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Visa, Mastercard mull increasing fees for processing transactions: WSJ
- throwaway-1283 8y agoThe best way to beat the system is to take advantage of the massive credit card reward bonuses that US banks offer. I've churned credit cards since 2012 and have nearly all my personal travel paid for by points every year, including international business/first class flights, luxury hotels, and cash for travel... Best thing is credit card rewards are not taxed because they are considered a rebate, which is quite amazing especially in a high tax state like CA!
- chris_mc 8y agoYou're just paying for that through increased prices on the products you buy. You're not beating any system, no one beats the system except for the top .001%.
- the_jeremy 8y agoI would argue that this level of dedication would be within the top 1% of credit card users and that probably is beating the system. Product prices are increased, but since the price increase is spread out among everyone (including those who pay cash), it seems likely to me he makes a good return. Maybe not $/hr, though.
- casual_slacker 8y agoSeems like game theory? If everyone else is playing, then it's better to play than abstain. Also I'm not sure about "higher prices", in my town there's two convenience stores across from each other, one with CC fee and one with no fee, same prices otherwise, so I just go to the no fee one. Maybe it gets worked in somewhere but it's not as fair/efficient as it could be.
- throwaway-1283 8y agoI am though, since everyone who doesn't play this game is subsidizing my free flights
- tibiapejagala 8y agoSo the poor pay for your flights.
- jacquesc 8y agoGood job beating the system. If you tracked all the hours and mental energy you spent on these tasks vs the amount of money returned, what do you think the hourly rate would come to?
- garmaine 8y agoSomething embarrassingly small. It’s not worth it.
- throwaway-1283 8y agoI took a first class flight to Japan during peak Christmas season on points from one credit card that I earned the bonus on by paying my rent with a credit card...it would've cost $15k out of pocket (even economy flights are almost $1000 one way during the holidays...)
- Axsuul 8y agoI am always hesitant on valuing redemptions for the price that would've been paid for the ticket, primarily because no one in their right mind would pay that price in the first place.
- throwaway-1283 8y agoYou can tell pretty easily who paid and didn't pay. Don't think the Japanese businessmen sitting in first used points.
- Axsuul 8y agoBut they still don't pay the full fare. They are atrociously high so that they can be heavily discounted, especially when it comes to corporate contracts.
- alexhutcheson 8y agoEh, even if you don't value airline/hotel points, you can pretty easily get ~$500/card in value in sign up bonus just for opening the card and using it for expenses you were going to incur anyway. You need to be discerning about what you apply for and only apply for the good deals, but it really doesn't take much time.
- loeg 8y agoI mean, yeah, that's good for a limited pool of consumers (myself included, as well), but really we're just being subsidized by other consumers who pay with cash, debit, or even credit cards that don't generate as high rewards. There's no reason Visa and Mastercard (as well as the banks) should be able to rent-seek the insanely high fees that they do on most retail transactions.
- throwaway-1283 8y agoI mean as a private individual I have no power to change what Visa or Mastercard do, so it makes no sense to "protest" by using cash (which actually hurts me since I'd be the one subsidizing others) instead of just trying to extract as much value as possible from the banking and payment industries.
- empath75 8y agoYou're not extracting that value from the banks. You're extracting it from poor people.
- gruez 8y agoCouldn't you say the same about taking advantage of any offer that poor people can't (or are less likely to) take advantage of? eg. buying toilet paper every 6 months when there's a deep discount, rather than buying small packs weekly (which poor people are more likely to do because they don't have the savings to buy 6 months of toilet paper upfront).
- loeg 8y ago> I mean as a private individual I have no power to change what Visa or Mastercard do Well, sort of. Enough bad publicity and public shaming has some impact on corporate bad behavior. > it makes no sense to "protest" by using cash I agree — I never suggested that.
- stefan_ 8y agoYou are playing a mini-game to increase Visa & co.'s profit margin.
- nickjj 8y agoWhat's the context tho? If you spend $250,000 a year on credit card purchases and get 4% back on everything you've cashed in on $10,000 bonuses, but you had to spend $250,000 to get that. It sounds like one of those conversations where it's like "yeah, just buy a car because you can write it off on your business account", so while you do get a discount on your taxes, you still had to pay for the car which is a net negative on how much $ you have in your pocket at the end vs not buying the car and paying more taxes.
