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Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical prope

Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical property. But it was never about the technology. Interchange fees primarily fund consumer rewards programs and benefits. To become an appealing choice for consumers, any new payment method has to offer competitive benefits. Those benefits are funded by the fees. Visa/MC/AmEx have essentially created a system whereby higher-spending customers are able to wrench more value from merchants in the form of higher fees. This is reflected in the fee schedules that slice and dice merchants by category and customers by card tier. If you want to build a new payment system it is important to understand that it’s not just a negotiation between merchants and issuers. It’s a two-sided market where customers also leverage their spending power, directly or indirectly.

ninepoints 3y ago
Surely that isn't the only reason
- MrSkyNet 3y ago
  The complexity of crypto is probably the biggest. The second biggest is the missing need: Most people don't have any advantage of using crypto. They go to work, get a salary, buy/sell things and thats it. If you don't need to buy something illegal or really believe that there is still a soviety left to take some crypto in worst case scenario, fiat is great.
  - clocot 3y ago
    [dead]
  - twosdai 3y ago
    I have this pet theory that the idea of decentralized currency is a bit ahead of its time, and the best consumer use case is for frequent travelers since you could more easily sidestep foreign exchange issues, and hassles. There's a bunch of backend and b2b use cases to be explored but those also take time. All this assumes the volatility issue is solved.
    - s-phi-nl 3y ago
      A paragraph from the previous essay by the OP comes to mind: > Less sardonically, there is a lesson here: systems which intermediate between cultures are useful. Intermediating between cultures is a thing the world urgently needs and is extremely prepared to pay for. https://www.bitsaboutmoney.com/archive/financial-systems-take-a-holiday/ https://www.bitsaboutmoney.com/archive/financial-systems-tak... I don't think decentralized currency will actually solve the issues travelers have with this, at least without reproducing much of the infrastructure already in place for traditional currencies.
    - BizarroLand 3y ago
      Ahead of its time. Not a bad call. In a quasicapitalist utopia, crypto would be a very convenient way to enable the government to set a stock value for a universal cryptocredit and make that credit its default method of value transfer. They could do something like pin the value to 1 credit = 1 hour of unskilled menial labor, and strictly control the supply. With appropriate software monitoring and a lack of other methods of direct wealth transfer, it would make it impossible to not properly pay your taxes and vastly more difficult to exchange wealth without government oversight, and make money crimes vastly more difficult, from hiring criminals to do crimes to purchasing drugs and weapons for illicit purposes. It's the perfect system for a dictatorship as well.
    - howeyc 3y ago
      Also doesn't need to be decentralized or an existing crypto currency to solve those issues. For example, central banks are exploring smart contracts for international payments. https://www.bis.org/press/p240403.htm https://www.bis.org/press/p240403.htm
    - organsnyder 3y ago
      > frequent travelers since you could more easily sidestep foreign exchange issues I don't travel internationally very frequently, but whenever I do my credit card handles currency exchange for me automatically. Perhaps I'm not getting the best exchange rate, but the difference is minimal enough that looking into alternatives isn't worth the hassle.
  - margalabargala 3y ago
    Amother huge piece is that it (Bitcoin and most other major cryptos) is by design a deflationary money system. Why would you spend crypto when you could get more for it if you wait a week? You wouldn't. And people don't.
    - max51 3y ago
      >Why would you spend crypto when you could get more for it if you wait a week? that never stopped capitalist from spending their money even if they make profit from their investment. If your logic was true, no one who has access to investment opportunities (eg. the stock market) would ever spend any money.
      - margalabargala 3y ago
