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> I'm not 100% steeped in cryptocurrency theory, and so I don't understand why this is presented as if it's agreed on by everyone. What problems does the world

> I'm not 100% steeped in cryptocurrency theory, and so I don't understand why this is presented as if it's agreed on by everyone. What problems does the world have that would be solved by an online, independent [of any nation, presumably?] currency? Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. There are many people all over the world without access to banking - they can't store money, they can't transfer money, and they can't invest money. That may be someone who has poor credit in the US, or someone who's living in rural India or Africa. Without access to banking, you are essentially cut off from globalization. If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check. Plenty of other examples. Whether this is a good solution I don't know, they just announced it.

rt2dap 7y ago
Visa and Mastercard have invested so I wonder how they might weigh in on the project. Also, the Libra-coin should also have a transaction cost associated but I would expect/presume it stands an order of magnitude lower than 3-4%
- taurath 7y ago
  Visa/Mastercard consider crypto an existential threat - the value add that they have in terms of consumer protection, middleman conflict resolution, and fraud prevention does not add up to that 2-4% level of value, and they admit that. Trust and the network effect keep them in play for now. https://qz.com/1646097/what-does-facebooks-crypto-coin-libra-mean-for-visa-and-mastercard/ https://qz.com/1646097/what-does-facebooks-crypto-coin-libra... Crypto transactions however, have not lived up to the "hype" of being truly cheap thus far. Visa/MC are positioning themselves such that the value they bring is not something that crypto can provide. We'll see where that ends up - I'd expect Visa/MC stock to move a bit if the transaction fees for Libra end up being sub-$.05.
  - TheSpiceIsLife 7y ago
    This 2-4% being thrown around appears to be incorrect, as @dan1234 pointed out elsewhere here. The Mastarcard fees appear to be 0.2%-1.65% as per https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-do/interchange.html https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...
    - oasisbob 7y ago
      That chart is interchange fees, which is only a portion of the overall "switch" fees paid by the merchant.
- benj111 7y ago
  It isn't clear to me that you wouldn't still have payment processors anyway. In the UK right now I can send money to your account nearly instantly, and for free. I wouldn't want to purchase anything like that though, I'd want to use some kind of card, why would Libra be any different?
markphip 7y ago
The true value of any currency is what you can do with it. If someone owns some coin and wants to buy some food to feed their family, the seller of the food first has to accept the coin, but regardless what value the rest of the world places on the coin, the seller of the product is still in control of what they will accept. I am not sure how using a cryptocurrency solves the problem of hyperinflation. It is still not going to be cheap or easy to purchase items in the areas these problems exist. I think your other points about access to banking and storing/transferring money are valid. It implies the person has a working mobile phone and access to a network though too.
- teknologist 7y ago
  "Using a cryptocurrency" doesn't solve the problem of hyperinflation in itself. However, Libra is backed by its reserve ("Libra Reserve") which is a basket of low-volatility assets structured to keep its value relatively stable. If my interpretation is correct, this basket can change over time so that it is always made up of stable currencies.
hjk05 7y ago
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. In Denmark we solved this the lowtech way. Visa cards have to be Dual visa/dancard, where the dancard has extremely low cut limited by law(0,055$/transaction flat rate) It’s not hard, it just requires you have politicians capable of dodging the huge piles of cash MasterCard and Visa throw at them whenever talk of breaking the duopoly hits the table. But maybe for the US, something like bitcoin will be the only way forwards, using technology to try to solve a market problem though “disruptive technology” when what is really needed is just disruptive politicians.
- Meekro 7y ago
  Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world.
  - vageli 7y ago
    > Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world. If there was political will, there is nothing stopping governments from capping the fees taken by Visa/MC.
    - traek 7y ago
      Many people feel the solution to bad products is making better competing products rather than adding government regulation.
dan1234 7y ago
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. I think you’re overestimating that rate, and by quite a bit. Mastercard’s fees seem to be between 0.2%-1.65%[0] depending on the card and transaction type. I didn’t bother to look for Visa’s rate, but I’d imagine it’d be similar. [0]https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-do/interchange.html https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...
- desdiv 7y ago
  You are correct if you interpret "Visa and Mastercard" as literally Mastercard Incorporated and Visa Inc. He used "Visa and Mastercard" as a metonymy for the entire payment processing network i.e. payment gateway + issuing bank + acquiring bank + card networks. The total fee for the entire network is indeed 3-4%, and as you rightly pointed out, Mastercard Incorporated and Visa Inc. fees actually only make up for less than half of the total transaction fees.
  - thedaveoflife 7y ago
    Of course the are not "taking" it either... they are issuing credit, allowing ease of purchase and providing fraud protection
- oasisbob 7y ago
  That chart is for interchange fees, which is only one part of the fees a merchant will pay. It's the portion which is returned to the issuing bank. It doesn't include the fees which go to MasterCard, nor does it include the fees paid by the merchant to their merchant bank.
fnord77 7y ago
