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I was struck by this bit: 'If Plaid remained free to develop its competing payment platform, then “Visa may be forced to accept lower margins or not have a comp

I was struck by this bit: 'If Plaid remained free to develop its competing payment platform, then “Visa may be forced to accept lower margins or not have a competitive offering."' My understanding is that Plaid would/could charge significantly less (up to 50% less) than Visa currently does. And that's the value of competition. Not necessarily as a race to the bottom (as we've seen in the airline industry, but that's another topic), but in providing Visa's customers with viable, more cost-effective alternatives. And that's been a problem (at least in the US) for a long time. Big corporations buying up potential competitors in order to maintain both their market share and their overpriced offerings.

warent 6y ago
I'm curious to hear more about the airline race to the bottom you're talking about. I've been flying once or twice a year for the last 7 years or so, and it's all pretty much been the same except perhaps a lot more addons and bagging fees. Were airlines very different in the past?
- ori_b 6y ago
  > Were airlines very different in the past? Yes, they were much more expensive, but used to provide more for free. There was a time they even had legroom. https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/ https://www.theatlantic.com/business/archive/2013/02/how-air...
  - porknubbins 6y ago
    Air travel has become so cheap you can pretty much subsidize 3-4 domestic trips a year with a good rewards credit card and flexible dates. I am not sure this is a net win for my personal happiness as I rarely take these trips for fun reasons.
    - mandelbrotwurst 6y ago
      Air travel has certainly become cheaper than it was in the past, but there are two sides to this - that credit card rewards are relatively high is largely a function of high credit card fees.
      - porknubbins 6y ago
        Thats true the fees are probably shared between all customers and businesses so its not fair for those who can’t get a credit card.
        mandelbrotwurst 6y ago
        Right - the rewards system is essentially a wealth transfer to those who have access to credit with the rewards acting as a refund of the bulk of the fees.
  - redisman 6y ago
    Right. If you give me $100 I’ll give you this free chocolate bar
  - refurb 6y ago
    Yeah, and ticket prices were 20 to 50% higher. Consumers had options and choose the lower price. I remember not long ago when flying was a serious financial commitment. Flying economy from LA to NYC might set you back $600 in 2000 dollars ($900 today). Now you can find a ton of flights for under $400. I don't want to go back to the way it was.
- momokoko 6y ago
  If you do an internet search for “price wars us airlines” you will find some good info from about 25 years ago about this.
- cstejerean 6y ago
  Yes. But much longer ago than 7 years. Seats have been getting closer together both in terms of less leg room and reduced seat width. Food has been all but eliminated from economy. To see the continued slide take a look at basic economy and carriers like Spirit (to which basic economy is a response to). No assigned seats, no carry on bags, no drinks on the plane. They’d offer standing room only and charge for the restroom if they could get away with it.
  - refurb 6y ago
    Right. But they have no problem filling those planes. Even when consumers have the option of flying a marginally better economy flight for $50 more, they reject it.
travisoneill1 6y ago
Isn't a race to the bottom the best possible thing that could happen to transaction fees?
- sadfev 6y ago
  To a certain extent, it is detrimental if the prices are lower than the transaction expenses. Because you have to pay indirectly which is even worse
  - jtsiskin 6y ago
    Can you elaborate on this?
    - cdirkx 6y ago
      It might be bad if their main source of incomes becomes not the transaction fees, but hidden fees or selling data about you. However, that argument requires them not doing this already :)
- sib 6y ago
  In a competitive industry with high fixed costs and low _marginal_ costs, a race to the bottom often leads to pricing less than _average_ costs and a reduction in service quality (or inability for providers to replace infrastructure consumed in providing service.
  - remarkEon 6y ago
    I keep having to make this point to both my liberal and conservative friends, but ... just because microecon 101 (or macroecon 101 in some cases) is conserved doesn’t mean it’s an optimal solution. If your high fixed cost infrastructure suddenly becomes critical for society to function perhaps it’s time for a much different conversation.
  - refurb 6y ago
    But that argument completely ignores the consequences to prices less than average. If you drop your fees so low your customers get pissed, well then, you'll loose customers. Or if you can't afford to maintain infrastructure, then you'll lose customers due to your unreliability. A race to the bottom is the reason we have 60" flat screen TVs that are better quality and cost a fraction of what a similar TV cost 10 years ago. It's a good thing. The race to the bottom in the airline industry was entirely driven by consumers who were willing to put up with crappy seat just to save $10. They got exactly what they wanted. That said, we are seeing a shift toward premium economy. Basically some airline said "I'll bet there are some customers will to pay more to get more" and they were right. HN likes to talk about the "race to the bottom" as some failing of capitalism, when it's actually working exactly as it should. "The market" doesn't get it right every time - plenty of companies make the wrong trade off - but the consumer is the ultimate decision maker if the tradeoff is worth it.
madrox 6y ago
I'm curious if this line of reasoning could extend to app stores and their 30%
- sneak 6y ago
  Apple charges approximately 10x the market rate for credit card processing for IAPs.
  - megablast 6y ago
    That is not all they provide.
    - sneak 6y ago
      There is the argument that they provide the app distribution, and the store, and all that, yes. But that's included in the paid developer subscription: free apps get all that and their devs pay nothing more. I cited IAPs specifically because Apple is indeed only providing the payment system, there. There's no download or anything else (already paid for, via the developer program anyway).
peteretep 6y ago
The only problem with the “race to the bottom” with airlines is the lack of tools to allow easy comparison of like with like, which in turn means airlines don’t (yet) have many different sized seats and service levels on a plane. One day we’ll see flight aggregators that allow you to specify how much luggage you have, how tall you are, what kind of seat you want, if you want a decent meal, etc, and will give you a unified seat price.
- lostlogin 6y ago
  In Europe, trains are somewhat closer to this and are in every way superior in my relatively limited experience. The difference when you go something like Paris > London is night and day compared to the horror that is flying.
  - megablast 6y ago
    Except trains are so damn expensive in Europe. Insanely so. Where flights can be a lot cheaper.
    - lostlogin 6y ago
      I come from New Zealand and European trains seemed very reasonable. This possible says more about the state of NZ railways. Even with the charges, given that you have to commute to and from the airport, that cost is basically removed with trains.

