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How credit card processing hasn't been classified and regulated as a utility is truly baffling to me. Especially with governments explicitly recommending contac

by franga2000 5y ago

How credit card processing hasn't been classified and regulated as a utility is truly baffling to me. Especially with governments explicitly recommending contactless card payments instead of cash during the pandemic and many doing things like taking large bank notes out of circulation for years now. We don't need crazy things like crypto - we need decentralised and accountable banks and payment processors (not that the distinction between the two makes any sense either). Speaking of credit card companies: why do they exist?? Why can't my card just sign a digital request for transfer and tell the POS terminal to send it to my bank to be executed. A room of computer science students could write an open standard for that in like a month and have a working implementation within the year.

psychlops 5y ago
Crypto is the only competition that can force financial innovation in TBTF era.
- franga2000 5y ago
  Innovation isn't what's needed, it's regulation. Making an alternative that does a couple things better but a thousand things worse isn't going to turn a broken market into a free one. There are multiple types of decentralization and the one we need for finance isn't the "everyone is (theoretically) equal and there are no rules" of crypto but the "distributed network of trusted providers" that we use for things like public key infrastructure and email. People WILL get hacked, lose their wallets, etc. so recovery MUST be possible and like it or not, law enforcement SHOULD have the power to freeze accounts and take back money that doesn't belong to someone.
  - mindslight 5y ago
    I'm no apologist for corporate power, but most payment network censorship seems to be driven by government regulations - Wikileaks, sex work, weed, and gambling are all things the government has passed laws to explicitly harm. As such, additional regulation is more likely to cement the current restrictions rather than repudiate them.
    - webspinner 5y ago
      Yeah I should know this. I tried to donate to WikiLeaks before. My bank flagged my account and alerted my mother.
  - CryptoPunk 5y ago
    I believe cyptocurrency has the potential to do everything a 1000 times better. Take security: with natively programmatic money, security providers can be debundled from currency issuers and payment providers. For example with smart contract wallets it's possible to assign your own guardians which act as security backups and who need to approve all transactions, based on whatever conditions you set, e.g. m of n need to sign to approve >x amount withdrawn within y time frame. This massively opens the space for competition which inevitably increases quality and efficiency. It's the same with the security of data: the centralized finance approach has all customer data stored by one party. If that party is compromised, you have a massive leak affecting millions of different people. With programmatic money, digital commerce can work like cash, with no private information disclosed at all, to any one, and no private data being collected in large centralized repositories. There are also basic institutional advantages with programmatic money on autonomous networks: the rules cannot be changed without consensus, so a rent-seeking party cannot use the network's monopoly status to extract economic rent. A centralized authority, like a regulator or a private company, can always abuse monopolistic control over an industry, meaning that risk will always hang over traditional industries, making them unreliable in the long run.
matheusmoreira 5y ago
> We don't need crazy things like crypto - we need decentralised and accountable banks and payment processors Sounds like you're saying we need crypto. Decentralized banks? That's exactly the sort of crazy idea that's just not gonna happen outside of crypto. > Speaking of credit card companies: why do they exist?? They provide a useful service. They pay for stuff for you, then you pay them back later. This is great because if fraud occurs it's their problem to deal with.
- franga2000 5y ago
  > decentralization => crypto Banks already are a decentralized system, just not a very good one. I can send a SEPA transfer from any EU account to any other EU account no matter which banks they are with and there isn't a "SCT processing company" that handles that for me, the banks communicate with each other - the system is decentralized. But that transaction takes up to a day for pretty much no reason, so we use payment cards for most things. Those are centralized. If Visa/Mastercard doesn't want to handle my transaction, I'm screwed. If instead cards simply signed an SCT message and my bank refused to process it, I could simply switch banks. > credit card companies Yeah, my bad, I should've said payment card companies / card payment processors. For debit card transactions they don't provide any benefit, they are only middlemen between me, the merchant and our respective banks.
  - matheusmoreira 5y ago
    Banks are centralized enough to be targets for government intervention. There simply aren't enough nodes in this supposedly decentralized system for the failure of a single node to not matter. > For debit card transactions they don't provide any benefit Agree.
- elzbardico 5y ago
