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> If they were, who do you think would be paying for your 1-3 pennies of cashback/rewards points on every said transaction? The bulk of card payment fees goes t

> If they were, who do you think would be paying for your 1-3 pennies of cashback/rewards points on every said transaction? The bulk of card payment fees goes to the issuers as interchange, not to Visa/MC or the acquiring bank or payment service provider. Visa/MC and everyone else along the chain makes insane amounts of money even on relative pittances, simply because of the market size they corner. That's particularly obscene in Europe - we already have SEPA Direct Debit and Instant Payment, we could rework national schemes like Girocard (that worked under the precursor scheme of SEPA DD) to work with it, but instead we add VISA and MC's debit card schemes to the payment flow for no reason at all.

lxgr 2y ago
They earn a non-negligible cut, yes, but stating that they're "taking 1-3 pennies" is simply not true (or rather, you'd have to expand your statement to "the card payments industry in collaboration with consumers"). Rewards and interchange foster a very bad market structure (it's a kind of "tragedy of the commons" in that it's the rational move to participate in this scheme as a consumer with good credit, and consumers with bad credit are ultimately paying for it), and the EU (in my view correctly) recognized that and capped most interchange rates significantly. But if you look into the details, you'll find that they did not do anything about Visa's or Mastercard's share of the card fees (at least so far). > we could rework national schemes like Girocard That would need a lot of reworking to be a real competitor. Girocard does not have a viable story for online payments (no actual processing capabilities beyond some Apple Pay only pilots, importantly no dispute resolution mechanism, which is critical for online payments, etc). It is a great low-fee payment method at the POS, though, and I'd love to see it compete EU-wide!
- mschuster91 2y ago
  > They earn a non-negligible cut, yes, but stating that they're "taking 1-3 pennies" is simply not true (or rather, you'd have to expand your statement to "the card payments industry in collaboration with consumers"). That's the range of fees that the merchants have to pay [1], subtract about 1% for "cashback" programs, and that leaves 1-2% to Mastercard, the payment processor service and the banks of the consumer and the store. It's a hefty amount of money, no matter what - and MC has a very healthy profit margin [2]. > Girocard does not have a viable story for online payments (no actual processing capabilities beyond some Apple Pay only pilots, importantly no dispute resolution mechanism, which is critical for online payments, etc). I'm talking about physical presence payments primarily. But for online, SEPA Instant Transfer works out just fine - 10 seconds processing time from payment initiation to confirmation for the merchant, and dispute/chargeback has been a thing in SEPA Direct Debit and SEPA transfers from the start. Only thing is quite a few banks don't support it because their core IT is decades old. [1] https://www.fool.com/money/research/average-credit-card-processing-fees-costs-america/?pStoreID=@@6qFsI https://www.fool.com/money/research/average-credit-card-proc... [2] https://www.wsj.com/market-data/quotes/MA/financials/annual/income-statement https://www.wsj.com/market-data/quotes/MA/financials/annual/...
  - lxgr 2y ago
    > for online, SEPA Instant Transfer works out just fine How? There is zero way to get back your money in case of problems as a payer! > dispute/chargeback has been a thing in SEPA Direct Debit and SEPA transfers from the start. Absolutely not for outbound transfers. You can chase a non-delivering merchant in court, but that's about it. For direct debit, the merchant has the equivalent problem – the payer can claw their money back without any justification ("I feel like spending it elsewhere" is a valid reason!) or recourse. > Only thing is quite a few banks don't support it because their core IT is decades old. It has absolutely nothing to do with "banks not supporting it because of old IT". There just is no incentive for them to play the role of arbiter between a payer and a payee at all! Consequently, there is no framework for it. SEPA (I)CT and DD are very efficient solutions for online payments only when payer and payee already extend significant trust in at least one direction. If there's mutual distrust, they are a terrible fit, and there's a reason people prefer cards or other schemes (sometimes layered on top of SEPA) providing dispute resolution.

lxgr 2y ago

They earn a non-negligible cut, yes, but stating that they're "taking 1-3 pennies" is simply not true (or rather, you'd have to expand your statement to "the card payments industry in collaboration with consumers"). Rewards and interchange foster a very bad market structure (it's a kind of "tragedy of the commons" in that it's the rational move to participate in this scheme as a consumer with good credit, and consumers with bad credit are ultimately paying for it), and the EU (in my view correctly) recognized that and capped most interchange rates significantly. But if you look into the details, you'll find that they did not do anything about Visa's or Mastercard's share of the card fees (at least so far). > we could rework national schemes like Girocard That would need a lot of reworking to be a real competitor. Girocard does not have a viable story for online payments (no actual processing capabilities beyond some Apple Pay only pilots, importantly no dispute resolution mechanism, which is critical for online payments, etc). It is a great low-fee payment method at the POS, though, and I'd love to see it compete EU-wide!

mschuster91 2y ago
> They earn a non-negligible cut, yes, but stating that they're "taking 1-3 pennies" is simply not true (or rather, you'd have to expand your statement to "the card payments industry in collaboration with consumers"). That's the range of fees that the merchants have to pay [1], subtract about 1% for "cashback" programs, and that leaves 1-2% to Mastercard, the payment processor service and the banks of the consumer and the store. It's a hefty amount of money, no matter what - and MC has a very healthy profit margin [2]. > Girocard does not have a viable story for online payments (no actual processing capabilities beyond some Apple Pay only pilots, importantly no dispute resolution mechanism, which is critical for online payments, etc). I'm talking about physical presence payments primarily. But for online, SEPA Instant Transfer works out just fine - 10 seconds processing time from payment initiation to confirmation for the merchant, and dispute/chargeback has been a thing in SEPA Direct Debit and SEPA transfers from the start. Only thing is quite a few banks don't support it because their core IT is decades old. [1] https://www.fool.com/money/research/average-credit-card-processing-fees-costs-america/?pStoreID=@@6qFsI https://www.fool.com/money/research/average-credit-card-proc... [2] https://www.wsj.com/market-data/quotes/MA/financials/annual/income-statement https://www.wsj.com/market-data/quotes/MA/financials/annual/...
- lxgr 2y ago
  > for online, SEPA Instant Transfer works out just fine How? There is zero way to get back your money in case of problems as a payer! > dispute/chargeback has been a thing in SEPA Direct Debit and SEPA transfers from the start. Absolutely not for outbound transfers. You can chase a non-delivering merchant in court, but that's about it. For direct debit, the merchant has the equivalent problem – the payer can claw their money back without any justification ("I feel like spending it elsewhere" is a valid reason!) or recourse. > Only thing is quite a few banks don't support it because their core IT is decades old. It has absolutely nothing to do with "banks not supporting it because of old IT". There just is no incentive for them to play the role of arbiter between a payer and a payee at all! Consequently, there is no framework for it. SEPA (I)CT and DD are very efficient solutions for online payments only when payer and payee already extend significant trust in at least one direction. If there's mutual distrust, they are a terrible fit, and there's a reason people prefer cards or other schemes (sometimes layered on top of SEPA) providing dispute resolution.