> Visa and Mastercard are taking a 3-4% cut have you tried buying anything with bitcoin? currently the transaction fee is almost $2 to have your transaction confirmed within 10 minutes. Not a lot on big purchases, but that's 20% if you're say trying to buy a $10 lunch with bitcoin.
- vpzom 7y ago
  Bitcoin isn't the only cryptocurrency, and many others have much lower fees
  - marcus_holmes 7y ago
    It's the only cryptocurrency that anyone outside of the crypto world has heard of/takes any interest in/would consider letting you buy their stuff with
- noob_slayer 7y ago
  Have you tried buying anything with Bitcoin Cash? Currently the transaction fee is under 500 satoshi (about 1/5 of 1 US cent) to have your transaction included in the next block.
  - bildung 7y ago
    Because no one uses it, or not? Transaction prices are determined by supply and demand on Bitcoin Cash, too, AFAIK.
- stef25 7y ago
  > lunch Bitcoin fees are basically just the price you pay for having drugs delivered to your house.
camgunz 7y ago
> If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check. Those same "tight currency and economic controls" apply just as much to cryptocurrencies as they do to Visa gift cards. There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars". But beyond that, people have the right to determine their country's monetary policy independent of, say, Bitcoin devs, Facebook executives, or a foreign government (ex: Venezuelans using USD), and it's hard for me to ignore the vague scent of opportunism here. The solution to corrupt governments is not "get rid of all governments", it's "get rid of corrupt governments".
- sytelus 7y ago
  > There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars". US has often taken advantage of its dominant world currency position. For example, massive amount of QE that eventually gets absorbed worldwide with little inflation in US. Similarly "petro dollars". The bottom line is that if someone is allowed to print currency at whim, they will.
TheSpiceIsLife 7y ago
Do we have any indication from Facebook that they intend to use Libra to massively undercut Visa / Mastercard for merchant services? I mean in the developed economies.
- liminal18 7y ago
  yes, their whitepaper heavily suggests that access to finance products for the poor is a big motivation behind Libra. However, it does feel a bit like white washing as the majority of the profits from Libra will obviously be the convenience of paying via facebook owned messengers etc.
  - TheSpiceIsLife 7y ago
    The poor, even in developed countries, aren’t well served by the incumbents. Visa and MasterCard are collaborating on the Libra protect. For those two reasons I don’t know if it makes sense to say Libra is competing with the incumbents.
    - marcus_holmes 7y ago
      The problem with Visa and Mastercard in the developing countries I've experienced is the banking system. In Cambodia, you can only get a credit card from a Cambodian bank if you have a deposit with them that matches your credit limit (i.e. to get a card with a $5K limit, you need to maintain a balance of $5K in your account). Most people cannot get credit/debit cards because the banks won't issue them, because they don't trust anyone and won't take the risk involved in issuing cards I can see how Libra will solve a lot of frustrations for Visa/Mastercard working in poorer countries
      - TheSpiceIsLife 7y ago
        What risk is there in issuing debit cards? Other than the obvious fraud potential, but that usually doesn’t originate with the card holder.
W-Stool 7y ago
If you're running some kind of IT infrastructure big enough for the whole world to use, you're going to want a cut of each transaction whether you are VISA/MC or Facebook's blockchain. Some sort of transaction fee is inevitable, even (or especially) on a private blockchain.
goatinaboat 7y ago
Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. There are two assumptions you are making, both of which are false. The first is that handling cash isn't expensive, but it is. You have to store in various secure locations, transport it between those locations, count it multiple times... And that's true even if you're a market trader or a small shop. For those people it could easily be a significant part of their day and a significant risk, all of which goes away with cards (and the fee is nowhere near 3-4%, it's more like 1-2%). The second is that, in a market that has demonstrated a willingness to accept the transaction fees of the major card providers, that anyone would "leave money on the table". Sure they'll undercut them initially to win market share but once they have it, the price will inexorably creep back up to the level the market will bear.
- taurath 7y ago
  My assumptions are based in that I’ve worked in the industry. There’s plenty of small restaurants that are cash only, because they operate on the thinnest of margins. Gas stations as well. To the merchant, a fee of 3% + .10c per transaction is very common. More for Amex. The second point sounds like an economics 101 conclusion. Network effects are real. Regulatory capture is real. Starting a new card network is harder than beating google in ad revenue in search.
  - blatantlies 7y ago
    not saying it is the case but a lot of restaurants I worked were cash only because their supply chain was very low tech (also cash-only) and they simply didn't pay the taxes. Gas stations might be higher at least in the USA because the kick back for gas is sometimes higher (e.g.: 1% cash back). Also, gas stations seem to really don't want to handle cash those days.
  - stef25 7y ago
    Quite sure that "cash only" means "fake books"
flatfilefan 7y ago
Being a Danish citizen and holding Krone at least in theory you may vote to control its inflation and claim social benefits from the issuer (Danish State). I mentioned the benefits because often they are financed through money printing by the government. With libra you won’t have those rights at all. One can argue that they basically get the same 4% as credit cards by depriving you benefits or voting power.
hnick 7y ago
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. I'm guessing some of that goes towards chargebacks and other protections in the form of reimbursing purchases from stolen credit cards. It would be tough for me to trust any online replacement without a very firm and reliable appeals system.

