, which monitors competition, said that Mastercard's rules prior to 2015 forced retailers to pay certain bank fees in the country they are located rather than let them shop around. Meanwhile I can’t get a debit card from my bank that defaults to a language I speak at POS terminals because that’s not the official language of the country I opened it in. The logic and connection being that is the country in which I signed the terms of service and agreed to x, y, and z (one of those being the language and another being fees). So I, as a consumer, am stuck with the terms of the country I reside in, but the bank, as a merchant, shouldn’t be?

jhrmnn 8y ago
That's a false analogy. No one forces you to stay with your bank. If you are an EU citizen, you can open an account in any other EU country. Mastercard was forcing merchants to only use banks within their respective countries.
- chrismeller 8y ago
  In point of fact my bank is German, but because I’m in Estonia I’m regulated (in their mind) by the Estonian TOS I signed.
  - jhrmnn 8y ago
    Which is necessary because each EU country still has its own local laws, which the local T&C must abide. If you travelled to Germany and opened a bank account at a local branch, you’d get German T&C.
simonh 8y ago
As a consumer you are free to open another account with any bank anywhere in Europe. The merchants should have the same freedom.
- chrismeller 8y ago
  *Any bank that will accept you as a client. In Estonia, at least, they will demand some sort of “tie to Estonia”. That could be residence or a business, but you’re not getting an account otherwise.

stevespang 8y ago

I assume that MC is a US owned/headquartered business so this act by the Europeans is part of the strategy to get back some of the money the US prosecutors / US Gov't have sucked out of Volkswagen, Deutsche Bank, etc. for actual, real crimes they have committed.

randomacct3847 8y ago

I have to say the best thing about credit cards in the U.S. is the massive point bonuses you get for signing up for cards. I have gamed the credit card bonus system for ~6 years and pay for 90%+ of my personal travel including international business and first class flights and high end hotels with points earned from opening multiple cards each year with almost no impact to my credit score (760+). Combined with the fact that points are not taxable it is probably the single most lucrative “side hustle” I have that requires almost no work.

ceejayoz 8y ago
All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices. You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.
- ams6110 8y ago
  That's all true, but as a consumer I think a percent or two is worth the conveniences that cards offer. I pay for virtually everything with cards. I rarely even carry cash. Cash is bulky, dirty, inconvenient to get, and has absolutely no loss protection. I pay my balance in full every month, so I don't pay finance charges. If you can't do that, then don't use cards. They will eat you alive. Understand that most of the benefits/points that are offered are paid for by people who carry a balance. If you can manage them and keep the balances paid, the points are just icing on the cake. I rarely pay for hotels anymore, for example.
  - AceJohnny2 8y ago
    > If you can't do that, then don't use cards. They will eat you alive. I like to think as credit cards as tax on the poor to feed the rich.
    - AlexTWithBeard 8y ago
      I would call it a tax on those with poor financial planning skills.

kodablah 8y ago

> The fine would have been higher, but Brussels reduced the amount by 10 percent to thank Mastercard for cooperating. I am unable to find a link to the ruling in the article, does anyone have it? Curious how this number was arrived at.

Someone 8y ago
Press release: http://europa.eu/rapid/press-release_IP-19-582_en.htm http://europa.eu/rapid/press-release_IP-19-582_en.htm. It says: ”Mastercard cooperated with the Commission by acknowledging the facts and the infringements of EU competition rules. The Commission granted Mastercard a 10% fine reduction in return for this cooperation. Further information on this type of cooperation can be found on the Commission's Competition website” with a link to https://europa.eu/!XC69Qb https://europa.eu/!XC69Qb. Basically, you get a fine reduction if you promise not to appeal to the fine.
- repolfx 8y ago
  That seems problematic. It appears to be equivalent to financial punishment for appealing a ruling. And in the EU competition law is enforced via the rule of essentially one woman and her department - competition laws are so vague that she effectively has the power to levy huge fines at will, unchecked by anything except the right to appeal, because she doesn't have to prove anything in court to begin with. If the Commission is now able to levy such massive fines and lower them if you promise not to appeal, in a binding way, then they can simply make whatever sum they pull out of thin air 10% higher, give a 10% "reduction" for cooperation, and that's effectively a second fine for appealing the first.

pixelpp 8y ago

The EU laying down the law!