        > If your logic was true... I think you're taking a stronger interpretation than what I wrote. I'm not saying no one ever spent any crypto. I'm saying that because it was deflationary, people tended to spend less than otherwise. This was so bad with bitcoin that it failed to be usable as a currency. If my logic were true, then when interest rates were higher and people could make more money doing nothing, then people with access to investment opportunities would tend to spend less money. Which is exactly what we are currently seeing.
  - missedthecue 3y ago
    Crypto is complex but I don't think very many people could explain how Visa's merchant payment network functions. It just does, and no one has to think about it.
    - MrSkyNet 3y ago
      Yes and thats not the case for crypto. For crypto you need to choose a cryptocoin, need to understand what a wallet is, best case install a secure wallet from the internet etc. You don't need to know how visa works as long as you know how to register for a cc and know how to put that card into a device when paying.
  - clocot 3y ago
    [dead]
- albrewer 3y ago
  15-60 minute settlement times early on certainly didn't help
  - mindcandy 3y ago
    Visa/Mastercard have settlement times of over 24 hours. Meanwhile, for over a decade now, Litecoin has had a settlement time of 2.5 minutes. And, for tiny (sub $100) transactions, it’s totally reasonable to just look up the wallet’s holdings in an instant. For online transactions, you can always let the customer go immediately. Just wait 3 minutes before you ship :P
    - ninepoints 3y ago
      You are comparing apples to oranges. Settlement times in traditional credit card transactions are not felt by the customer, and provide safeguards for fraud prevention and charge backs. Furthermore, transactions are easily reversible through a claims system. Guess what crypto doesn't have?
      - mindcandy 3y ago
        This is exactly the apples I’m talking about. Merchants eat much higher fees on behalf of the customer so they can hide the much longer settlement times from the customer and accept that they’ll also have to just eat the occasional fraudulent chargeback from the customer. They put up with all this hassle because “That’s just how it’s always been if you want to do business.” And, yet people say crypto can’t work because the fees are too high (they’re lower) and the settlement times are too slow (they’re faster). Dealing with merchant fraud is a legit call-out though. I don’t know what a good crypto solution to that is. I can imagine replacing that department with a smart contract. But, I’ve haven’t looked around to see what’s been tried.
ThrowawayTestr 3y ago
>this is why crypto never took off as a replacement for credit cards I thought it was because transactions take minutes instead of seconds.
- SketchySeaBeast 3y ago
  And because it's uncompelling. I have a bunch of consumer protections around my credit card, why would I want to use crypto instead? Especially when it's a wildly fluctuating speculative asset and the burger I buy for $15 worth of coins today will be $60 dollars of coins tomorrow.
- tcmart14 3y ago
  That is almost certainly one reason and an important one. But as the other commenter to your comment shows, there is a lot more. Protections is a big one. I also personally side that, you need a way for people to interface with their crypto like they do with their current bank and as simple as possible. Normal people don't want to have to juggle around keys. Hell, Im a software engineer and I hate having to keep track of keys. So every time I get a new machine, I create fresh new SSH keys. My SSH keys are disposable to me.
- Obi_Juan_Kenobi 3y ago
  They can take either; waiting for confirmations is only a matter of reducing double-spend risk. In practice, seconds after a transaction has been signed and broadcast, it is already very unlikely to double-spend. Miner incentives are such that the first-seen transaction is the most likely to be used. A delay of a couple seconds is sufficient to account for network-propagation lag. You wouldn't do this for high-value transactions, but there's some threshold where real-world risk is lower than the convenience of a fast transaction, and that threshold is reasonably high.
objclxt 3y ago
> this is why crypto never took off as a replacement for credit cards If this were true you would expect crypto to have taken off in countries with low interchange rates. Europe, for example, has far less of a rewards and points culture for payment, and (compared to the US) much lower interchange. Crypto never took off as a replacement for credit cards for many reasons - the biggest coins out there are simply too volatile to be usable as a currency, they lack the consumer protections you get paying with a credit card, and they’re simply too complex for an average person to understand.