warent 6y ago

I'm curious to hear more about the airline race to the bottom you're talking about. I've been flying once or twice a year for the last 7 years or so, and it's all pretty much been the same except perhaps a lot more addons and bagging fees. Were airlines very different in the past?

ori_b 6y ago
> Were airlines very different in the past? Yes, they were much more expensive, but used to provide more for free. There was a time they even had legroom. https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/ https://www.theatlantic.com/business/archive/2013/02/how-air...
- porknubbins 6y ago
  Air travel has become so cheap you can pretty much subsidize 3-4 domestic trips a year with a good rewards credit card and flexible dates. I am not sure this is a net win for my personal happiness as I rarely take these trips for fun reasons.
  - mandelbrotwurst 6y ago
    Air travel has certainly become cheaper than it was in the past, but there are two sides to this - that credit card rewards are relatively high is largely a function of high credit card fees.
    - porknubbins 6y ago
      Thats true the fees are probably shared between all customers and businesses so its not fair for those who can’t get a credit card.
      - mandelbrotwurst 6y ago
        Right - the rewards system is essentially a wealth transfer to those who have access to credit with the rewards acting as a refund of the bulk of the fees.
- redisman 6y ago
  Right. If you give me $100 I’ll give you this free chocolate bar
- refurb 6y ago
  Yeah, and ticket prices were 20 to 50% higher. Consumers had options and choose the lower price. I remember not long ago when flying was a serious financial commitment. Flying economy from LA to NYC might set you back $600 in 2000 dollars ($900 today). Now you can find a ton of flights for under $400. I don't want to go back to the way it was.
momokoko 6y ago
If you do an internet search for “price wars us airlines” you will find some good info from about 25 years ago about this.
cstejerean 6y ago
Yes. But much longer ago than 7 years. Seats have been getting closer together both in terms of less leg room and reduced seat width. Food has been all but eliminated from economy. To see the continued slide take a look at basic economy and carriers like Spirit (to which basic economy is a response to). No assigned seats, no carry on bags, no drinks on the plane. They’d offer standing room only and charge for the restroom if they could get away with it.
- refurb 6y ago
  Right. But they have no problem filling those planes. Even when consumers have the option of flying a marginally better economy flight for $50 more, they reject it.