rt2dap 7y ago

Visa and Mastercard have invested so I wonder how they might weigh in on the project. Also, the Libra-coin should also have a transaction cost associated but I would expect/presume it stands an order of magnitude lower than 3-4%

taurath 7y ago
Visa/Mastercard consider crypto an existential threat - the value add that they have in terms of consumer protection, middleman conflict resolution, and fraud prevention does not add up to that 2-4% level of value, and they admit that. Trust and the network effect keep them in play for now. https://qz.com/1646097/what-does-facebooks-crypto-coin-libra-mean-for-visa-and-mastercard/ https://qz.com/1646097/what-does-facebooks-crypto-coin-libra... Crypto transactions however, have not lived up to the "hype" of being truly cheap thus far. Visa/MC are positioning themselves such that the value they bring is not something that crypto can provide. We'll see where that ends up - I'd expect Visa/MC stock to move a bit if the transaction fees for Libra end up being sub-$.05.
- TheSpiceIsLife 7y ago
  This 2-4% being thrown around appears to be incorrect, as @dan1234 pointed out elsewhere here. The Mastarcard fees appear to be 0.2%-1.65% as per https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-do/interchange.html https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...
  - oasisbob 7y ago
    That chart is interchange fees, which is only a portion of the overall "switch" fees paid by the merchant.
benj111 7y ago
It isn't clear to me that you wouldn't still have payment processors anyway. In the UK right now I can send money to your account nearly instantly, and for free. I wouldn't want to purchase anything like that though, I'd want to use some kind of card, why would Libra be any different?