- abalone 3y ago
  Interchange is regulated in Europe. You would likely run into legal issues if you tried to jack up merchant fees via a novel payment method. However, even if it were legal, I don’t think this would counter my claim. I’m merely saying that you’d need to match existing rewards schemes in markets where they are established. Introducing them into a new market is an entirely different matter. The system we have today evolved through many decades of negotiation and deal making among merchants, issuers and card networks. You’re right about consumer protections —- it would be very expensive for a crypto-based system to provide those without an intermediary that can adjudicate and reverse transactions (chargebacks).
throwaway918274 3y ago
This is where a lot of tech folks fail. It's almost never about the technology. Most of the time all you need is a spreadsheet.
- bombcar 3y ago
  Most tech things are various forms of spreadsheet. Blockchain is a distributed and complicated one.
mdaniel 3y ago
I had high hopes for https://www.prnewswire.com/news-releases/ternio-blockcard-will-function-on-visa-payment-network-for-us-residents-300837686.html https://www.prnewswire.com/news-releases/ternio-blockcard-wi... but it was just too much hassle to keep transferring in money While looking up a representative link for that, I also saw that it appears Venmo is in that game, too: https://www.cryptovantage.com/best-crypto-credit-cards/venmo-visa-card/ https://www.cryptovantage.com/best-crypto-credit-cards/venmo...
Sohcahtoa82 3y ago
> Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical property. I always thought the big problem with crypto was that the fees were atrocious for any small transaction. And the fees only get higher as the network gets busier. You can choose to have a send some money with a small fee, but the miners will never confirm your transaction, as each block is limited.
- mattdesl 3y ago
  Not quite the case anymore—rollup fees are often below $0.05 per transaction.[1] [1] https://www.gasfees.io/ https://www.gasfees.io/
skrbjc 3y ago
It's not just crypto it's any alternative payment system. Multiple payment vendors have tried to up-end the credit card companies by focusing on lower fees for merchants, but customers have no incentive to use that new system if they have a benefit to using their credit card, at least in the US. It's why, though, there are a bunch of payments companies that have popped up in places throughout Asia that aren't competing with rewards systems off the back of interchange.
k8svet 3y ago
Funny, because I would pay twice the CC fee for credit card transactions to be as painless as crypto. I'd rather scan a barcode and wait two minutes, compared to typing my address, handing over my phone number, confirming my zip, waiting for my CC's TOTP to arrive. Only for it to still fail 5% of the time for who knows what reason.
- abalone 3y ago
  You should try Apple Pay (or maybe Google Pay?) It addresses all those pain points and more, while still giving you the consumer protections and fast transactions of cards.
  - k8svet 3y ago
    I'm not interested in giving more parties access to my financial data, certainly not an ad company. And I'm not about to buy an iPhone to use it. Also, merchant support for it is abysmal. But, appreciate the tip all the same.
    - abalone 3y ago
      I don’t know where you are but NFC terminals are extremely common here (I’m in CA). And Apple Pay doesn’t track your transactions. It actually protects you better than a regular card by using a distinct number tied to the secure element in the phone, and thus your passcode/biometrics. Even if the merchant is hacked your number is useless.
      - k8svet 3y ago
        Well, for the example that started this subthread, it's not exactly as if I'm entering my address to swipe my card. I'm talking about online purchases. And I already addressed Apple, and I certainly don't trust Google. Like, sure, I'd use Apple Pay, except the entire concept of their ecosystem has no place for someone like me. Apple chooses not to support Android, not the other way around. Not least of which, I'm not at all impressed at Apple's ability to run financial products, or manage online security. Imagine my surprise upon finding out that the only way to use 2FA with an Apple ID is a phone number. Stunning.

