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This. Regulation has been set so high on banks that it makes it extremely difficult for new players to compete. The reasons given for regulation are: - protec

by m101 2y ago

This. Regulation has been set so high on banks that it makes it extremely difficult for new players to compete. The reasons given for regulation are: - protection from failure because of inability to not bail them out (and it has done a good job of this by and large, with some obvious risk oversights - e.g. silicon valley bank) - money laundering regulations The real corruption/monopoly in financial services that needs addressing are the amex/visa/mastercard transaction fees. The only way to fix this, in my opinion, is to have the consumer pay the fees.

bryanlarsen 2y ago
The big problem with amex/visa/mastercard is that it's a three sided market. So make it a 2 sided market, unify the processor into one of the sides. In other words, either a merchant co-operative or a consumer co-operative. In this case, a merchant co-operative seems a natural fit. The merchants jointly own the co-op, and get a refund of their fees proportional to the profit of the co-op. And you get the consumers on board the standard way: by bribing them. So something like a 2% rebate. So the merchant fees stay at a similar rate, but the merchants win in other ways because they own the processor. Nobody's going to become a billionaire starting a co-op, but an executive in a successful financial co-op would pull in a multi-seven figure salary, which should be sufficient motivation to interest the startup folks. And Y-Combinator would have to loan money to such a startup, they couldn't buy in. But it's in their interest to do so, given how much of the Y-Combinator portfolio is dependent on credit cards.
- toast0 2y ago
  I don't see how this is going to work. Rewards cards already bribe me at 2% (and there are better offers). Big merchants often offer a store card, sometimes a store card that's also a general use card, but they typically bribe people with 5%.
  - lesuorac 2y ago
    I really don't get why it took so long for a bank to buy Discover. It seems like such a good deal to get higher margin and then you could ultimately offer consumers better cashback or w/e rewards than a less vertically integrated card could.
  - bryanlarsen 2y ago
    The cards that pay 2%+ are the premium cards that charge merchants 4%+. If you're competing against that rate, you could give a 4% cash back. Those big merchant store cards are a likely path for how my scenario plays out. Imagine if a half dozen of those big merchant store cards merge, ditch their visa/mastercard pairing and provide an attractive path for other merchants to join.
blitzar 2y ago
> The real corruption/monopoly in financial services that needs addressing are the amex/visa/mastercard transaction fees. The filthy anti capitalist socialists in Europe have already done that. EU Interchange cap as follows: 0.2% of the transaction value for Visa and Mastercard consumer debit cards. 0.3% of the transaction value for Visa and Mastercard consumer credit cards. Seems to work fine.

by m101 2y ago

bryanlarsen 2y ago

The big problem with amex/visa/mastercard is that it's a three sided market. So make it a 2 sided market, unify the processor into one of the sides. In other words, either a merchant co-operative or a consumer co-operative. In this case, a merchant co-operative seems a natural fit. The merchants jointly own the co-op, and get a refund of their fees proportional to the profit of the co-op. And you get the consumers on board the standard way: by bribing them. So something like a 2% rebate. So the merchant fees stay at a similar rate, but the merchants win in other ways because they own the processor. Nobody's going to become a billionaire starting a co-op, but an executive in a successful financial co-op would pull in a multi-seven figure salary, which should be sufficient motivation to interest the startup folks. And Y-Combinator would have to loan money to such a startup, they couldn't buy in. But it's in their interest to do so, given how much of the Y-Combinator portfolio is dependent on credit cards.

toast0 2y ago
I don't see how this is going to work. Rewards cards already bribe me at 2% (and there are better offers). Big merchants often offer a store card, sometimes a store card that's also a general use card, but they typically bribe people with 5%.
- lesuorac 2y ago
  I really don't get why it took so long for a bank to buy Discover. It seems like such a good deal to get higher margin and then you could ultimately offer consumers better cashback or w/e rewards than a less vertically integrated card could.
- bryanlarsen 2y ago
  The cards that pay 2%+ are the premium cards that charge merchants 4%+. If you're competing against that rate, you could give a 4% cash back. Those big merchant store cards are a likely path for how my scenario plays out. Imagine if a half dozen of those big merchant store cards merge, ditch their visa/mastercard pairing and provide an attractive path for other merchants to join.

blitzar 2y ago

> The real corruption/monopoly in financial services that needs addressing are the amex/visa/mastercard transaction fees. The filthy anti capitalist socialists in Europe have already done that. EU Interchange cap as follows: 0.2% of the transaction value for Visa and Mastercard consumer debit cards. 0.3% of the transaction value for Visa and Mastercard consumer credit cards. Seems to work fine.