  If it only we have some kind of country-wide entity that was run by the people through elections and that could create a centralized payment system with open access to everyone.... But no! The state! oh the horror! Cant have state-run things!!!!
elzbardico 5y ago
The Brazilian government created an instant payment system that doesn't depend on payment processors. You can send money to anyone in seconds using their tax id number or their phone numbers, it clears in seconds. It is named PIX. All banks implemented it, so, no matter what is your bank you're able to do payments from your smartphone using your banks app. It is so popular and easy to use that even street merchants accept it.
- franga2000 5y ago
  Awesome! We need more countries implementing systems like that. Once that happens, an international or at least EU standard is hopefully soon to follow.
  - lagadu 5y ago
    I thought this was ubiquitous in Europe already: both countries I call home (Denmark and Portugal) have each had their own for a long time now.
    - franga2000 5y ago
      Not in my experience, although I haven't done an insane amount or traveling. I've seen local payment systems in a handful of countries, but I don't remember any that were commonly used at POS. I know of a handful, for example, built by a few banks or a mobile network operator, but those have little market penetration due to only working with those providers or their partners (but of course not their largest competitor).
- yjftsjthsd-h 5y ago
  How do they deal with fraud/theft?
  - elzbardico 5y ago
    Well, the same you do with Credit Cards or other forms of electronic transfer of debts. In most banks you must first authenticate your smartphone app by going to an ATM where you use your card and some sort of biometrics to authenticate along with your pin. The app can only be used after this first "machine" authentication. There are also customer-customizable limits, the usual anti-fraud controls. Of course, there is a lot of scams involving people with less instruction, but it is not substantially different from the levels in other types of transfer/payment.
jaywalk 5y ago
>Speaking of credit card companies: why do they exist?? Why can't my card just sign a digital request for transfer and tell the POS terminal to send it to my bank to be executed. Because the POS terminal (or more likely, the payment processor) would have to work with thousands of individual banks. The credit card companies handle that complexity so that payment processors only have to integrate with a handful of credit card companies instead of thousands of banks.
- kroltan 5y ago
  That's because there is no open standard for it, which is mentioned in the following sentence. > A room of computer science students could write an open standard for that in like a month and have a working implementation within the year. (While I don't share the optimism regarding the timeframe, I agree with the general sentiment)
  - jaywalk 5y ago
    There are standards, however making them "open" wouldn't change anything. You've obviously never tried to integrate with a large number of separate entities before.
    - kroltan 5y ago
      I have not, I've just clarified the point of the parent in case you misread. But now I'm curious, what are the challenges with having a large number of entities implement a standard? Is it "just" the shrink-wrap effect of having a few-initial or large players, is it getting the parties involved to even agree to the standard, or what?
      - jaywalk 5y ago
        You are talking about a many-to-many relationship here. Every payment processor has to ensure their system works with every bank, and vice versa. So the standard defines the data format, great. What happens when Payment Provider #223 has an issue communicating with Bank #16252? On an even bigger scale, who is going to maintain all of the necessary technical info for the parties to all interoperate? Who will handle fraud detection? Who will be liable for fraud that goes undetected? Credit card companies handle all of that and much more in exchange for transaction fees.
ebawho44 5y ago
Sure, the standard could be made relatively easily, but how do you go about getting every bank to agree on this standard and update their systems to accommodate it, as well as the 10s of millions of POS terminals in the US alone to be updated, as well as all of the major credit card companies, etc.
- franga2000 5y ago
  You get banks to agree by mandating it. Just like the formats of SEPA Credit Transfers are written into law and required by all EU banks to support. As for rollout: the NFC payment rollout took like a year to get to the point where I haven't encountered any non-NFC terminals since and that required all new hardware. Now that the hardware is out there, adding support for a new system is just a matter of software. At worst, a technician will have to visit every terminal and update the firmware manually (not sure if those things have OTA). "All the major credit card companies" == two, and it wouldn't really matter for their systems anyways since they're not banks, they are now-obsolete middlemen. People could still choose to use cards and vendors would likely still want to support them, there would simply be one more payment option available. And yes, I agree that this would probably take forever in the US, but they're still using magstripe and the government is too big of a mess to be able to mandate a technical standard or even pass any legislation regarding banking anyways, so I think they have other things to deal with first.

