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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
by 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 agoI 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 agoI 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 agoThe 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.