travisoneill1 6y ago

Isn't a race to the bottom the best possible thing that could happen to transaction fees?

sadfev 6y ago
To a certain extent, it is detrimental if the prices are lower than the transaction expenses. Because you have to pay indirectly which is even worse
- jtsiskin 6y ago
  Can you elaborate on this?
  - cdirkx 6y ago
    It might be bad if their main source of incomes becomes not the transaction fees, but hidden fees or selling data about you. However, that argument requires them not doing this already :)
sib 6y ago
In a competitive industry with high fixed costs and low _marginal_ costs, a race to the bottom often leads to pricing less than _average_ costs and a reduction in service quality (or inability for providers to replace infrastructure consumed in providing service.
- remarkEon 6y ago
  I keep having to make this point to both my liberal and conservative friends, but ... just because microecon 101 (or macroecon 101 in some cases) is conserved doesn’t mean it’s an optimal solution. If your high fixed cost infrastructure suddenly becomes critical for society to function perhaps it’s time for a much different conversation.
- refurb 6y ago
  But that argument completely ignores the consequences to prices less than average. If you drop your fees so low your customers get pissed, well then, you'll loose customers. Or if you can't afford to maintain infrastructure, then you'll lose customers due to your unreliability. A race to the bottom is the reason we have 60" flat screen TVs that are better quality and cost a fraction of what a similar TV cost 10 years ago. It's a good thing. The race to the bottom in the airline industry was entirely driven by consumers who were willing to put up with crappy seat just to save $10. They got exactly what they wanted. That said, we are seeing a shift toward premium economy. Basically some airline said "I'll bet there are some customers will to pay more to get more" and they were right. HN likes to talk about the "race to the bottom" as some failing of capitalism, when it's actually working exactly as it should. "The market" doesn't get it right every time - plenty of companies make the wrong trade off - but the consumer is the ultimate decision maker if the tradeoff is worth it.

madrox 6y ago

I'm curious if this line of reasoning could extend to app stores and their 30%

sneak 6y ago
Apple charges approximately 10x the market rate for credit card processing for IAPs.
- megablast 6y ago
  That is not all they provide.
  - sneak 6y ago
    There is the argument that they provide the app distribution, and the store, and all that, yes. But that's included in the paid developer subscription: free apps get all that and their devs pay nothing more. I cited IAPs specifically because Apple is indeed only providing the payment system, there. There's no download or anything else (already paid for, via the developer program anyway).

peteretep 6y ago

The only problem with the “race to the bottom” with airlines is the lack of tools to allow easy comparison of like with like, which in turn means airlines don’t (yet) have many different sized seats and service levels on a plane. One day we’ll see flight aggregators that allow you to specify how much luggage you have, how tall you are, what kind of seat you want, if you want a decent meal, etc, and will give you a unified seat price.

lostlogin 6y ago
In Europe, trains are somewhat closer to this and are in every way superior in my relatively limited experience. The difference when you go something like Paris > London is night and day compared to the horror that is flying.
- megablast 6y ago
  Except trains are so damn expensive in Europe. Insanely so. Where flights can be a lot cheaper.
  - lostlogin 6y ago
    I come from New Zealand and European trains seemed very reasonable. This possible says more about the state of NZ railways. Even with the charges, given that you have to commute to and from the airport, that cost is basically removed with trains.