ninepoints 3y ago

Surely that isn't the only reason

MrSkyNet 3y ago
The complexity of crypto is probably the biggest. The second biggest is the missing need: Most people don't have any advantage of using crypto. They go to work, get a salary, buy/sell things and thats it. If you don't need to buy something illegal or really believe that there is still a soviety left to take some crypto in worst case scenario, fiat is great.
- clocot 3y ago
  [dead]
- twosdai 3y ago
  I have this pet theory that the idea of decentralized currency is a bit ahead of its time, and the best consumer use case is for frequent travelers since you could more easily sidestep foreign exchange issues, and hassles. There's a bunch of backend and b2b use cases to be explored but those also take time. All this assumes the volatility issue is solved.
  - s-phi-nl 3y ago
    A paragraph from the previous essay by the OP comes to mind: > Less sardonically, there is a lesson here: systems which intermediate between cultures are useful. Intermediating between cultures is a thing the world urgently needs and is extremely prepared to pay for. https://www.bitsaboutmoney.com/archive/financial-systems-take-a-holiday/ https://www.bitsaboutmoney.com/archive/financial-systems-tak... I don't think decentralized currency will actually solve the issues travelers have with this, at least without reproducing much of the infrastructure already in place for traditional currencies.
  - BizarroLand 3y ago
    Ahead of its time. Not a bad call. In a quasicapitalist utopia, crypto would be a very convenient way to enable the government to set a stock value for a universal cryptocredit and make that credit its default method of value transfer. They could do something like pin the value to 1 credit = 1 hour of unskilled menial labor, and strictly control the supply. With appropriate software monitoring and a lack of other methods of direct wealth transfer, it would make it impossible to not properly pay your taxes and vastly more difficult to exchange wealth without government oversight, and make money crimes vastly more difficult, from hiring criminals to do crimes to purchasing drugs and weapons for illicit purposes. It's the perfect system for a dictatorship as well.
  - howeyc 3y ago
    Also doesn't need to be decentralized or an existing crypto currency to solve those issues. For example, central banks are exploring smart contracts for international payments. https://www.bis.org/press/p240403.htm https://www.bis.org/press/p240403.htm
  - organsnyder 3y ago
    > frequent travelers since you could more easily sidestep foreign exchange issues I don't travel internationally very frequently, but whenever I do my credit card handles currency exchange for me automatically. Perhaps I'm not getting the best exchange rate, but the difference is minimal enough that looking into alternatives isn't worth the hassle.
- margalabargala 3y ago
  Amother huge piece is that it (Bitcoin and most other major cryptos) is by design a deflationary money system. Why would you spend crypto when you could get more for it if you wait a week? You wouldn't. And people don't.
  - max51 3y ago
    >Why would you spend crypto when you could get more for it if you wait a week? that never stopped capitalist from spending their money even if they make profit from their investment. If your logic was true, no one who has access to investment opportunities (eg. the stock market) would ever spend any money.
    - margalabargala 3y ago
      > If your logic was true... I think you're taking a stronger interpretation than what I wrote. I'm not saying no one ever spent any crypto. I'm saying that because it was deflationary, people tended to spend less than otherwise. This was so bad with bitcoin that it failed to be usable as a currency. If my logic were true, then when interest rates were higher and people could make more money doing nothing, then people with access to investment opportunities would tend to spend less money. Which is exactly what we are currently seeing.
- missedthecue 3y ago
  Crypto is complex but I don't think very many people could explain how Visa's merchant payment network functions. It just does, and no one has to think about it.
  - MrSkyNet 3y ago
    Yes and thats not the case for crypto. For crypto you need to choose a cryptocoin, need to understand what a wallet is, best case install a secure wallet from the internet etc. You don't need to know how visa works as long as you know how to register for a cc and know how to put that card into a device when paying.
- clocot 3y ago
  [dead]
albrewer 3y ago
15-60 minute settlement times early on certainly didn't help
- mindcandy 3y ago
  Visa/Mastercard have settlement times of over 24 hours. Meanwhile, for over a decade now, Litecoin has had a settlement time of 2.5 minutes. And, for tiny (sub $100) transactions, it’s totally reasonable to just look up the wallet’s holdings in an instant. For online transactions, you can always let the customer go immediately. Just wait 3 minutes before you ship :P
  - ninepoints 3y ago
    You are comparing apples to oranges. Settlement times in traditional credit card transactions are not felt by the customer, and provide safeguards for fraud prevention and charge backs. Furthermore, transactions are easily reversible through a claims system. Guess what crypto doesn't have?
    - mindcandy 3y ago
      This is exactly the apples I’m talking about. Merchants eat much higher fees on behalf of the customer so they can hide the much longer settlement times from the customer and accept that they’ll also have to just eat the occasional fraudulent chargeback from the customer. They put up with all this hassle because “That’s just how it’s always been if you want to do business.” And, yet people say crypto can’t work because the fees are too high (they’re lower) and the settlement times are too slow (they’re faster). Dealing with merchant fraud is a legit call-out though. I don’t know what a good crypto solution to that is. I can imagine replacing that department with a smart contract. But, I’ve haven’t looked around to see what’s been tried.

ThrowawayTestr 3y ago

>this is why crypto never took off as a replacement for credit cards I thought it was because transactions take minutes instead of seconds.

SketchySeaBeast 3y ago
And because it's uncompelling. I have a bunch of consumer protections around my credit card, why would I want to use crypto instead? Especially when it's a wildly fluctuating speculative asset and the burger I buy for $15 worth of coins today will be $60 dollars of coins tomorrow.
tcmart14 3y ago
That is almost certainly one reason and an important one. But as the other commenter to your comment shows, there is a lot more. Protections is a big one. I also personally side that, you need a way for people to interface with their crypto like they do with their current bank and as simple as possible. Normal people don't want to have to juggle around keys. Hell, Im a software engineer and I hate having to keep track of keys. So every time I get a new machine, I create fresh new SSH keys. My SSH keys are disposable to me.
Obi_Juan_Kenobi 3y ago
They can take either; waiting for confirmations is only a matter of reducing double-spend risk. In practice, seconds after a transaction has been signed and broadcast, it is already very unlikely to double-spend. Miner incentives are such that the first-seen transaction is the most likely to be used. A delay of a couple seconds is sufficient to account for network-propagation lag. You wouldn't do this for high-value transactions, but there's some threshold where real-world risk is lower than the convenience of a fast transaction, and that threshold is reasonably high.

