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> No, this highlights that the EU is willing and able to regulate markets to keep them open to all participants. Exactly. I find it absurd that credit card com

by FabHK 7y ago

> No, this highlights that the EU is willing and able to regulate markets to keep them open to all participants. Exactly. I find it absurd that credit card companies can charge between 1.5% and 3.5% in merchant fees. Some 2%+ of the retail volume goes to credit card companies! (Who then turn around and give a small fraction of it back to their more savvy and rich customers via miles or points, while charging their poorer or less organised customers horrendous late fees and interest.) The German Girocard debit card system charges merchants at most 0.2%, an order of magnitude less. That's the way it should be.

ericmay 7y ago
Well, on the other hand if such a system was implemented in the US, prices would stay the same. For me as an end user I don’t care if Wal-Mart eats those fees or Visa does, except I get a credit card where, as you say, I get points and whatnot to keep using. There is also nothing stopping companies in the US from either implementing a super low-cost system, or just only accepting cash. I think CC have critical adoption in the US, and nothing but legislation would remove them - it’s a zero sum game. If I stop using a card I don’t get points and pay the same price for products. I don’t know all of the details of the German Girocard, seems like it’s a good product potentially, but would need some more info. In the US, if someone scams my debit card I am out of cash until it’s recovered. How does it work in this case for this card? I would also like to challenge the notion that prices should be X, just because someone is perceived as a middleman. Prices should be (excluding healthcare) whatever people are willing to pay. It’s equivalent to someone complaining about mobile app developers costing a certain amount of money and just saying that’s the way it should be. Companies put a lot of money, time, and development into building the infrastructure and products, so they should be free to charge what the market will bear for these types of products.
- lotsofpulp 7y ago
  > Well, on the other hand if such a system was implemented in the US, prices would stay the same. For me as an end user I don’t care if Wal-Mart eats those fees or Visa does, except I get a credit card where, as you say, I get points and whatnot to keep using. There is no reason prices would stay the same, unless there was collusion between all the retailers. And neither Walmart nor Visa eat the fees. Anyone not earning credit card rewards eat the fees. Also, money transfer infrastructure is just as important as healthcare. As is water, electricity, and transportation. I’m assuming you wouldn’t want the electric or gas company to charge what the market will bear when it’s -10C outside for a few weeks.
  - ericmay 7y ago
    Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. > Wal-Mart/Visa don’t eat the fees Well, in Wal-Mart’s case either they pay the fees, or they raise prices to compensate. If we assume that they raise prices to compensate for transaction costs, then anyone who doesn’t use a rewards debit/credit card eats the fees in the sense that they don’t get any sort of reimbursement yet pay the same price. > Also, money transfer infrastructure is just as important as healthcare. As is water, electricity, and transportation. I’m assuming you wouldn’t want the electric or gas company to charge what the market will bear when it’s -10C outside for a few weeks. Eh I don’t think it’s as important as those items. But that’s besides the point, unless you want to nationalize money transfer or something. It’s not a necessary service, it’s just very convenient and good for the economy. When someone creates Venmo you want to legislate the prices they can charge per-transaction?