- streptomycin 8y agoThe big money is in sign-up bonuses, like "spend $3000 in the first 3 months and get 50000 points, which is worth $500 cash or even more towards travel".
- bigpoppa 8y ago+1 for bitcoin. there, i said it. i am the champion. raise the belt.
- GoodJokes 8y agoRentier capitalism
- devoply 8y agoConsidering how much of a rip off they already are on the financial system. Simple rent seeking at 23% interest, 20% + 3% processing. There should be legislation to combat this shit.
- WrtCdEvrydy 8y agoIf you struck down the rules about providing different prices based on payment type and did a 10% discount by paying in cash, you'd be surprised how quickly things would change.
- bsbechtel 8y agoPretty sure the 20% interest goes to the bank and the 3% fee goes to the processor. They’re not the same entity.
- chrisseaton 8y agoDoes the card processor get any of the interest? I don't think the system works like that.
- avolcano 8y agoWorth noting that here in NYC, the courts have gone back and forth on whether passing transaction fees onto consumer is legal: https://www.law.com/newyorklawjournal/2018/10/23/ny-court-of-appeals-says-info-requirement-on-credit-card-surcharge-doesnt-infringe-merchants-speech-right/?slreturn=20190115114916 https://www.law.com/newyorklawjournal/2018/10/23/ny-court-of... I remember being shocked when my local pizza place put a sign on the register saying there was now a 3% fee on card usage (which became legal to do as of ~September 2017). Absolutely wild that Visa/Mastercard would raise prices further. It's already hard enough to find a place that accepts my Discover card, let alone an independent joint that will accept Amex (accept for all the places in and around Chinatown who only accept Amex, never will understand how _that_ happened).
- lstodd 8y agoAbsolutely support passing crap like this on to customers. Otherwise there is no incentive to lower them.
- toomuchtodo 8y agoConversely, we could regulate and treat card networks as utilities (allowing them to recoup reasonable operations costs) instead of for-profit concerns siphoning unnecessarily off of the flows of capitalism. It works for Europe. Customers regulating through voting with their wallet isn't going to work with how much power large financial firms wield. I contacted Elizabeth Warren's office (she's on the Senate Banking Committee); if this matters to you, I suggest you do too!
- dragonwriter 8y ago> I contacted Elizabeth Warren's office (she's on the Senate Banking Committee); if this matters to you, I suggest you do too! Unless you've also got a plan to get a Democratic majority in the Senate, your plan probably needs to extend beyond Warren if you are relying on her role in the Banking Committee (if you are expecting her to win the Presidency in 2020, that's perhaps another story.)
- kevin_b_er 8y agoThis means a price increase for everyone. The stores will just increase their prices across the board, even for cash, because most of their transactions are credit cards now. This is the cost of wanting a cashless society, mastercard and visa get a tax on everything. A tax not subject to voting, but one controlled by unconstrained capitalism.
- deleted 8y ago[deleted]
- suff 8y ago... aaaaand blockchain just won
- lemcoe9 8y agoYep, I am sure that this will be the turning point for "blockchain" and "cryptocurrency" and "machine learning" and "artificial intelligence" and "self-driving cars." /s
- eugeniub 8y agoThis is good for Bitcoin
- seanmcdirmid 8y agoYou mean people will actually start using it to buy things rather than using it merely as a vehicle for speculation?
- sokoloff 8y agoI think it's far more likely that this is irrelevant for Bitcoin.
- xur17 8y agoThe problem is that merchants don't directly pass the transaction costs onto users. If I spend bitcoin, I pay a small fee (a few cents). If I spend with a credit card, I get 1% cash back and pay no fee. Why would I pay with Bitcoin?
- duskwuff 8y ago> If I spend bitcoin, I pay a small fee (a few cents). Worse than that, actually. Bitcoin transaction fees can be pretty volatile, but they're currently in the $0.20-0.30 range. https://bitcoinfees.info/ https://bitcoinfees.info/
- momentmaker 8y ago
- bsbechtel 8y ago‘Your margin is my opportunity’ -someone who has a lot of money
- tome 8y agoIs it a cosmic coincidence that these two large competitors are going to increase fees at exactly the same time?
- iaw 8y agoHas to be if there's no documented evidence otherwise, right?