psychlops 5y ago

Crypto is the only competition that can force financial innovation in TBTF era.

franga2000 5y ago
Innovation isn't what's needed, it's regulation. Making an alternative that does a couple things better but a thousand things worse isn't going to turn a broken market into a free one. There are multiple types of decentralization and the one we need for finance isn't the "everyone is (theoretically) equal and there are no rules" of crypto but the "distributed network of trusted providers" that we use for things like public key infrastructure and email. People WILL get hacked, lose their wallets, etc. so recovery MUST be possible and like it or not, law enforcement SHOULD have the power to freeze accounts and take back money that doesn't belong to someone.
- mindslight 5y ago
  I'm no apologist for corporate power, but most payment network censorship seems to be driven by government regulations - Wikileaks, sex work, weed, and gambling are all things the government has passed laws to explicitly harm. As such, additional regulation is more likely to cement the current restrictions rather than repudiate them.
  - webspinner 5y ago
    Yeah I should know this. I tried to donate to WikiLeaks before. My bank flagged my account and alerted my mother.
- CryptoPunk 5y ago
  I believe cyptocurrency has the potential to do everything a 1000 times better. Take security: with natively programmatic money, security providers can be debundled from currency issuers and payment providers. For example with smart contract wallets it's possible to assign your own guardians which act as security backups and who need to approve all transactions, based on whatever conditions you set, e.g. m of n need to sign to approve >x amount withdrawn within y time frame. This massively opens the space for competition which inevitably increases quality and efficiency. It's the same with the security of data: the centralized finance approach has all customer data stored by one party. If that party is compromised, you have a massive leak affecting millions of different people. With programmatic money, digital commerce can work like cash, with no private information disclosed at all, to any one, and no private data being collected in large centralized repositories. There are also basic institutional advantages with programmatic money on autonomous networks: the rules cannot be changed without consensus, so a rent-seeking party cannot use the network's monopoly status to extract economic rent. A centralized authority, like a regulator or a private company, can always abuse monopolistic control over an industry, meaning that risk will always hang over traditional industries, making them unreliable in the long run.

matheusmoreira 5y ago

> We don't need crazy things like crypto - we need decentralised and accountable banks and payment processors Sounds like you're saying we need crypto. Decentralized banks? That's exactly the sort of crazy idea that's just not gonna happen outside of crypto. > Speaking of credit card companies: why do they exist?? They provide a useful service. They pay for stuff for you, then you pay them back later. This is great because if fraud occurs it's their problem to deal with.

franga2000 5y ago
> decentralization => crypto Banks already are a decentralized system, just not a very good one. I can send a SEPA transfer from any EU account to any other EU account no matter which banks they are with and there isn't a "SCT processing company" that handles that for me, the banks communicate with each other - the system is decentralized. But that transaction takes up to a day for pretty much no reason, so we use payment cards for most things. Those are centralized. If Visa/Mastercard doesn't want to handle my transaction, I'm screwed. If instead cards simply signed an SCT message and my bank refused to process it, I could simply switch banks. > credit card companies Yeah, my bad, I should've said payment card companies / card payment processors. For debit card transactions they don't provide any benefit, they are only middlemen between me, the merchant and our respective banks.
- matheusmoreira 5y ago
  Banks are centralized enough to be targets for government intervention. There simply aren't enough nodes in this supposedly decentralized system for the failure of a single node to not matter. > For debit card transactions they don't provide any benefit Agree.
elzbardico 5y ago
If it only we have some kind of country-wide entity that was run by the people through elections and that could create a centralized payment system with open access to everyone.... But no! The state! oh the horror! Cant have state-run things!!!!

