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Visa and Mastercard agree to lower average credit card interchange fee below 1%
- wmf 3y ago...in Canada
- chrisbolt 3y agoThis really should be put in the title.
- deleted 3y ago[deleted]
- donmcronald 3y agoWhere we also get surcharged +2% when using a credit card for USD purchases and no one seems to care what a massive ripoff that is.
- rahimnathwani 3y agoThe last time I checked, most UK banks add 2.75% to the Visa/MC wholesale rate. Occasionally, a bank will create an account whose debit card has 0% FX loading, to help gain customers. Then, once they've gained a bunch of customers, they'll change the terms of the account.
- bediger4000 3y agoWow, what happened here? These 2 companies are usually cutthroat. Has debit card transactions cut into their profits that much?
- arcticbull 3y agoVisa and Mastercard operates many global debit networks, too. Visa Interlink, Mastercard Maestro, Discover Pulse for instance. 72% of US card present debit volume. Not in Canada, mind you, that remains squarely Interac for card present transactions. Even on dual-branded cards with Visa-binned card numbers.
- Waterluvian 3y ago> That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. I absolutely love the heavy lifting “as little as” is doing here. > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard. That’s revenue, not profit. So your business basically needs to be casual or failing to get the lower rate.
- viraptor 3y ago> needs to be casual or failing to get the lower rate. Or in a positive version - it may be just starting up, so every $ matters.
- umeshunni 3y agoI bet this is mostly so that very small business who might have switched to Venmo or some other P2P payment system (Interac in Canada?) stay with Visa/MC
- BoorishBears 3y agoI love how tech margins are so insane we think going from 3% to 1% isn't that much, meanwhile entire industries built on the margins that fit in said gap...
- quickthrower2 3y agoIt is a lot for most small businesses and they tend to pass on the cost.
- woodruffw 3y ago> I absolutely love the heavy lifting “as little as” is doing here. My understanding is that grocery store margins are typically between 1% and 3%, so even "small" shifts in the interchange rate can have massive impacts on their bottom line.
- dguest 3y ago
- arcticbull 3y agoVisa and Mastercard don't keep much of interchange at all and never have. The vast majority is paid to issuing banks to pay for loan origination, fraud and, most significantly, to return in the form of cash back or points. These networks charge 0.2% for debit and 0.3% for credit in Europe as per regulation, you just don't get rewards there. Kinda sounds like they're just going to squeeze issuing banks. Cash back and points cards in Canada (already pretty weak offerings compared to the US) are going to get further watered down. I've no real opinion on this, tbh. Some napkin math that may not be right: Visa processed 11.6T in payment volume last year. Net revenue was $29B. Opex was $9.3B. Net income was $16B. That means their net revenue is about 0.25% and their net income is like 0.137% of transaction volume. This passes the smell test given their EU-mandated numbers. [1] [1] https://annualreport.visa.com/financials/default.aspx https://annualreport.visa.com/financials/default.aspx
- e63f67dd-065b 3y agoThese numbers are not public, but the grapevine is that visa/mastercard keeps about a third of all interchange. Credit card rewards are a regressive tax on the poor -- literally, only those like us here on HN with good credit can get 2% cashback on everything, the rest who pay with debit/cash effectively subsidise our 2% discount. I enjoy my 2% cashback, but really would rather see a world where, like the EU, interchange got slashed to 30bps and it all went away. Take a look around the rest of the world -- Alipay in China is 55bps, TNG is Malaysia is 50, Pix in Brazil (I can't find concrete numbers, but seems to be around 22bps), etc. 2-300 bps is outrageous, we should demand better. I don't know what's the solution here. I'm weary of government intervention in capping prices, but I'm not sure what's the alternative here -- force each card to be available over multiple networks and for them to bid the interchange per transaction? Durbin amendment style caps? I don't know. But I do know that the status quo cannot stand. Edit: see the classic Boston Fed paper https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... for a more through explanation of my point
- arcticbull 3y ago
- deleted 3y ago[deleted]