- dontbenebby 8y agoYour comment reminds me of a recent article I read (on HN iirc but can't find the comment thread): https://www.technologyreview.com/the-download/612947/pricing-algorithms-can-learn-to-collude-with-each-other-to-raise-prices/ https://www.technologyreview.com/the-download/612947/pricing... >Researchers at the University of Bologna in Italy created two simple reinforcement-learning-based pricing algorithms and set them loose in a controlled environment. They discovered that the two completely autonomous algorithms learned to respond to one another’s behavior and quickly pulled the price of goods above where it would have been had either operated alone. >“What is most worrying is that the algorithms leave no trace of concerted action,” the researchers wrote. “They learn to collude purely by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude.” This risks driving up the price of goods and ultimately harming consumers. I don't think it's out of the realm of possibility that two companies could arrive at such a move without conscious collusion. I also don't think it should be treated differently. Long term, I think Visa an MC could shoot themselves in the foot. Merchants are now allowed to charge fees for using CCs IIRC in at least some areas. You could easily end up with a situation like Europe where people mostly use debit cards for in person purchases since the processing fees are lower. Consumers lose the protection of a buffer from their bank account, issuers lose out on revenue. Not a good outcome IMHO.
- jfoster 8y agoOf course. They also share most of their customers. Their business model is the same. A lot of their metrics probably trend similarly. Each would definitely know what the other is up to without talking directly.
- pexaizix 8y agoHow is it legal for them both to do it at the same time?
- uasm 8y agoCash free societies?
- bob_theslob646 8y agoWill never happen. What happens if the power goes out or the systems fail? There will always need to be a backup.
- fosco 8y agothis just happened for me shopping at a grocery store I do not usually frequent, I overheard them saying it was happening company-wide. people left full carts of food because the ATM was also not working. (non-urban area)
- dustinmoorenet 8y agoThey have survived the internet revolution where other businesses have been disrupted. No startup is even close to chipping away their collective control. So they are empowered to do as they please.
- geofft 8y agoI suspect a big reason for this is that merchant agreements prevent you from directly passing on the cost of cards to customers. So if you accept Visa, MasterCard, and payment form X (where X could be cash, bitcoin, Venmo, whatever), the price you charge customers is the actual price you want to set plus the Visa/MasterCard fees, even if they pay with form X. One way a disruptor could tackle this is by providing all (or even almost all) of those fees as cash back - giving everyone 2.5% cash back regardless of their creditworthiness / ability to get a sweet rewards card would be very popular. But then you'd probably want to not do that at merchants that aren't accepting traditional credit cards, and I'm not sure how customers would feel about this.
- cma 8y agoObama changed that to let states decide it. I don't know about websites though that are interstate.
- iabacu 8y agoPeople forget that cash transactions also have a cost. It’s mostly on the risk of keeping and transporting cash, and the cost associated to mitigate those risks. Small shops are usually more willing to take the risk to avoid fees.
- edge17 8y agoI don't think most people feel they are in mortal danger for carrying around small sums of cash
- ArtDev 8y agoSmall businesses not customers.
- Entalpi 8y agoIn Sweden the cost of handling cash is forcing small shops to go card only. Even banks thesedays have cash-free offices.
- dontbenebby 8y agoAre there a lot of violent robberies in Sweden? I'd think in a society with less guns people would be more wary of robbing. The clerk is separated by a counter and may have a bat or simply hit the panic button before you can get on them, leaving little time to escape...
- AnssiH 8y agoAssuming Sweden is similar to Finland, I think the main point is not avoiding robberies, but just to save money. Here, visits to bank branches have been in decline for decades now, especially for cash services, so it makes sense for the banks to reduce the amount of locations that offer those services to save money. In 2018 there were 854 bank branches in Finland, compared to 1627 in 2007 and 3600 in 1985. Population is 5.5M. This also has the effect of increasing cash handling costs to businesses if they have to get cash services from a bank branch that is far away. Sources (Finnish): https://www.finanssivalvonta.fi/kuluttajansuoja/kysymyksia-ja-vastauksia/pankkipalvelut/peruspankkipalvelut/selvitys-peruspankkipalveluiden-saatavuudesta-ja-hinnoittelusta-2018/ https://www.finanssivalvonta.fi/kuluttajansuoja/kysymyksia-j... https://www.savonsanomat.fi/kotimaa/Suomessa-pian-alle-tuhat-pankkikonttoria-Fiva-Alaraja-alkaa-tulla-vastaan/1039549 https://www.savonsanomat.fi/kotimaa/Suomessa-pian-alle-tuhat... https://www.kauppalehti.fi/uutiset/pankkien-konttorit-katoavat/6b102a9e-f5b8-34eb-a164-a7a1bcb8f565 https://www.kauppalehti.fi/uutiset/pankkien-konttorit-katoav...
