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Part 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 increasing

Part 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 ago
The 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 ago
This 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.