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- lyrrad 3y agoLooks like this is an agreement between Visa/Mastercard and banks with the Canadian Federal government to lower credit card transaction fees for small businesses. The government's press release is here: https://www.canada.ca/en/department-finance/news/2023/05/government-announces-lower-credit-card-transaction-fees-for-small-businesses.html https://www.canada.ca/en/department-finance/news/2023/05/gov... Applies to annual charges below $300K/$175K CAD for Visa/Mastercard. They still will charge higher fees to large businesses. "As part of these new agreements with Visa and Mastercard, Canada’s large banks have agreed to protect Canadians’ reward points." Notably, this seems to be a partial extension to a 2018 agreement with Visa, Mastercard and Amex to lower fees to 1.40% for five years for "small and medium sized businesses": https://www.canada.ca/en/department-finance/news/2018/08/new-agreements-to-deliver-lower-credit-card-costs-for-small-and-medium-sized-businesses.html https://www.canada.ca/en/department-finance/news/2018/08/new... The prior agreement was for medium businesses with credit sales under $5 million CAD and small businesses with sales under $1 million CAD. The 2018 agreement claimed that it would save businesses "$250 million [CAD] per year", while the 2023 agreement claims "$1 billion [CAD] over five years". Since less companies are covered in the 2023 agreement, I assume rates will be going up for some businesses that no longer qualify under the voluntary agreement.
- dingledork69 3y agoHow isn't this price fixing?
- hiatus 3y agoIt is, but it's government sanctioned.
- kondro 3y agoYou don't want to see the Australian interchange rates… https://www.visa.com.au/about-visa/interchange.html https://www.visa.com.au/about-visa/interchange.html
- ulfw 3y agoAustralia is the only country I've ever been at that heavily discourages using a credit card because almost every single shop charges you 1-2% MORE for using a credit card, including international hotel chains, restaurants etc. THAT is something that should be outlawed.
- snovv_crash 3y agoPricing transparency is a good thing. It makes sure incentives for everyone are correctly aligned.
- missingcolours 3y agoEven as a fan of the rewards points system I'm fine with this. My only beef is that I wish the credit card price was the list price and cash had a 2% discount. A fee that affects nearly everyone isn't a fee (see resort fees), a cash discount reduces surprise and cognitive load.
- pgeorgi 3y agoIn the past (decades ago), before the EU capped processing fees, I had pretty good success just asking for a discount when paying cash, even in supermarkets. And yes, "it can only become cheaper" has a much lower cognitive load than US style payments where the advertised price is just a lower bound.
- nulbyte 3y agoI agree. I wish the credit card networks didn't give into this, even if I might agree with other parts of the recent reforms. Cash discounts were always allowed. I think the real problem is that merchants don't want to discount cash, because it still costs money. So now they can have their cake and eat (some of) it, too.
- ddtaylor 3y agoThis will probably only actually apply to large volume stores. My guess is that your average Stripe or Square merchant won't see any difference.
- Firerouge 3y agoYou would be wrong, this lower fee only applies to business with annual charges below $300K/$175K CAD for Visa/Mastercard.
- preommr 3y agoNot surprising, the issue of extra charges for credit cards has been a recent issue in Canada. I know the whole world is struggling with inflation and rising costs, but it feels like Canada is getting particularly screwed. Our housing prices are out of control, rents sky high, price of food way up when things like dairy are already high because of protectionism and sold by companies that have been caught price fixing things like bread, price of telecommunications a special kind of crazy, our infrastructure stretched to the limit, our roads maxed out... It's bad.
- RheingoldRiver 3y agoFor anyone reading this thread and not knowing what the terms being tossed around mean, but curious, there was recently a thread here [0] with some resources that you can check out to understand the space a bit. I devoured two of the three books [1], [2] in about 4 days total, they're really easy to get through, definitely recommend. [0] https://news.ycombinator.com/item?id=35714145 https://news.ycombinator.com/item?id=35714145 [1] https://www.amazon.com/Field-Guide-Global-Payments/dp/0578295261/ https://www.amazon.com/Field-Guide-Global-Payments/dp/057829... [2] https://www.amazon.com/Anatomy-Swipe-Making-Money-Move/dp/1641374470/ https://www.amazon.com/Anatomy-Swipe-Making-Money-Move/dp/16...