- exabrial 8y agoGood. Let's break the oligopoly.
- occamrazor 8y agoAs a point of comparison, interchange fees in the EU are capped at 0.3% and total average cost for merchants is less than 1%.
- deleted 8y ago[deleted]
- rb808 8y agoPresumably this is to pay for all the points people get by using cards, not to mention the sign up promotions. I like how in Europe and Australia interchange fees are capped. Even if it means they live without such bountiful premium cards. https://en.wikipedia.org/wiki/Interchange_fee https://en.wikipedia.org/wiki/Interchange_fee >> In the United States, the fee averages approximately 2% of transaction value.[2] In the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards.[3]
- altmind 8y agoI think the points are fully paid by avg 21% APR, $37 late fees, interchange fees, foreign transaction fees(2%) and ATM fees on credit cards. Its just greed.
- liquidwax 8y agoSaw a video by vox today where they argue that the points are also paid by increased retail prices. Even if you decide to use cash, you are basically paying for someone's business class upgrades https://www.youtube.com/watch?v=ySH5SudRwak https://www.youtube.com/watch?v=ySH5SudRwak
- yborg 8y agoAnd the card holder pays with their privacy as well, that data stream is also monetized.
- KorematsuFred 8y agoThe Chinese store I buy from offers me discounts if I pay in cash. He offers me 5% discount on furniture and also gives me a proper invoice (so he is not really defrauding the tax authorities either).
- empath75 8y agoYeah but the people getting the points aren't the people paying those fees. It's mostly a wealth transfer from the poor to the well off. It's grotesque, and I think they should be banned.
- rellui 8y agoI forgot where I read it but an article explained the way credit card companies hide how the fees have been transferred to the customers. The merchant takes the burden but they jack up the prices of the goods which hits the consumers. The reward point systems of the credit cards work the same way. Merchants jack up the price of the goods to be part of the reward point system which in the end hits the customers. In fact, the people that don't get a credit card with reward points actually end up losing by not joining. I thought it's interesting that everything in the end gets put on the customers. It's the price we pay for convenience. I just don't like the way it's hidden to make it look like we're not actually the ones paying for it.
- maxxxxx 8y agoIt reminds me a little of medical pricing. The real costs are hidden from the customer and things are intentionally convoluted. There are a lot of areas where we need more transparency.
- SketchySeaBeast 8y ago> I thought it's interesting that everything in the end gets put on the customers. It's the price we pay for convenience. I just don't like the way it's hidden to make it look like we're not actually the ones paying for it. Where else would the cost go? Credit card costs, delivery costs, supply costs, advertising costs, the consumer always pays for it as they are the only one who are providing cash in any of these scenarios. I suppose the merchant could just eat the cost, but, assuming the markup isn't wild, that's a proposition that leads to a dead business.
- kyrra 8y agoSource article: https://www.wsj.com/articles/purchases-with-plastic-get-costlier-for-merchantsand-consumers-11550226601 https://www.wsj.com/articles/purchases-with-plastic-get-cost...
- tsuru 8y agoI don't know how justified this feeling is by fact, but I feel like this is being done to further compete with cash back rewards. The more card holders want in cash back percentage perks, the more the credit card companies will want to collect in transaction fees.
- chillydawg 8y agoPart of their rationale is that the cost of anti fraud and AML and so on is going up. At the same time, the volume of transactions going via cards is increasingly massively year on year and will continue to do so for quite some time. Surely a lot of these anti fraud and other systems benefit hugely from economies of scale. Once you've got your anti fraud tooling set up, you mostly just need to throw a few new VMs and staff at it as tx rates grow. This seems to me like a good cover for them to cartel up and raise prices.
- fpoling 8y agoThe problem is that frauds are fat-tailed. The vast mayority of them are small, but most harm comes not from them but few huge ones where there is no economy of scale to offset it. If one increases the number of transactions, then it can be depending on fraud distribution details that harm from big ones increases disproportionately and makes average cost of transaction higher.
