(and no, bitcoin doesn't fix that at all)
I think if we were in an alternate universe where the government managed a free utility for digital payments no one would find it strange for a second.
Cash costs money too--you have to count it, handle it, deposit it, protect it from theft, verify it's authenticity, make sure you have enough change, spend time counting change, etc. As a consumer, if a merchant fucks you over you have little recourse besides suing. Cash takes no time to clear so you can spend it right after getting it, it is anonymous, it is hard to trace so you can skip on taxes, etc.
Checks can bounce, you have to deposit them, they take time to clear, they take forever to write, they can be fake, etc. However, it is hard for your cashiers to skim off the top, it uses exact amounts so no change to keep, it is a single slip of paper to carry around instead of a pocket of paper currency, as a consumer you can stop payment on a check if the merchant fucks you over, etc...
Credit cards are super quick to use at the register. They don't require any change (unless handing cash back). As a consumer, if a merchant fucks you over you can issue a chargeback. It is easy to track your spending as a consumer because all transactions are recorded electronically. As a merchant you don't have to handle change or cash, your cashiers can't easily skim off the top, etc...
It's all trade offs and I'll bet if you did an NPV on all the different methods taking into consideration all their pros and cons, they'd all wind up "costing" similar amounts.
At least they used to be. Chips ruined that. Now I have to stand there staring at the screen for half a minute waiting to respond to prompts and to pull the card out at the end. For most transactions, cash is probably faster than using a chip.
Everyone hates the chip.
At least in Spain
In the US it's chip and signature, and you can't sign until after the chip verification (either signing a paper receipt, or with a stylus on the terminal screen).
In addition chips are new and some terminals are painfully slow (30 seconds) to verify. I'm not sure I've ever seen one finish in under 5 seconds, though a few merchants have terminals that come close to that.
We now have contactless payments for under £30 in the UK, similar to Apple pay but you just place your card on the reader.
When you use a PIN you get a nice two factor signature from the card chip: it signs the current timestamp and the PIN you knew, and can do both as quickly as chip's processing capability and the bandwidth between the chip and terminal allows.
US banks came up with a dumb compromise just like most of their websites use Wish-It-Were-Two-Factor auth and secondary "Security Question" passwords, the chip cards in the US are doing their own Wish-It-Were-Two-Factor: sign a timestamp, wait some amount of wall clock time, sign a different timestamp.
Most of the wait in a chip purchase in the US is artificial just to make sure that two timestamps are "sufficiently" different. US banks should just give people PINs and stop this silliness.
Is this conjecture, or do you have actual citations to back this up? Those same banks have been issuing debit cards with PINs for a couple decades.
Every chip card I've received to date from several different major US banks has included some variation of "Great news! You don't need to learn or use a PIN to use this card."
My personal reaction every time has been, "But what if I want to use a PIN?" and this far I've never seen a satisfactory answer in those same letters or on those banks' own websites.
Admittedly that is purely anecdotal, as far as citations go, but in my mind it seems pretty clear what these banks think about PINs for credit cards.
Though I’m in the US. I hear chip transactions are way faster in other countries where they’ve been using that system for a while.
When I was visiting Sweden the terminals did not support NFC or I was just doing something wrong.
I had high hopes for bitcoin like currency having a flat fee in cents and an optional percentage few for insurance if you do want a charge back and other nice credit card like features.
But bitcoin is riddled with its own charge mania nowadays.
You may not care about security, but all I said was it's worse, and not good enough for me which you have not denied.
In that case cash can save ~5 minutes.
Near field is also limited by transaction size so it's far from sipe for anything.
Waiters used to take cars and swipe them ASAP presumably to get better tips by being prompt. Now, put this off until they finish a full round and/or put cards in and start doing something else because it's going to take a while.
Granted, this is far from a complete switch, but it was still noticeable.
Major US banks made $171B _profit_ last year. Lets not pretend that they're already bending over backwards to lower costs on transaction processing.
It's a free market and you as a merchant are free to pick your vendor. In addition, you don't even have to accept credit cards if you want--you can just take cash or check, or even just cash. Of course people entering your store might not buy anything from you because who the hell carries around cash or checks anymore, but no jackbooted thugs will force you at gunpoint to accept credit cards.
