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Visa and Mastercard and their highly anticompetitive tactics early in the network landgrab for the payment card space foretold what would happen in the tech spa

by lvl102 3y ago

Visa and Mastercard and their highly anticompetitive tactics early in the network landgrab for the payment card space foretold what would happen in the tech space (that is to say do whatever you can to win the landgrab which is exactly what Google/FB did). DFS never caught on. Now the landscape has changed and this deal sort of serves as a bookend. People in fintech should go after the Visa/MC monopoly. There is no “network” and people are paying legacy fees just because it’s what they know.

laylower 3y ago
Why are you not including amex in your point I am wondering?
elevatedastalt 3y ago
My feeling is Google / FB have done nothing close to Visa / MC when it comes to landgrabbing, but I am open to information / arguments.
- lvl102 3y ago
  I actually think it’s worse because it’s not as natural of a monopoly as it was for the payment network space. Google and Meta actively created a duopoly in the ad space and at a global scale too.
  - pasttense01 3y ago
    No. For many of us it irrelevant if there is duopoly in the ad space because we don't use Facebook and we use ad-blockers. But in the payment space VISA/MC charge high fees which are passed onto all consumers.
    - Kbelicius 3y ago
      > For many of us it irrelevant if there is duopoly in the ad space because we don't use Facebook and we use ad-blockers. But in the payment space VISA/MC charge high fees which are passed onto all consumers. Products that you buy have their marketing priced in. Even if you don't see the adds you are still paying for them.
      - alephnerd 3y ago
        > Products that you buy have their marketing priced in. Even if you don't see the adds you are still paying for them Marketing costs are not included in Gross Profit Margin calculations, and don't have an impact on COGS. Marketing spend is primarily used to grow your TAM and channel customers to your product, but is very marginal spend wise.
    - kaynelynn 3y ago
      Visa and MC only take .1% of the 2.9% you are thinking of. The rest goes to the banks on either side of the transaction (one for the merchant, one for the purchaser). They are however building more “solutions” to try and capture more of the transaction fees, but most people’s disdain for the payment rails would be better redirected at the banks in this case.
    - lvl102 3y ago
      Well in the ad space, we are talking about ad buyers not so much consumers. I think a good analogy would be if ABC and NBC purchased all other broadcasters and cable channels in the 80s. And then they go and purchased all INTERNATIONAL broadcasters.
toomuchtodo 3y ago
https://www.axios.com/2023/07/22/fednow-instant-payments-credit-cards https://www.axios.com/2023/07/22/fednow-instant-payments-cre... Networks (credit card rails) are dead long term. Capital One is buying a less than prime customer base instead of organic growth (plus the deposits). The profit is in the revolving interest on a customer base that carries a balance, not the interchange and network. https://investorrelations.discover.com/newsroom/press-releases/press-release-details/2024/Discover-Financial-Services-Reports-Fourth-Quarter-2023-Net-Income-of-388-Million-or-1.54-Per-Diluted-Share-and-Full-Year-Net-Income-of-2.9-Billion-or-11.26-Per-Diluted-Share/default.aspx https://investorrelations.discover.com/newsroom/press-releas... This should come as no surprise, as subprime is what Capital One does. https://newrepublic.com/article/155212/worked-capital-one-five-years-justified-piling-debt-poor-customers https://newrepublic.com/article/155212/worked-capital-one-fi... Tangentially, it’s questionable how sustainable this is. This customer base is under material financial stress, and no one knows what’s going to happen next. https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS https://www.cnbc.com/2024/02/06/credit-card-delinquencies-surged-in-2023-indicating-financial-stress-new-york-fed-says.html https://www.cnbc.com/2024/02/06/credit-card-delinquencies-su...
- xp84 3y ago
  Regarding your New Republic link: I find a lot of these kinds of critiques of subprime lending to be disturbingly patronizing. The notion that some third party (the government, presumably) ought to be decreeing that people whose credit is (in this article’s words) so bad that they can’t qualify for a $300 limit at 27% interest, should just not be allowed to access legal credit at all. Terms get worse as you prove you’re an unwise risk. That’s just math. If you ask the people who are opening these credit cards, they’ll tell you that yes they do want the credit. They would rather have that than not have it. And they’re adults. And suspiciously, it’s only years after voluntarily taking this money that some of them turn around and complain about “predatory lending.” If we ban all forms of subprime (or make it impossible with interest rate caps, etc) the most desperate bad-with-credit people, whom we’re supposedly trying to protect, will still find a way to borrow money anyway, at far worse terms—this is what loan sharks do. You can’t fix humans with regulation.
NoPedantsThanks 3y ago
Not to mention that retailers are getting screwed harder all the time. I thought that the major cards had set fees across their brands, but NO: retailers are screwed at all different levels by different ISSUERS. Apparently Capital One is one of (if not THE) worst, coming in at something obscene like 4.5%. That's the entire profit margin of some businesses. At least some places like L.A. are taking tiny steps to prevent a total takeover by these assholes by outlawing "cashless" businesses.
- EVa5I7bHFq9mnYK 3y ago
  I think they should outlaw the clause in the CC contracts that forbids discounts for cash payments.
  - NoPedantsThanks 3y ago
    The Obama administration did! That's why these have returned. I was disappointed by many of the "reforms" passed under Obama, but this one in particular and some other banking-related ones stand out as truly helpful.