- matthewdgreen 8y agoThis chart shows overall card fraud rates (in absolute $) as being essentially flat, albeit noisy, over the past several years: https://www.zdnet.com/article/identity-theft-credit-card-fraud-cost-us-consumers-16-billion-in-2016/ https://www.zdnet.com/article/identity-theft-credit-card-fra... If transaction rate is increasing, that means that fraud costs should actually be going down as a percentage of transaction income. And of course, Visa and MC control the technology. Their continued avoidance of major technical advances in the core card technology (things like one-time credit card numbers for online shopping) tends to undermine the "fraud is why we charge so much" theory. Also wouldn't hurt to look at the profit margin of Visa while you're at it, it's remarkable.
- TheChaplain 8y agoI believe Visa and Mastercard are feeling threatened perhaps? For both UnionPay and Alipay are huge in Asia, various banks replacing Visa/MC as primary choice for credit/debit cards and mobile payments in a majority of shops. Europe seems to be next from what I've noticed, their brands showing up here and there in shops. But I think this might be a good thing, we need more competition in that area.
- johnmaguire2013 8y agoIf they felt threatened, wouldn't it make sense to lower fees to make their service more appealing to retailers?
- the_duke 8y agoThe situation in Europe is generally better because EU legislation (Interchange Fee Regulation) has limited the fees that payment processors can charge. That regulation also requires more transparency and is supposed to promote alternative payment systems by limiting lock in. As always, Europe is too fragmented, and slower to adopt new tech, for one of these app based solutions to gain wide spread adoption quickly, though.
- jwr 8y ago> As always, Europe is too fragmented, and slower to adopt new tech, for one of these solutions to gain wide spread adoption quickly Not sure what you're talking about. In Poland, I can use my phone to pay for anything anywhere. Seriously. I can buy a single apple at a grocery stand and tap my phone on the reader that will surely be there and will surely work with all NFC payment systems. Coming to the US is a shock, because suddenly nothing works, and even in places where it's supposed to work nobody tries to pay with a phone, because it's flaky. So I'd say it's exactly the other way around. With customer-facing banking tech, Europe is way ahead of the US.
- the_duke 8y agoAnd what is the name of the app? Because I guarantee most of Europe has never heard of it. That was my point. Solutions might gain adoption in a single country quickly, and there are some that are becoming very popular in various countries. But it's hard for any one of them to get adoption across the EU.
- ArtDev 8y agoSomething should be done about this. These companies have a criminal monopoly by forcing out their competitors. If you have ever ran a small business and seen the obscene amounts these companies make; you would be outraged too.
- joshe 8y agoRaising rates from 2.5% is a pretty great indicator of monopoly power, and a good target for startup disruption.
- CardFellow 8y agoVisa / MC rates aren't 2.5%. There are multiple components to the final rate that a business pays, with the bulk of it being interchange, which goes to the banks that issue cards. Visa/MC only get assessments and dues, which are significantly smaller. (Visa's volume assessment is 0.13%, for example.) We need to know which fees they're raising, and by how much, to know what sort of impact this will have.
- amaccuish 8y agoI think there's a place for a nationalised network or some sort of not-for-profit org. Seems silly to rest such an important part of society in the hands of a few private orgs. Or maybe even empowering banks to better compete (as long as we don't end up with 50 different networks).
- howard941 8y agoThe post office would be a good host for such a network, among other banky things.
- DesiLurker 8y agoIt does so in India for rural communities. I've always wondered why it cannot do low cost banking in US. they already have the infrastructure and the manpower.
- Cu3PO42 8y agoWe have a national network in Germany. It’s called girocard and has debit cards only. You get one from your bank by default for every checking account. Transaction fees are very low at ~0.25%. They double as an ATM card and are usually co-branded with either Maestro or V-Pay so you can use them internationally. Of course they’re not perfect and are often behind MC/Visa when it comes to new features like contactless, tokenization, etc., but it’s still a great little system.
- Aiphie3E 8y agoMeanwhile europe phases in instant inter-bank transfers, had direct debit for years (now standardized via SEPA) and paying via wire transfer (to any bank, via IBAN) has always been an option.
- segmondy 8y agoI hope they do, I hope they make it very large, 10x, 20x! Increase it so much that folks run back to cash, checks and alternate digital payments. Let greed do them in!