markphip 7y ago

The true value of any currency is what you can do with it. If someone owns some coin and wants to buy some food to feed their family, the seller of the food first has to accept the coin, but regardless what value the rest of the world places on the coin, the seller of the product is still in control of what they will accept. I am not sure how using a cryptocurrency solves the problem of hyperinflation. It is still not going to be cheap or easy to purchase items in the areas these problems exist. I think your other points about access to banking and storing/transferring money are valid. It implies the person has a working mobile phone and access to a network though too.

teknologist 7y ago
"Using a cryptocurrency" doesn't solve the problem of hyperinflation in itself. However, Libra is backed by its reserve ("Libra Reserve") which is a basket of low-volatility assets structured to keep its value relatively stable. If my interpretation is correct, this basket can change over time so that it is always made up of stable currencies.

hjk05 7y ago

> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. In Denmark we solved this the lowtech way. Visa cards have to be Dual visa/dancard, where the dancard has extremely low cut limited by law(0,055$/transaction flat rate) It’s not hard, it just requires you have politicians capable of dodging the huge piles of cash MasterCard and Visa throw at them whenever talk of breaking the duopoly hits the table. But maybe for the US, something like bitcoin will be the only way forwards, using technology to try to solve a market problem though “disruptive technology” when what is really needed is just disruptive politicians.

Meekro 7y ago
Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world.
- vageli 7y ago
  > Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world. If there was political will, there is nothing stopping governments from capping the fees taken by Visa/MC.
  - traek 7y ago
    Many people feel the solution to bad products is making better competing products rather than adding government regulation.

dan1234 7y ago

> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. I think you’re overestimating that rate, and by quite a bit. Mastercard’s fees seem to be between 0.2%-1.65%[0] depending on the card and transaction type. I didn’t bother to look for Visa’s rate, but I’d imagine it’d be similar. [0]https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-do/interchange.html https://www.mastercard.co.uk/en-gb/about-mastercard/what-we-...

desdiv 7y ago
You are correct if you interpret "Visa and Mastercard" as literally Mastercard Incorporated and Visa Inc. He used "Visa and Mastercard" as a metonymy for the entire payment processing network i.e. payment gateway + issuing bank + acquiring bank + card networks. The total fee for the entire network is indeed 3-4%, and as you rightly pointed out, Mastercard Incorporated and Visa Inc. fees actually only make up for less than half of the total transaction fees.
- thedaveoflife 7y ago
  Of course the are not "taking" it either... they are issuing credit, allowing ease of purchase and providing fraud protection
oasisbob 7y ago
That chart is for interchange fees, which is only one part of the fees a merchant will pay. It's the portion which is returned to the issuing bank. It doesn't include the fees which go to MasterCard, nor does it include the fees paid by the merchant to their merchant bank.

fnord77 7y ago

> Visa and Mastercard are taking a 3-4% cut have you tried buying anything with bitcoin? currently the transaction fee is almost $2 to have your transaction confirmed within 10 minutes. Not a lot on big purchases, but that's 20% if you're say trying to buy a $10 lunch with bitcoin.

vpzom 7y ago
Bitcoin isn't the only cryptocurrency, and many others have much lower fees
- marcus_holmes 7y ago
  It's the only cryptocurrency that anyone outside of the crypto world has heard of/takes any interest in/would consider letting you buy their stuff with
noob_slayer 7y ago
Have you tried buying anything with Bitcoin Cash? Currently the transaction fee is under 500 satoshi (about 1/5 of 1 US cent) to have your transaction included in the next block.
- bildung 7y ago
  Because no one uses it, or not? Transaction prices are determined by supply and demand on Bitcoin Cash, too, AFAIK.
stef25 7y ago
> lunch Bitcoin fees are basically just the price you pay for having drugs delivered to your house.

camgunz 7y ago

> If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check. Those same "tight currency and economic controls" apply just as much to cryptocurrencies as they do to Visa gift cards. There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars". But beyond that, people have the right to determine their country's monetary policy independent of, say, Bitcoin devs, Facebook executives, or a foreign government (ex: Venezuelans using USD), and it's hard for me to ignore the vague scent of opportunism here. The solution to corrupt governments is not "get rid of all governments", it's "get rid of corrupt governments".

sytelus 7y ago
> There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars". US has often taken advantage of its dominant world currency position. For example, massive amount of QE that eventually gets absorbed worldwide with little inflation in US. Similarly "petro dollars". The bottom line is that if someone is allowed to print currency at whim, they will.

