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This market is a natural monopoly and it’s no surprise it has few competitors. Imagine how frustrating credit cards would be if there were 40 competing companie

by TimPC 4y ago

This market is a natural monopoly and it’s no surprise it has few competitors. Imagine how frustrating credit cards would be if there were 40 competing companies and each merchant accepted a different 25 of them. Merchants benefit greatly from only having to deal with a small handful of credit card companies. Yes there are also costs but it seems a bit disingenuous to ignore all the benefits from the current situation.

vineyardmike 4y ago
Interestingly though, as of late I’ve started seeing a lot of different accepted methods of payment in store in major metros. Cash. Visa. Mastercard. Amex. Diners Club. Venmo. Union pay. Square + CashApp QR. Apple Pay/G Pay (could one day be their own processor so listed separately). More I can’t recall.
- Dracophoenix 4y ago
  Venmo uses Visa uses via Paypal. Diner's Club is a subsidiary of Mastercard. Square and Cash also use Mastercard's network and I think they piggybacks off others. In the US, and likely in most of the world, the only self-sufficient processors are Visa, Mastercard, American Express, and Discover.
  - nybble41 4y ago
    That's correct if you're processing a credit card, but some of these (PayPal, Cash App, perhaps Venmo) have their own separate accounts which bypass the card networks altogether. If you have a balance in Cash App and you send part of it to another Cash App user then they're not paying any fees to Visa, Mastercard, American Express, or Discover. PayPal and Cash App also support direct bank transfers (ACH) in addition to credit cards. Then you have the newcomers like Bitcoin with their own networks and processors (e.g. BitPay or Coinbase), or the option to perform your own processing.
  - vineyardmike 4y ago
    1. Venmo is part of PayPal, and can use visa, but they don't need it. 2. Same with square and Mastercard. 3. No, there's plenty more ways to pay across the world, eg.: https://bam.kalzumeus.com/archive/payments-in-japan/ https://bam.kalzumeus.com/archive/payments-in-japan/ or another comment mentioning Indian UPI. 4. My argument is that there are more, and further that fintech was helping proliferate options, including the possibility that new processors spread. Eg. Apple Pay could be its own processor instead of falling back on just card networks, just as square+cashapp started doing.
2Gkashmiri 4y ago
Look at Indian UPI. It doesn't have to be stuck to visa/MasterCard with their monolith fees incurring infrastructure and eesto go along with it. UPI has been a great hit because the govt implemented a "ecosystem". Banks and apps and users are ALL part of the same network, everyone talks to everyone, everything is compatible. There is no moat except for having a bank account and a mobile number. Coming from 2.5-4% fees for MDR in cards to UPI which is literally free,there is a LOT of savings in general when the daily transactions are in billions. Those 2.5% fees really add up. And there is no stupid argument of " fraud protection" fees and all. Arent banks already paying that insurance and they have an incentive to reduce leakages by improving the tech.
supertrope 4y ago
In the US debit networks have cheap fees but merchants don’t want to buy more PIN pads. There’s a lot of inertia behind the waiter/employee physically running the payment - often through highly integrated POS systems that would have to be entirely replaced to upgrade the card reader.

by TimPC 4y ago

vineyardmike 4y ago

Interestingly though, as of late I’ve started seeing a lot of different accepted methods of payment in store in major metros. Cash. Visa. Mastercard. Amex. Diners Club. Venmo. Union pay. Square + CashApp QR. Apple Pay/G Pay (could one day be their own processor so listed separately). More I can’t recall.

Dracophoenix 4y ago
Venmo uses Visa uses via Paypal. Diner's Club is a subsidiary of Mastercard. Square and Cash also use Mastercard's network and I think they piggybacks off others. In the US, and likely in most of the world, the only self-sufficient processors are Visa, Mastercard, American Express, and Discover.
- nybble41 4y ago
  That's correct if you're processing a credit card, but some of these (PayPal, Cash App, perhaps Venmo) have their own separate accounts which bypass the card networks altogether. If you have a balance in Cash App and you send part of it to another Cash App user then they're not paying any fees to Visa, Mastercard, American Express, or Discover. PayPal and Cash App also support direct bank transfers (ACH) in addition to credit cards. Then you have the newcomers like Bitcoin with their own networks and processors (e.g. BitPay or Coinbase), or the option to perform your own processing.
- vineyardmike 4y ago
  1. Venmo is part of PayPal, and can use visa, but they don't need it. 2. Same with square and Mastercard. 3. No, there's plenty more ways to pay across the world, eg.: https://bam.kalzumeus.com/archive/payments-in-japan/ https://bam.kalzumeus.com/archive/payments-in-japan/ or another comment mentioning Indian UPI. 4. My argument is that there are more, and further that fintech was helping proliferate options, including the possibility that new processors spread. Eg. Apple Pay could be its own processor instead of falling back on just card networks, just as square+cashapp started doing.

2Gkashmiri 4y ago

Look at Indian UPI. It doesn't have to be stuck to visa/MasterCard with their monolith fees incurring infrastructure and eesto go along with it. UPI has been a great hit because the govt implemented a "ecosystem". Banks and apps and users are ALL part of the same network, everyone talks to everyone, everything is compatible. There is no moat except for having a bank account and a mobile number. Coming from 2.5-4% fees for MDR in cards to UPI which is literally free,there is a LOT of savings in general when the daily transactions are in billions. Those 2.5% fees really add up. And there is no stupid argument of " fraud protection" fees and all. Arent banks already paying that insurance and they have an incentive to reduce leakages by improving the tech.

supertrope 4y ago

In the US debit networks have cheap fees but merchants don’t want to buy more PIN pads. There’s a lot of inertia behind the waiter/employee physically running the payment - often through highly integrated POS systems that would have to be entirely replaced to upgrade the card reader.