- ramshanker 8y agoYes please. So that our local alternative RuPay gets even broader adoption. :)
- nafey 8y agoBefore we break up Google and Facebook how about we take a look at collusion and behind the back deals happening in these companies. This duopoly has been levying tax on huge chunk of transactions happening all across the world. How have they avoided scrutiny for so long?
- fitzroy 8y ago> They also say that expenses for ramping up anti-fraud/theft security measures, to make payment processing safer, need to be covered. Or they could implement Chip & Pin like the rest of the planet – with the side benefit that we might be able to reliably purchase a train ticket from an automated kiosk overseas on occasion.
- RickS 8y agoWhile this is a hostile development that will be painful for some, there's a part of me that's grateful for every shitty thing they do because it increases the likelihood of a challenger. Would Stripe exist if PayPal hadn't been so hostile to their customers? Giant markets of money movers all explicitly saying "We hate having to use these guys, isn't there anything better?" tells David that it might be worth fighting Goliath. IMO blockchain is like a green-party candidate that undermines more promising candidates by sapping votes in a system that doesn't allow runoff voting – it's a shiny, utopian distraction that prevents people from starting the companies I think are more appropriate and promising – card & payments startups that support or resemble existing infrastructure. Privacy.com, Final (RIP), the venmo card – the first company to unseat the incumbents in the card space is going to be a big deal. Stripe is making excellent headway in eating the elephant, using their web payments platform to get big enough to compete in the more difficult card issuance space. Here's hoping they have ambitions of re-investing the clout they get from cards to attack the underlying processing layers, and disrupt global financial infrastructure from the outside in. The Point Of Sale industry is making great headway here too. Revel, etc. The blockchain equivalents have flopped, but the card-based ones are now standard issue at even the tiny mom and pop stores. There's real hunger for modern tech in the payments space, it just needs to roll out in more accessible stages.
- martin_bech 8y agoWe have a solution in Denmark, thats cheaper called Dankort, litteraly everyone over 18 has one (Works just like any credit card). Jointly created by all Danish Banks. Works pretty much flawless, but the banks jointly sold the company behind it, and now looks like some banks wants to let it die... So they can instead get kickbacks from Visa/MasterCard.
- RickS 8y ago> the banks jointly sold the company behind it, and now looks like some banks wants to let it die There could be a dark brilliance to such a move. Want to raise your margins? Get paid to sell your low margin product, let it die, and get paid again when you raise your margins in the new market.
- newscracker 8y ago> However, it is up to merchant banks if they want to pass on the fee hike to sellers, or absorb it themselves. Similarly, it is sellers’ discretion to pass on the hike to consumers or not. Of course, we know what will happen! This whole scheme is like indentured servitude. They not only get more of your money, but also sell your habits to others and make even more money creating or helping others create profiles of you. And you have no control over this as long as you take it with resignation. What consumers need is a disruption on electronic payments by moving to non-conventional non-electronic/non-digital payments (cash is a good option, but it needs to be encouraged more and made to look sexier).
- cronix 8y agoMaybe if they did a better job at securing their systems and card security requirements there wouldn't be as much fraud that they are liable to cover? Their systems are broken. CC fraud is at a high. They're having to pay out more, decreasing profits. Answer? Raise fees and keep the broken system in place so they don't have to spend millions/billions to fix their problem they created. Being able to use a RFID/NFC reader in close proximity to someones wallet (like in their back pocket, standing ahead of you in line) and being able to charge their card without even touching it is not a very good thing lol. Chip cards are pretty cool. https://www.youtube.com/watch?v=PmoE1mDz_cM https://www.youtube.com/watch?v=PmoE1mDz_cM I can't find the other demo/video where they were just walking up to people and making charges in realtime by rfid scans. One of the first thing I do on chip cards is cut the antennae trace on the chip. I don't need or want that convenience. Swiping the mag strip on the card isn't that hard for me, and never was. They recently (last year?) raised limits (at least Visa) for the amount you (or someone) can spend without requiring a signature. It doesn't make me feel good that if my card is stolen someone can charge up to $1k on it without a signature. I don't know when the last time a merchant asked me to see my identification to see if it matched the name on my card. This will just raise the price of all goods since merchants figure the cc fees into the prices of all products, whether you're paying with cash or card. Meh, it's easier to just raise fees than fix the real problems directly affecting their bottom line: Fraud.