TheSpiceIsLife 7y ago

Do we have any indication from Facebook that they intend to use Libra to massively undercut Visa / Mastercard for merchant services? I mean in the developed economies.

liminal18 7y ago
yes, their whitepaper heavily suggests that access to finance products for the poor is a big motivation behind Libra. However, it does feel a bit like white washing as the majority of the profits from Libra will obviously be the convenience of paying via facebook owned messengers etc.
- TheSpiceIsLife 7y ago
  The poor, even in developed countries, aren’t well served by the incumbents. Visa and MasterCard are collaborating on the Libra protect. For those two reasons I don’t know if it makes sense to say Libra is competing with the incumbents.
  - marcus_holmes 7y ago
    The problem with Visa and Mastercard in the developing countries I've experienced is the banking system. In Cambodia, you can only get a credit card from a Cambodian bank if you have a deposit with them that matches your credit limit (i.e. to get a card with a $5K limit, you need to maintain a balance of $5K in your account). Most people cannot get credit/debit cards because the banks won't issue them, because they don't trust anyone and won't take the risk involved in issuing cards I can see how Libra will solve a lot of frustrations for Visa/Mastercard working in poorer countries
    - TheSpiceIsLife 7y ago
      What risk is there in issuing debit cards? Other than the obvious fraud potential, but that usually doesn’t originate with the card holder.

W-Stool 7y ago

If you're running some kind of IT infrastructure big enough for the whole world to use, you're going to want a cut of each transaction whether you are VISA/MC or Facebook's blockchain. Some sort of transaction fee is inevitable, even (or especially) on a private blockchain.

goatinaboat 7y ago

Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. There are two assumptions you are making, both of which are false. The first is that handling cash isn't expensive, but it is. You have to store in various secure locations, transport it between those locations, count it multiple times... And that's true even if you're a market trader or a small shop. For those people it could easily be a significant part of their day and a significant risk, all of which goes away with cards (and the fee is nowhere near 3-4%, it's more like 1-2%). The second is that, in a market that has demonstrated a willingness to accept the transaction fees of the major card providers, that anyone would "leave money on the table". Sure they'll undercut them initially to win market share but once they have it, the price will inexorably creep back up to the level the market will bear.

taurath 7y ago
My assumptions are based in that I’ve worked in the industry. There’s plenty of small restaurants that are cash only, because they operate on the thinnest of margins. Gas stations as well. To the merchant, a fee of 3% + .10c per transaction is very common. More for Amex. The second point sounds like an economics 101 conclusion. Network effects are real. Regulatory capture is real. Starting a new card network is harder than beating google in ad revenue in search.
- blatantlies 7y ago
  not saying it is the case but a lot of restaurants I worked were cash only because their supply chain was very low tech (also cash-only) and they simply didn't pay the taxes. Gas stations might be higher at least in the USA because the kick back for gas is sometimes higher (e.g.: 1% cash back). Also, gas stations seem to really don't want to handle cash those days.
- stef25 7y ago
  Quite sure that "cash only" means "fake books"

flatfilefan 7y ago

Being a Danish citizen and holding Krone at least in theory you may vote to control its inflation and claim social benefits from the issuer (Danish State). I mentioned the benefits because often they are financed through money printing by the government. With libra you won’t have those rights at all. One can argue that they basically get the same 4% as credit cards by depriving you benefits or voting power.

hnick 7y ago

> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number. I'm guessing some of that goes towards chargebacks and other protections in the form of reimbursing purchases from stolen credit cards. It would be tough for me to trust any online replacement without a very firm and reliable appeals system.