    - lotsofpulp 7y ago
      > Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. That’s a good point, and I can see two options for it. One is that it’s more costly to maintain two sets of prices, or that it’s better for retailers to encourage purchases with credit cards as people using credit cards are likelier to spend more. > When someone creates Venmo you want to legislate the prices they can charge per-transaction? No, I’d rather the government already have setup a system. It’s the reason why payments and transferring money still involves paper in the US. Northern Europe has been able to enjoy the convenience of instant, secure, and cheap money transfers for decades that people in the US are just starting to get. Certain types of infrastructure in society is best handled as a society. Roads, water, energy, payment networks. I don’t see the point in duplicating them.
    - Slartie 7y ago
      > Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. You're from the US, right? Then you should be familiar with gas stations which have two sets of prices: an expensive one for credit card customers, and a cheaper one for cash customers. Last time I road-tripped through the California/Oregon area, those were a thing and quite common. Why doesn't Walmart do the same? Probably because they have 50k prices to consider, while a gas station has like 3 or 4. But the gas stations demonstrate that there obviously is a possibility for reduced payment costs to end up at the customer in the form of reduced prices. Now imagine taking away the burden of having Walmart (and any other retailer for that matter) add 50k additional prices to their inventory by simply capping all CC fees at 0,3%. If you don't see the likelihood for a reduction in prices for customers in the long run, you either don't have much trust in free markets, or you must assume that the market in question is not free at all, but burdened by collusion.
lxgr 7y ago
> Exactly. I find it absurd that credit card companies can charge between 1.5% and 3.5% in merchant fees. They can't anymore in the EU. It's capped to exactly the 0.2% you mention for debit and 0.3% for credit cards. This is also the reason why you don't see rewards on consumer cards anymore around here.
- occamrazor 7y ago
  Note that 0.3% is the cap on interchange fees, i.e. what the card circuit (Visa, MasterCard) charges. The actual cost to merchants is about 1%. Moreover, AMEX somehow is not subject to this regulation.
  - johnnycab 7y ago
    >Moreover, AMEX somehow is not subject to this regulation. NAL. It is somewhat complex and involved Amex exploiting a 'loophole' in the EU law, which capped the fees. It revolves around how three party and four party arrangements were structured and implemented. Nonetheless, it was challenged and Amex lost it's appeal and currently open for interpretation, notwithstanding the fees that it has to continue swallowing as a result. Excerpt: What is more complex is that American Express doesn’t even charge interchange fees because there is no intermediary. There are no interchange fees to cap. Instead, it has to cap its general fee charged to retailers. This will presumably need to be set at a level similar to the total fees now charged to retailers for accepting Visa or Mastercard. https://www.headforpoints.com/2018/02/08/american-express-european-court-of-justice-interchange-fees/ https://www.headforpoints.com/2018/02/08/american-express-eu...
  - lxgr 7y ago
    The reason for that is that as a merchant, you don't get to choose your customer's issuing bank, but you do get to negotiate with your PSP/merchant acquirer (and switch – there is quite some competition in that space). Scheme fees are still unregulated, though, and I assume that these will be the next focus area of the EU regulator(s).