- sitkack 8y agoThis makes Visa complicit in the fraud, they are passing the costs onto the consumer and the businesses while they take a bigger cut. My theory is that they will do both, raise fees and eventually get better security, so this is how Visa will double their profits.
- kyledrake 8y agoThey deal with fraud by reversing transactions, and then charging a fee. So the merchant is out for the money used to pay for the thing, and also a fine is placed on top of it. As far as I understand it, the card companies don't spend a nickel on compensating for fraud, they keep all of that fee.
- Gpetrium 8y ago
- abalone 8y agoVisa/MC are probably going to try to target the margin that fintech startups have able to eek out at the lower end of the card processing market. From their perspective, the fact that companies like Stripe and Square have been able to obtain unicorn valuations for card processing services means that there's money left on the table. Card processing was a basic commodity business before these guys. Somehow, Stripe et al have been able to convince a large swath of customers to accept 2.9% + $0.30. Did you know that interchange on most debit cards is just 0.05% + $0.22?[1] That's massive margin. Visa/MC is like, sorry Stripe, don't try to play our game on our platform. We invented it. (Somewhat cynically you could argue this is why Stripe spends a lot of time/resources on "big thinking" and kind of puffing themselves up into more than a "card processor". It's part of the sell.) [1] https://www.burlingtonbankcard.com/interchange-plus-pricing/interchange-plus-credit-card-processing-faqs/what-are-the-interchange-fees-on-a-10-visa-debit-card-sale/ https://www.burlingtonbankcard.com/interchange-plus-pricing/...
- Uhhrrr 8y agoeke
- CardFellow 8y agoVisa/MC don't care what Stripe (or any other) processor charges, they get their money FROM Stripe/the other processors, by way of assessments. >Did you know that interchange on most debit cards is just 0.05% + $0.22?[1] That's massive margin. Except on certain transactions where it's a money loser. Square was charging Starbucks 2.75% and Starbucks' average $5 debit transaction was killing them. They lost millions. Square’s cost to process a regulated debit card works out to 0.16% of the total sale price (the 0.05% regulated and the assessments from the card brands) plus a transaction fee of $0.2355. (Again, the regulated transaction fee plus assessments.) So, Square’s cost to process a $5 transaction is $0.2435 (5 x 0.0016 + 0.2355). However, 2.75% of $5 is only $0.1375, which means Square losses $0.106 (0.2435 – 0.1375). It only charged its customer $0.1375 for a transaction that it paid $0.2435 to the bank and the card brand to process.
- abalone 8y ago
- avanderveen 8y agoAll this talk of regulating Google, Facebook, Twitter. What about Visa and Mastercard? How is acceptable for so much power to rest in the hands of such a small number of companies?
- rc_kas 8y agoWould Stripe or Paypal ever create their own credit cards?
- thehoopyfrood 8y agoStripe already does: https://stripe.com/issuing https://stripe.com/issuing Granted, it seems geared towards businesses who want programatic control of the credit cards they own, but still.
- cwkoss 8y agoWhen Mastercard and Visa blocked transactions to Wikileaks in 2011, it created the first bitcoin bubble.
- CardFellow 8y agoThe problem is that as far as pricing is concerned, regulating at the interchange level isn't going to have the effect people want. That's what happened with the Durbin Amendment.. it capped regulated debit at 0.05% and 22 cents at the interchange level... but processors can still add whatever fees they want on top of that.
- KorematsuFred 8y agoIndia launched UPI (Unified Payment Infrastructure) which is more like a public utility which does 10x more transactions that Visa and Mastercard in mere 28 months of its launch and is 100% free. More interestingly you can built very interesting apps on top of it and make money.
- actuator 8y agoI don't know if the stats you quoted are true but UPI is a fantastic product. The only problem being you can't use credit so you pretty much pay through your bank account. Also, they have a more direct rival to Visa and MasterCard as well. RuPay, which has lower fees apparently.
- KorematsuFred 8y agoThe stats are for India only BTW. UPI does close to 700M transactions a month and growing around 20% month on month. Compared to that Visa, MasterCard and Rupay combined do around 150M transactions a month. Of course if we add ATM withdrawals (which is actually a cash transaction to think of) than that number is around 800M per month for all of them combined. All numbers are for India only. in USA Mastercard alone does around 12B transactions a year and globally around 75B transactions a year. Large but India's UPI had a fair chance to even overtake than in next 5 years.