xwvvvvwx 8y ago

This is why we need crypto.

purerandomness 8y ago
How would crypto-currencies change the situation?
- xutopia 8y ago
  Decentralization.
  - purerandomness 8y ago
    The market has shown that cryptocurrency infrastructure tends to centralize in the same way.
- xwvvvvwx 8y ago
  because a commonly owned and permissionless value transfer layer has no control over the actions of the businesses and individuals who use it.
moosey 8y ago
We already have crypto. Now we await utopia, apparently.

thefounder 8y ago

Hopefully crypto payments/stablecoins will get more traction so we can get ride of these mono/dupolies.

freedomben 8y ago
This was my thought too. It amazes me that people don't see crypto currencies as the answer here, and one that solves a number of other problems at the same time.
- thefounder 8y ago
  I believe the main reason is the association of bitcoin and its flaws(i.e volatility) with crypto payments. The payment processors don't seem very eager to support stable coins either as it's harder for them to inflate the fees/conversion to fiat.
acdha 8y ago
For that to happen, they'd need to match the current system on cost, performance, safety, and availability. There are a ton of people — e.g. almost every small business — who would like alternatives but for a legal business there are too many cases where their costs (either direct or support) would go up enough not to be worth it.
AlexTWithBeard 8y ago
How would they help here?
deevolution 8y ago
still lots of progress needs to be made from a usability standpoint.

wslh 8y ago

I don't know the entry barrier details, but are governments working on standards to put your own payment system based on a defined API and following standard regulations?

briandear 8y ago

> On this basis, the Commission concluded that Mastercard's rules prevented retailers from benefiting from lower fees and restricted competition between banks cross border, in breach of EU anti-trust rules The following will be extremely unpopular here, however, it's a bit interesting that the EU is, in the case of private businesses, interested in preventing "restricted competition," however, when it comes to taxes, the EU continually criticizes Ireland for low corporate taxes. Essentially the EU is opposed to tax competition. The EU parliament has accused Ireland of being a tax haven and damaging the economies of its neighbors. While now, Mastercard is being accused of harming the EU economy by preventing competition. Mastercard gets fined for preventing competition (a correct decision in my opinion,) while strangely, Ireland also gets condemned for attempting to have lower taxes. Ireland, Hungary, and Bulgaria are promoting competition and they're in "trouble" while Mastercard is restricting competition and they're in "trouble" with the EU as well. So the EU Parliament is effectively acting like Mastercard by attempting to prevent tax competition which would lower prices for consumers far more than anything Mastercard could come up with. If the EU actually cared about competition and lower prices for consumers, then they'd let members set tax rates to whatever they want, but instead they want to "harmonize" tax rates -- essentially destroying the competitive advantage of lower tax locales. The countries that are harmed the most by tax competition are the ones that have highest taxes and public obligations -- yet Ireland, Hungary, and Bulgaria are supposed to raise their taxes to compensate for the fiscal decisions of France, Spain, or Italy? "The EU’s tax commissioner Pierre Moscovici said in November that the Commission was considering using extraordinary powers to strip EU states of their veto power on tax matters to break resistance over blocked legislation."[1] So the EU tax commissioner wants to essentially force EU member states to comply with a "harmonization" of tax rates, despite some members opposing such a move and now the EU is fining Mastercard for attempting to "harmonize" interchange fees? That's hypocrisy, assuming the reason for the EU fine is to protect competition and/or lower prices for consumers. The difference is that businesses can more easily stop accepting Mastercard than they can change governments. It's worth noting that Pierre Moscovici is French and France has some signifiant headwinds in terms of regulatory and taxation attractiveness for companies. Punishing Ireland, Hungary, Bulgaria and other countries with significantly lower taxes serves to benefit high tax countries such as France. So good for the EU for punishing Mastercard -- let's hope that they now turn to punish themselves for attempting to prevent competition with taxes. To be clear, I'm not anti-tax, I'm anti-tax harmonization and the reason is that tax harmonization essentially subsidizes bad fiscal policy. So countries like Ireland lose a competitive advantage simply because Spain can't balance its checkbook. [1] https://www.reuters.com/article/us-hungary-ireland-taxation/hungary-ireland-oppose-eu-wide-tax-harmonization-efforts-idUSKBN1ET1ZY https://www.reuters.com/article/us-hungary-ireland-taxation/...