5 ms·

> 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

by 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).
  - haneefmubarak 8y ago
    Not the parent, but I think I can explain it decently. So let's say that you swipe your card at a retailer, perhaps an IKEA. IKEA has a card payments processor (ie: the vendor that the little terminal you sign on / stick the card into is from). This processor deals with a network (usually Visa or MasterCard, although there are smaller vendors such as Amex, Discover, etc) who ultimately connects the payment processors to the banks. Now, for each transaction, your bank charges a fee to the network (the interchange fee, limited in the EU to like 0.3% I think) as a percentage of the total transaction. The network then charges some fees to the payment processor, which includes the fee that the bank charged. Finally the payment processor adds in their own fees and charges some unified fee schedule to the merchant (in our case, IKEA).
    - dogma1138 8y ago
      You are missing two parties here and mixing one. The payment processor doesn’t belong to any of the credit card companies if they are tied to any institution they will be part of the acquiring bank but these days most of them aren’t, all they do is facilitate the transaction and there could be more than one in the chain. The issuing bank as in the institution that issued the card charges a fee, as well as the acquiring bank the bank that actually receives the payment also charges a fee. There are fees that are levied on multiple parties across the chain by multiple parties however at the end these tend to be mostly be then baked into the fees that are levied on the merchant.
    - CodeMage 8y ago
      Thank you for explaining this. I had no idea banks charged a fee to Visa and MasterCard; for some reason I thought it was the other way around.
      - dogma1138 8y ago
        Different banks there are two banks involved in the process the issuing bank who issued the card and from which account the money is taken and the acquiring bank the bank that the receives the payment. Each of them charges a fee, and can be charged a fee. A credit card transaction is a multiparty transaction with a lot of small fees.

by vmarsy 8y ago

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).
- haneefmubarak 8y ago
  Not the parent, but I think I can explain it decently. So let's say that you swipe your card at a retailer, perhaps an IKEA. IKEA has a card payments processor (ie: the vendor that the little terminal you sign on / stick the card into is from). This processor deals with a network (usually Visa or MasterCard, although there are smaller vendors such as Amex, Discover, etc) who ultimately connects the payment processors to the banks. Now, for each transaction, your bank charges a fee to the network (the interchange fee, limited in the EU to like 0.3% I think) as a percentage of the total transaction. The network then charges some fees to the payment processor, which includes the fee that the bank charged. Finally the payment processor adds in their own fees and charges some unified fee schedule to the merchant (in our case, IKEA).
  - dogma1138 8y ago
    You are missing two parties here and mixing one. The payment processor doesn’t belong to any of the credit card companies if they are tied to any institution they will be part of the acquiring bank but these days most of them aren’t, all they do is facilitate the transaction and there could be more than one in the chain. The issuing bank as in the institution that issued the card charges a fee, as well as the acquiring bank the bank that actually receives the payment also charges a fee. There are fees that are levied on multiple parties across the chain by multiple parties however at the end these tend to be mostly be then baked into the fees that are levied on the merchant.
  - CodeMage 8y ago
    Thank you for explaining this. I had no idea banks charged a fee to Visa and MasterCard; for some reason I thought it was the other way around.
    - dogma1138 8y ago
      Different banks there are two banks involved in the process the issuing bank who issued the card and from which account the money is taken and the acquiring bank the bank that the receives the payment. Each of them charges a fee, and can be charged a fee. A credit card transaction is a multiparty transaction with a lot of small fees.