Is it a cosmic coincidence that these two large competitors are going to increase fees at exactly the same time?
https://www.technologyreview.com/the-download/612947/pricing...
>Researchers at the University of Bologna in Italy created two simple reinforcement-learning-based pricing algorithms and set them loose in a controlled environment. They discovered that the two completely autonomous algorithms learned to respond to one another’s behavior and quickly pulled the price of goods above where it would have been had either operated alone.
>“What is most worrying is that the algorithms leave no trace of concerted action,” the researchers wrote. “They learn to collude purely by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude.” This risks driving up the price of goods and ultimately harming consumers.
I don't think it's out of the realm of possibility that two companies could arrive at such a move without conscious collusion. I also don't think it should be treated differently.
Long term, I think Visa an MC could shoot themselves in the foot. Merchants are now allowed to charge fees for using CCs IIRC in at least some areas.
You could easily end up with a situation like Europe where people mostly use debit cards for in person purchases since the processing fees are lower.
Consumers lose the protection of a buffer from their bank account, issuers lose out on revenue. Not a good outcome IMHO.
That is there is more than you win/I lose or I win/you lose but there is win/win.
It’s definately conceivable two algorithms or two ai would be capable of concluding the same. In fact it may be even easier because what’s the actual dilemma/self interest of such a system without the selfishness of human nature?
And the CC "protection policies" aren't that useful here, in my experience it's near impossible to do a successful chargeback and there are few cards with high cashback.
In India, banks have transferred the liability of debit card frauds directly to the card holder. As far as they are concerned, the cards have EMV chips, and you have to provide a PIN to use the card on every transaction (merchant or ATM). Further, everytime a transaction occurs, the user gets an email and SMS message on their mobile informing them of the same. So ultimately it is presumed to be your fault if your debit card is "misused" in any manner.
In fact, there was recently an interesting and controversial indian court case and ruling on debit card usage -
A spouse used his wife's card at an ATM to try and withdraw money to pay her medical bills (she had just given birth). The transaction failed (i.e. he didn't get the money) but the amount was debited from the account. They informed the bank and the bank told them that there might be an issue with the ATM and in such cases the amount would be credited back to the account in 24-48 hours. When that didn't they filed a complaint, and the ATM's CCTV footage confirmed that the ATM had not disbursed the money. But since the footage also showed the spouse using the card, and not the card holder, they closed the case stating that since debit card PIN has been shared, the bank is not liable as debit cards are non-transferable. After appealing in various forums, and finally in court, even the court sided with the bank. They further added that if the account holder wanted her husband to withdraw money, she should have given him a self-cheque for the amount, and not her debit card.
In India, banks have transferred the liability of debit card frauds directly to the card holder.
As far as they are concerned, the cards have EMV chips, and you have to provide a PIN to use the card on every transaction (merchant or ATM). Further, everytime a transaction occurs, the user gets an email and SMS message on their mobile informing them of the same. So ultimately it is presumed to be your fault if your debit card is "misused" in any manner.
If you lose your card or suspect fraud, you can always block it through your online net banking account or by calling the bank.
In fact, there was recently an interesting and controversial indian court case and ruling on debit card usage -
A spouse used his wife's card at an ATM to try and withdraw money to pay her medical bills (she had just given birth). The transaction failed (i.e. he didn't get the money) but the amount was debited from the account. They informed the bank and the bank told them that there might be an issue with the ATM and in such cases the amount would be credited back to the account in 24-48 hours. When that didn't happen, they filed further complaints with the bank and the ATM's CCTV footage confirmed that the ATM had not disbursed the money. But since the footage also showed the spouse using the card, and not the card holder, they closed the case stating that since debit card PIN has been shared, the bank is not liable as debit cards are non-transferable. After appealing in various forums, and finally in court, even the court sided with the bank. They further added that if the account holder wanted her husband to withdraw money, she should have given him a self-cheque for the amount, and not her debit card.
- the typical open and transparent "price signaling" where competitors can "see" others' price changes. Similar to one airline immediately changing (matching) a ticket price in response to another airline lowering or raising its price. Same mechanism as Amazon bots constantly web scraping Best Buy and Walmart and Best Buy in turn scrapes Amazon. Everybody is constantly monitoring everybody's prices.
- Visa and MC have overlap of owners[1][2]. 4 out of the top 5 owners are the same for both: Vanguard, Blackrock, FMR, State Street
- Visa and MC have overlap of member banks that also have minority ownership
Yes, you were being sarcastic about the coincidence but it seems like the natural economic equilibrium is for both to have near identical network fees.
[1] Visa top 5 institutional stockholders: https://www.nasdaq.com/symbol/v/ownership-summary
[2] MC top 5 institutional stockholders: https://www.nasdaq.com/symbol/ma/ownership-summary
Economists have found evidence that as ownership concentration increases, firms act more like a monopoly.
See this paper for one example in the airline industry: https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12698
There's been a trend towards more activism with passive indexes. One example with Blackrock's passive fund:
https://www.afr.com/business/larry-fink-says-blackrock-will-...
it’s at least not totally implausible.
Company A 'mulls' something, company B and C follows, X gets done.
If company A mulled something and no one else piped up, they could still of course go it alone, or they could decide that they want to help save their customers even more money, and not raise prices.
Technically it depends, but it's still Delta branded with Delta setting the policies. Endeavor Air is, for instance, wholly owned by Delta.
to be fair, one needs to experience the current credit card rigamarole to realize that straight lower prices are less complicated and preferable. i get tired of having to remember to cash in my points in a convoluted system involving yet another third party (the rewards provider).
Get Citi Double Cash and you'll get 2% on everything without point conversion hassles.
Also, some cards automatically apply rewards points. My Schwab Amex card deposits my 2% cash back each month directly into my brokerage account. My Amazon Prime card just gives you a checkbox when buying on Amazon where you can apply cash back to your purchase during checkout.
Visa and Mastercard change prices much less often than that, so this take is a little too apples-and-oranges for me.
All data shows the same: competition is being trumped by consolidation and its eventual end, cartelization
That's not to say that capitalism is thus refuted as an economic model. All it means is that someone hasn't been doing an adequate enough job (probably regulators or lawmakers, in this case).
Capitalism's success is always a function of adequate rule of law, economic regulation, social trust, and personal generosity. Where those are present, it absolutely trounces other models.
Capitalism isn't just a hand, it is mostly a mind that runs as an overlay over all the participants willing or not, and it isn't very bright, but it is very powerful. We are all but rabbits under its strong hands.
these services should not operate as for-profits. though efficient oversight is also hard :(
Cooperation is the way to maximize profits for both companies.
Source: am in the industry.
Along with lowering costs, Optblue let processors add a markup to Amex transactions. (Previously they couldn't. That meant no incentive for processors to suggest or push Amex acceptance, as they didn't make money on Amex transactions.)
Now they can, and those markups tend to be higher than for Visa/MC. In egregious cases, the processor simply continues charging the business the old Amex rate (~3.5%) and pockets the entire difference between 3.5% and the new lower rates.
Why are they not competitors?
I might be way out there, but if two companies provide the same service (even if they vary slightly), they are competitors.
It's the same reason why airlines don't compete with each other.
Well merchants and consumers aren’t the competitors of visa/MC. Maybe they should cooperate by lowering the fees. If cooperation is the way to maximize profits...or does that only work when two companies collude to price fix?