elzbardico 5y ago

The Brazilian government created an instant payment system that doesn't depend on payment processors. You can send money to anyone in seconds using their tax id number or their phone numbers, it clears in seconds. It is named PIX. All banks implemented it, so, no matter what is your bank you're able to do payments from your smartphone using your banks app. It is so popular and easy to use that even street merchants accept it.

franga2000 5y ago
Awesome! We need more countries implementing systems like that. Once that happens, an international or at least EU standard is hopefully soon to follow.
- lagadu 5y ago
  I thought this was ubiquitous in Europe already: both countries I call home (Denmark and Portugal) have each had their own for a long time now.
  - franga2000 5y ago
    Not in my experience, although I haven't done an insane amount or traveling. I've seen local payment systems in a handful of countries, but I don't remember any that were commonly used at POS. I know of a handful, for example, built by a few banks or a mobile network operator, but those have little market penetration due to only working with those providers or their partners (but of course not their largest competitor).
yjftsjthsd-h 5y ago
How do they deal with fraud/theft?
- elzbardico 5y ago
  Well, the same you do with Credit Cards or other forms of electronic transfer of debts. In most banks you must first authenticate your smartphone app by going to an ATM where you use your card and some sort of biometrics to authenticate along with your pin. The app can only be used after this first "machine" authentication. There are also customer-customizable limits, the usual anti-fraud controls. Of course, there is a lot of scams involving people with less instruction, but it is not substantially different from the levels in other types of transfer/payment.

jaywalk 5y ago

>Speaking of credit card companies: why do they exist?? Why can't my card just sign a digital request for transfer and tell the POS terminal to send it to my bank to be executed. Because the POS terminal (or more likely, the payment processor) would have to work with thousands of individual banks. The credit card companies handle that complexity so that payment processors only have to integrate with a handful of credit card companies instead of thousands of banks.

kroltan 5y ago
That's because there is no open standard for it, which is mentioned in the following sentence. > A room of computer science students could write an open standard for that in like a month and have a working implementation within the year. (While I don't share the optimism regarding the timeframe, I agree with the general sentiment)
- jaywalk 5y ago
  There are standards, however making them "open" wouldn't change anything. You've obviously never tried to integrate with a large number of separate entities before.
  - kroltan 5y ago
    I have not, I've just clarified the point of the parent in case you misread. But now I'm curious, what are the challenges with having a large number of entities implement a standard? Is it "just" the shrink-wrap effect of having a few-initial or large players, is it getting the parties involved to even agree to the standard, or what?
    - jaywalk 5y ago
      You are talking about a many-to-many relationship here. Every payment processor has to ensure their system works with every bank, and vice versa. So the standard defines the data format, great. What happens when Payment Provider #223 has an issue communicating with Bank #16252? On an even bigger scale, who is going to maintain all of the necessary technical info for the parties to all interoperate? Who will handle fraud detection? Who will be liable for fraud that goes undetected? Credit card companies handle all of that and much more in exchange for transaction fees.

ebawho44 5y ago

Sure, the standard could be made relatively easily, but how do you go about getting every bank to agree on this standard and update their systems to accommodate it, as well as the 10s of millions of POS terminals in the US alone to be updated, as well as all of the major credit card companies, etc.

franga2000 5y ago
You get banks to agree by mandating it. Just like the formats of SEPA Credit Transfers are written into law and required by all EU banks to support. As for rollout: the NFC payment rollout took like a year to get to the point where I haven't encountered any non-NFC terminals since and that required all new hardware. Now that the hardware is out there, adding support for a new system is just a matter of software. At worst, a technician will have to visit every terminal and update the firmware manually (not sure if those things have OTA). "All the major credit card companies" == two, and it wouldn't really matter for their systems anyways since they're not banks, they are now-obsolete middlemen. People could still choose to use cards and vendors would likely still want to support them, there would simply be one more payment option available. And yes, I agree that this would probably take forever in the US, but they're still using magstripe and the government is too big of a mess to be able to mandate a technical standard or even pass any legislation regarding banking anyways, so I think they have other things to deal with first.