- pbreit 3y agoThis is only in Canada and only for small businesses (<$300k on Visa, <$175k on Mastercard).
- golemotron 3y agoIsn't this price fixing and collusion?
- rahimnathwani 3y agoThe article says: On Thursday, the government announced a deal with the two card companies that will reduce interchange fees for in-store transactions to 0.95 per cent, on average. And then claims that this means: That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. This is wrong! Interchange is what banks pay to other banks. It's not what retailers (the acquiring bank's customers) pay. So, the retailer's bank will get at least $99. The article is suggesting: * Customer pays $100 * Retailer's bank pays $0.95 cents to the cardholder's bank * Retailer gets $99 or more. If this were true, the retailer's bank would be left with 5 cents or less. This seems implausible. The retailer will almost certainly get less than $99.
- knallfrosch 3y ago> Companies agree on product pricing. Shouldn't a free market handle that with competition?
- dzikimarian 3y agoIt happens in smaller countries, where local payment schemes manage to get traction. On global level it's A LOT harder. Main challenge is that fees are invisible for end users, so they will default to most widely accepted payment method. Today that's Visa/MC by a landslide. To really threaten them you would have to be accepted at virtually 100% of merchants that accept them today. Even a few percent behind and most of the people will not use your solution. That means connecting billions of banks, merchants and intermediaries both from technology and business perspective.
- nailer 3y agoHeadline is slightly misleading: > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard.
- uf00lme 3y agoThe market is still ripe for disruption, this is a defensive move based on fear and the eventually that the era of free money for these players is coming to an end. These middle man are going to be cut out sooner than even they expected, since every smart phone is a PoS device e.g., the move with iPhones in Australia https://www.smartcompany.com.au/industries/retail/apple-iphone-tap-payment-small-business-portability/ https://www.smartcompany.com.au/industries/retail/apple-ipho...
- hocuspocus 3y agoIt's already started, unsurprisingly in countries like China, India or Brazil, that didn't have widespread card acceptance and could push mobile payments faster. The EU has more or less given up on creating a new competing card payment scheme (EPI) and wants to support mobile payments instead. The EMPSA has already started federating a few domestic networks, and should also eventually be interoperable with AliPay, WeChat, UPI and so on.
- lvl102 3y agoIt’s 2023 and we are still letting these companies take money from EVERY SINGLE TRANSACTION. This is the single greatest open scam in the world.
- hocuspocus 3y agoThey provide a service. Handling payments is never free. It's up to governments to do their job and cap fees where the market cannot do it on its own.
- devoutsalsa 3y agoI get what you're saying, but those systems don't pay for themselves. How should payment processing be funded if not per transaction?
- sumedh 3y ago> How should payment processing be funded if not per transaction? reply Taxes? Do you pay a toll to use each and every road for your car? Do something like what India has done.
- cj 3y agoThe "road toll" may not be the best example. At least in New York, you pay a toll every time you cross most bridges and every time you enter/exit a thruway (aka "freeway" in other parts of the country)
- sumedh 3y agoSo in New York do you have to pay a toll for each and every road, if not then its a good example.
- lvl102 3y agoIt only made sense when banks were much smaller and we didn’t have smartphones and cheap internet. You’re paying for a network that’s lost value. You’re paying for a brand at this point. It’s a scam.
- deleted 3y ago[deleted]
- Separo 3y agoThe dream of crypto was supposed to make this near zero
- Maxburn 3y agoI love my American Express but this is why small businesses do not; less than a million a year is 1.6~2.85% merchant fees. https://merchantcostconsulting.com/lower-credit-card-processing-fees/the-complete-guide-to-amex-interchange-and-processing-fees/ https://merchantcostconsulting.com/lower-credit-card-process...
- eweise 3y agoCould you please put Canada in the title? I scared everyone at work with this article.
- gnabgib 3y agoNot sure why the original URL wasn't submitted? https://www.cbc.ca/news/business/visa-mastercard-fees-1.6848082 https://www.cbc.ca/news/business/visa-mastercard-fees-1.6848...