The credit card industry is a huge, highly competitive industry with little barriers to entry. Massive market forces are at work squeezing the margins for transaction processing fees to as little as possible.
My bet is that transaction fees are priced at what they are because:
- its cheaper than handling cash or checks
- it results in more revenue, even with the "cash back" discount given to CC users.
- it is more traceable and easier for your bookkeepers to manage
And to be honest, I believe many small business who take cash only do so because they aren't reporting all their income. When it is off the books cash-only, you can pocket the sales tax, underreport income tax, pay your vendors cash under the table, etc. I also believe that if their margins are so thin they can't afford a 2% transaction fee they probably have no business staying in business anyway. Whatever they are doing is more likely than not a value-destroying NPV-negative project to begin with. (see also: just about every business shown on those "save my bar / save my restaurant / save my hotel" TV shows)
Holy God. I might as well say it's all equally free, since when the heat death of the universe is done with, there will be no difference between something having existed or taken place or not.
If I understand it right, merchants often aren't allowed to pass on the fees or (much the same thing) give discounts if you chose a cheaper payment option. No wonder there's little competition on the fees, and Visa[1], Mastercard[2] and PayPal[3] are all having record profits.
[1] https://www.cnbc.com/2017/10/25/visa-quarterly-profit-rises-...
[2] https://www.reuters.com/article/us-mastercard-results/master...
[3] https://www.reuters.com/article/us-paypal-hldg-results/paypa...
Anecdotally, I worked at a company store years ago where we would charge customers paying with cards a 2.75% fee, which is what we were paying. And that store was operated by a Fortune 500 company.
Also, virtually every small private business I go to in Los Angeles charges some fee, or has stipulations, for credit card transactions.
The big change came in January 2013 after a big court judgment. Adding fees, though, is still illegal in some states: https://www.creditcards.com/credit-card-news/business-surcha...
Made me wonder about the stores/restaurants I frequent here that do charge, apparently they're still ok to do so after 2015(link from the comments in your linked post): https://oag.ca.gov/consumers/general/credit-card-surcharges
There are more stores not accepting credit cards than charging extra.
Credit card "processing fees" however are high because of the stupid rewards programs that Americans are so addicted to because it makes them feel like they are "sticking it to the man" and getting money back, to the point of having dozens of plastic cards in their wallet. Of course with processing fees at >1% of gross value no cashback or airline miles program is ever going to make you come out ahead.
In the EU there are no silly rewards games and fixed processing fees of at most 0.3%.
I would 100% opposes to a government run digital payment system, the government is too closing integrated to todays electronic systems as it is, I in no way want them to own and directly control it
Though, the Federal Reserve is quasi-public/quasi-private. But for any systemically important transactional system you can be sure that the government is plugged in one way or another. The Clearing House company is the main alternative to the Federal Reserve electronic systems for interbank transfers (they're the "private" ACH operator), and they're heavily regulated, with the Federal Reserve given substantial oversight authorities.
Just because the current system sucks and needs to be replace, does not mean that replacement should be another Government Run System.
As I stated in my original comment the government is too closly integrated to today's electronic systems as it is
I want the government out, not more ingrained
What makes you think we could do it digitally?
Note that nearly all fees are flat fees.
Even they have a $15 fee and sometimes a $15 receiving fee as well.
Ideally you'd have zero fees for transactions under $5. $5-$X0000 would have a percentage based fee and thereafter a flat fee for large transactions.
In general, real time payments for large amounts can be made for <1$ (both fedwire system for its participants and various EUR systems do that), and consumer payments that can be (a) batched and sent in bulk and (b) get delivered e.g. at the end of day, not in real time, those have a cost of ~$0.01 (perhaps 0.02 in case of small volumes) to the bank.
So, in EU, everyone has access to something that's pretty much equivalent to USA "wire transfer", and it might cost e.g. some 40 cents or can be offered to consumers either "for free" as part of a common services bundle/maintenance fee.
I have really hopes for the Euro