objclxt 3y ago

> this is why crypto never took off as a replacement for credit cards If this were true you would expect crypto to have taken off in countries with low interchange rates. Europe, for example, has far less of a rewards and points culture for payment, and (compared to the US) much lower interchange. Crypto never took off as a replacement for credit cards for many reasons - the biggest coins out there are simply too volatile to be usable as a currency, they lack the consumer protections you get paying with a credit card, and they’re simply too complex for an average person to understand.

abalone 3y ago
Interchange is regulated in Europe. You would likely run into legal issues if you tried to jack up merchant fees via a novel payment method. However, even if it were legal, I don’t think this would counter my claim. I’m merely saying that you’d need to match existing rewards schemes in markets where they are established. Introducing them into a new market is an entirely different matter. The system we have today evolved through many decades of negotiation and deal making among merchants, issuers and card networks. You’re right about consumer protections —- it would be very expensive for a crypto-based system to provide those without an intermediary that can adjudicate and reverse transactions (chargebacks).

throwaway918274 3y ago

This is where a lot of tech folks fail. It's almost never about the technology. Most of the time all you need is a spreadsheet.

bombcar 3y ago
Most tech things are various forms of spreadsheet. Blockchain is a distributed and complicated one.

mdaniel 3y ago

I had high hopes for https://www.prnewswire.com/news-releases/ternio-blockcard-will-function-on-visa-payment-network-for-us-residents-300837686.html https://www.prnewswire.com/news-releases/ternio-blockcard-wi... but it was just too much hassle to keep transferring in money While looking up a representative link for that, I also saw that it appears Venmo is in that game, too: https://www.cryptovantage.com/best-crypto-credit-cards/venmo-visa-card/ https://www.cryptovantage.com/best-crypto-credit-cards/venmo...

Sohcahtoa82 3y ago

> Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical property. I always thought the big problem with crypto was that the fees were atrocious for any small transaction. And the fees only get higher as the network gets busier. You can choose to have a send some money with a small fee, but the miners will never confirm your transaction, as each block is limited.

mattdesl 3y ago
Not quite the case anymore—rollup fees are often below $0.05 per transaction.[1] [1] https://www.gasfees.io/ https://www.gasfees.io/

skrbjc 3y ago

It's not just crypto it's any alternative payment system. Multiple payment vendors have tried to up-end the credit card companies by focusing on lower fees for merchants, but customers have no incentive to use that new system if they have a benefit to using their credit card, at least in the US. It's why, though, there are a bunch of payments companies that have popped up in places throughout Asia that aren't competing with rewards systems off the back of interchange.

k8svet 3y ago

Funny, because I would pay twice the CC fee for credit card transactions to be as painless as crypto. I'd rather scan a barcode and wait two minutes, compared to typing my address, handing over my phone number, confirming my zip, waiting for my CC's TOTP to arrive. Only for it to still fail 5% of the time for who knows what reason.

abalone 3y ago
You should try Apple Pay (or maybe Google Pay?) It addresses all those pain points and more, while still giving you the consumer protections and fast transactions of cards.
- k8svet 3y ago
  I'm not interested in giving more parties access to my financial data, certainly not an ad company. And I'm not about to buy an iPhone to use it. Also, merchant support for it is abysmal. But, appreciate the tip all the same.
  - abalone 3y ago
    I don’t know where you are but NFC terminals are extremely common here (I’m in CA). And Apple Pay doesn’t track your transactions. It actually protects you better than a regular card by using a distinct number tied to the secure element in the phone, and thus your passcode/biometrics. Even if the merchant is hacked your number is useless.
    - k8svet 3y ago
      Well, for the example that started this subthread, it's not exactly as if I'm entering my address to swipe my card. I'm talking about online purchases. And I already addressed Apple, and I certainly don't trust Google. Like, sure, I'd use Apple Pay, except the entire concept of their ecosystem has no place for someone like me. Apple chooses not to support Android, not the other way around. Not least of which, I'm not at all impressed at Apple's ability to run financial products, or manage online security. Imagine my surprise upon finding out that the only way to use 2FA with an Apple ID is a phone number. Stunning.