by FabHK 7y ago

ericmay 7y ago

Well, on the other hand if such a system was implemented in the US, prices would stay the same. For me as an end user I don’t care if Wal-Mart eats those fees or Visa does, except I get a credit card where, as you say, I get points and whatnot to keep using. There is also nothing stopping companies in the US from either implementing a super low-cost system, or just only accepting cash. I think CC have critical adoption in the US, and nothing but legislation would remove them - it’s a zero sum game. If I stop using a card I don’t get points and pay the same price for products. I don’t know all of the details of the German Girocard, seems like it’s a good product potentially, but would need some more info. In the US, if someone scams my debit card I am out of cash until it’s recovered. How does it work in this case for this card? I would also like to challenge the notion that prices should be X, just because someone is perceived as a middleman. Prices should be (excluding healthcare) whatever people are willing to pay. It’s equivalent to someone complaining about mobile app developers costing a certain amount of money and just saying that’s the way it should be. Companies put a lot of money, time, and development into building the infrastructure and products, so they should be free to charge what the market will bear for these types of products.

lotsofpulp 7y ago
> Well, on the other hand if such a system was implemented in the US, prices would stay the same. For me as an end user I don’t care if Wal-Mart eats those fees or Visa does, except I get a credit card where, as you say, I get points and whatnot to keep using. There is no reason prices would stay the same, unless there was collusion between all the retailers. And neither Walmart nor Visa eat the fees. Anyone not earning credit card rewards eat the fees. Also, money transfer infrastructure is just as important as healthcare. As is water, electricity, and transportation. I’m assuming you wouldn’t want the electric or gas company to charge what the market will bear when it’s -10C outside for a few weeks.
- ericmay 7y ago
  Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. > Wal-Mart/Visa don’t eat the fees Well, in Wal-Mart’s case either they pay the fees, or they raise prices to compensate. If we assume that they raise prices to compensate for transaction costs, then anyone who doesn’t use a rewards debit/credit card eats the fees in the sense that they don’t get any sort of reimbursement yet pay the same price. > Also, money transfer infrastructure is just as important as healthcare. As is water, electricity, and transportation. I’m assuming you wouldn’t want the electric or gas company to charge what the market will bear when it’s -10C outside for a few weeks. Eh I don’t think it’s as important as those items. But that’s besides the point, unless you want to nationalize money transfer or something. It’s not a necessary service, it’s just very convenient and good for the economy. When someone creates Venmo you want to legislate the prices they can charge per-transaction?
  - lotsofpulp 7y ago
    > Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. That’s a good point, and I can see two options for it. One is that it’s more costly to maintain two sets of prices, or that it’s better for retailers to encourage purchases with credit cards as people using credit cards are likelier to spend more. > When someone creates Venmo you want to legislate the prices they can charge per-transaction? No, I’d rather the government already have setup a system. It’s the reason why payments and transferring money still involves paper in the US. Northern Europe has been able to enjoy the convenience of instant, secure, and cheap money transfers for decades that people in the US are just starting to get. Certain types of infrastructure in society is best handled as a society. Roads, water, energy, payment networks. I don’t see the point in duplicating them.
  - Slartie 7y ago
    > Why would they lower prices? Wal-Mart could lower prices now for cash or debit card purchases but they don’t. You're from the US, right? Then you should be familiar with gas stations which have two sets of prices: an expensive one for credit card customers, and a cheaper one for cash customers. Last time I road-tripped through the California/Oregon area, those were a thing and quite common. Why doesn't Walmart do the same? Probably because they have 50k prices to consider, while a gas station has like 3 or 4. But the gas stations demonstrate that there obviously is a possibility for reduced payment costs to end up at the customer in the form of reduced prices. Now imagine taking away the burden of having Walmart (and any other retailer for that matter) add 50k additional prices to their inventory by simply capping all CC fees at 0,3%. If you don't see the likelihood for a reduction in prices for customers in the long run, you either don't have much trust in free markets, or you must assume that the market in question is not free at all, but burdened by collusion.

lxgr 7y ago

> Exactly. I find it absurd that credit card companies can charge between 1.5% and 3.5% in merchant fees. They can't anymore in the EU. It's capped to exactly the 0.2% you mention for debit and 0.3% for credit cards. This is also the reason why you don't see rewards on consumer cards anymore around here.

occamrazor 7y ago
Note that 0.3% is the cap on interchange fees, i.e. what the card circuit (Visa, MasterCard) charges. The actual cost to merchants is about 1%. Moreover, AMEX somehow is not subject to this regulation.
- johnnycab 7y ago
  >Moreover, AMEX somehow is not subject to this regulation. NAL. It is somewhat complex and involved Amex exploiting a 'loophole' in the EU law, which capped the fees. It revolves around how three party and four party arrangements were structured and implemented. Nonetheless, it was challenged and Amex lost it's appeal and currently open for interpretation, notwithstanding the fees that it has to continue swallowing as a result. Excerpt: What is more complex is that American Express doesn’t even charge interchange fees because there is no intermediary. There are no interchange fees to cap. Instead, it has to cap its general fee charged to retailers. This will presumably need to be set at a level similar to the total fees now charged to retailers for accepting Visa or Mastercard. https://www.headforpoints.com/2018/02/08/american-express-european-court-of-justice-interchange-fees/ https://www.headforpoints.com/2018/02/08/american-express-eu...
- lxgr 7y ago
  The reason for that is that as a merchant, you don't get to choose your customer's issuing bank, but you do get to negotiate with your PSP/merchant acquirer (and switch – there is quite some competition in that space). Scheme fees are still unregulated, though, and I assume that these will be the next focus area of the EU regulator(s).