- munk-a 8y agoIn Canada we've got the Interact network which was built by a coalition to banks and offers an entirely separate plastic based method... it's sort of like a US debt card. You Americans should really give the free market a try one of these days...
- rfinney 8y agoWe did. We had American Express, Diner's Club, Discover (the old Sears) ,department store cards, gas station cards, Bankamericard (Visa) and Interbank (Mastercard). In the 1960s there were hundreds of credit cards. Visa and Mastercard won the free market battle.
- munk-a 8y agoForming a cartel is not "winning a free market battle" it is kicking the free market out of your business domain.
- blhack 8y agoVisa and mastercard should be careful they don't compete their way out of a market. Stripe, square, apple, google, samsung, etc; there is no reason these companies couldn't band together to create their own clearing system. Visa and MC started as credit cards, but almost nobody I know uses them that way anymore. They're all bank cards, and visa/MC/Amex are just proxies. I see no reason why they can't be replaced, and I'm honestly hopeful that they will be. Okay and seriously: I actually just want US Mint backed card. I think it's absolute lunacy that these private companies are essentially levying their own tax on consumer transactions. Cash is outdated, and the government should react appropriately. (And only in my most feverish of fever dreams: it's a cryptocurrency, and only at >104F temperatures, it's on the ethereum network. Oh boy a man can dream!) In this world: Amex, Visa, and MC can go back to being credit cards.
- AmericanChopper 8y agoThe clearing system isn’t the core part of the card brands value though. It’s their payment network. The fact that a card issued anywhere can be used to process payments to a majority of the worlds merchants and banks.
- deleted 8y ago[deleted]
- venantius 8y agoI mean the actual reason these companies are able to levy these taxes is because they provide contractual consumer protection. If we had strong consumer protection laws in the US in the first place, there wouldn't be much value left in Visa/MC etc.
- habosa 8y agoThe credit-card model is spinning out of control. I have a good income and decent credit. So I have a credit card that gives me 2-3% cash back on everything, low or zero fees, and tons of other bonus perks (various kinds of insurance, airport lounges, whatever). So I should be excited right? Well, not really. The 2% cash back barely makes up for the 2% that MC/Visa take out of the middle in the first place! So the goods I buy cost more than they should and I get a "kickback" on the backend. And if you're someone without access to great cards, then you still pay the same price in stores but you get no cash back, high APR, low credit limits, and crazy late fees. It's regressive taxation.
- kazinator 8y agoI would ditch credit cards the moment all the merchants I use would give me a 2% discount for paying cash. Using credit cards is perfectly rational until then. What's more, it's rational even for credit cards that don't earn any rewards or cash back, let alone ones that do.
- vardump 8y agoThe merchants would probably love to do that if cash handling related costs were lower.
- ahartmetz 8y agoTheir contracts with credit card companies forbid different prices for credit card and cash. It's slightly insane IMO.
- deleted 8y ago[deleted]
- ensignavenger 8y agoThat used to be true, but it was ruled illegal and so it is not anymore. See https://www.washingtonpost.com/business/capitalbusiness/as-rules-change-more-retailers-offer-discounts-for-cash-payments/2013/06/29/d4c84d7a-dcfc-11e2-bd83-e99e43c336ed_story.html?noredirect=on&utm_term=.6e45a190c290 https://www.washingtonpost.com/business/capitalbusiness/as-r...
- xwvvvvwx 8y agoThis is why we need crypto :)
- chrischen 8y agoA few thoughts 1) Why doesn’t PayPal lower fees 2) Use our transit/metro cards as a digital cash equivalent like in many other highly developed cities/countries.
- techsin101 8y agoThere is no need for private Banks. Banks and lending should be separated. Banks have only one purpose to store the money and give it back when I need it. No interest no fees or anything else. It doesn't require some great feats to increment or decrement numbers. Similarly paying, transferring, etc should be instantaneous and cost free. Highest cost should be electricity cost of computer running the transaction. It boggles my mind why let there be cluster fuck of crappy private solutions when the problem is faced by whole society. Why not build 1 efficient cheaper public owned system. We don't have private highways, private dams, so why can't we have public owned banking system
- SN76477 8y agoCash is king. Actions like this by visa and mc is gross. They are just bloated asshole companies.