by lvl102 3y ago

laylower 3y ago

Why are you not including amex in your point I am wondering?

elevatedastalt 3y ago

My feeling is Google / FB have done nothing close to Visa / MC when it comes to landgrabbing, but I am open to information / arguments.

lvl102 3y ago
I actually think it’s worse because it’s not as natural of a monopoly as it was for the payment network space. Google and Meta actively created a duopoly in the ad space and at a global scale too.
- pasttense01 3y ago
  No. For many of us it irrelevant if there is duopoly in the ad space because we don't use Facebook and we use ad-blockers. But in the payment space VISA/MC charge high fees which are passed onto all consumers.
  - Kbelicius 3y ago
    > For many of us it irrelevant if there is duopoly in the ad space because we don't use Facebook and we use ad-blockers. But in the payment space VISA/MC charge high fees which are passed onto all consumers. Products that you buy have their marketing priced in. Even if you don't see the adds you are still paying for them.
    - alephnerd 3y ago
      > Products that you buy have their marketing priced in. Even if you don't see the adds you are still paying for them Marketing costs are not included in Gross Profit Margin calculations, and don't have an impact on COGS. Marketing spend is primarily used to grow your TAM and channel customers to your product, but is very marginal spend wise.
  - kaynelynn 3y ago
    Visa and MC only take .1% of the 2.9% you are thinking of. The rest goes to the banks on either side of the transaction (one for the merchant, one for the purchaser). They are however building more “solutions” to try and capture more of the transaction fees, but most people’s disdain for the payment rails would be better redirected at the banks in this case.
  - lvl102 3y ago
    Well in the ad space, we are talking about ad buyers not so much consumers. I think a good analogy would be if ABC and NBC purchased all other broadcasters and cable channels in the 80s. And then they go and purchased all INTERNATIONAL broadcasters.

toomuchtodo 3y ago

https://www.axios.com/2023/07/22/fednow-instant-payments-credit-cards https://www.axios.com/2023/07/22/fednow-instant-payments-cre... Networks (credit card rails) are dead long term. Capital One is buying a less than prime customer base instead of organic growth (plus the deposits). The profit is in the revolving interest on a customer base that carries a balance, not the interchange and network. https://investorrelations.discover.com/newsroom/press-releases/press-release-details/2024/Discover-Financial-Services-Reports-Fourth-Quarter-2023-Net-Income-of-388-Million-or-1.54-Per-Diluted-Share-and-Full-Year-Net-Income-of-2.9-Billion-or-11.26-Per-Diluted-Share/default.aspx https://investorrelations.discover.com/newsroom/press-releas... This should come as no surprise, as subprime is what Capital One does. https://newrepublic.com/article/155212/worked-capital-one-five-years-justified-piling-debt-poor-customers https://newrepublic.com/article/155212/worked-capital-one-fi... Tangentially, it’s questionable how sustainable this is. This customer base is under material financial stress, and no one knows what’s going to happen next. https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS https://www.cnbc.com/2024/02/06/credit-card-delinquencies-surged-in-2023-indicating-financial-stress-new-york-fed-says.html https://www.cnbc.com/2024/02/06/credit-card-delinquencies-su...

xp84 3y ago
Regarding your New Republic link: I find a lot of these kinds of critiques of subprime lending to be disturbingly patronizing. The notion that some third party (the government, presumably) ought to be decreeing that people whose credit is (in this article’s words) so bad that they can’t qualify for a $300 limit at 27% interest, should just not be allowed to access legal credit at all. Terms get worse as you prove you’re an unwise risk. That’s just math. If you ask the people who are opening these credit cards, they’ll tell you that yes they do want the credit. They would rather have that than not have it. And they’re adults. And suspiciously, it’s only years after voluntarily taking this money that some of them turn around and complain about “predatory lending.” If we ban all forms of subprime (or make it impossible with interest rate caps, etc) the most desperate bad-with-credit people, whom we’re supposedly trying to protect, will still find a way to borrow money anyway, at far worse terms—this is what loan sharks do. You can’t fix humans with regulation.

NoPedantsThanks 3y ago

Not to mention that retailers are getting screwed harder all the time. I thought that the major cards had set fees across their brands, but NO: retailers are screwed at all different levels by different ISSUERS. Apparently Capital One is one of (if not THE) worst, coming in at something obscene like 4.5%. That's the entire profit margin of some businesses. At least some places like L.A. are taking tiny steps to prevent a total takeover by these assholes by outlawing "cashless" businesses.

EVa5I7bHFq9mnYK 3y ago
I think they should outlaw the clause in the CC contracts that forbids discounts for cash payments.
- NoPedantsThanks 3y ago
  The Obama administration did! That's why these have returned. I was disappointed by many of the "reforms" passed under Obama, but this one in particular and some other banking-related ones stand out as truly helpful.