Visa is planning the biggest changes to merchant fees in a decade
bloomberg.com
bloomberg.com
In my eyes it's useless circulation of money in the best case (when recouping via kickback) and a tax on the financially illiterate or poor in the worst case. In any case it is creating a lot of expensive administrative overhead for no economic purpose whatsoever, and thus a healthy capitalistic society should want to get rid of it - which is even relatively easy to do in this case, as the European regulation demonstrates.
Particularly driven by https://en.m.wikipedia.org/wiki/Expressions_Hair_Design_v._S...
Does that also allow merchants to put an additional surcharge depending on the card used onto a receipt? Or has that been deemed legal in an earlier ruling? Because I always thought the big card networks had some kind of legally binding contract with merchants which prohibits the addition of surcharges that only apply to their particular payment method - contract clauses that they could only muscle through because merchants effectively didn't have the possibility to just not accept Visa or MasterCard payments, while most of their competitors accepted them.
Weird instance of banking actually getting better with time?!
When Monzo made EU withdrawals completely free (again), they said
> After a change in EU regulation on cross-border payments we've decided to remove ATM fees and limits for countries in the European Economic Area (EEA). This means in all EU countries (and a few more) your cash withdrawals are now free! You can see the full list of countries here.
[1] https://www.quora.com/How-much-volume-is-traded-per-day-in-t...
https://www.thinmargin.com/blogs/why-comparing-against-excha...
Mastercard rates are very good (typically better than Transferwise's), and Visa has been catching up as well.
Cryptocurrencies, except BTC and a couple of others, are doing it right. A transfer should cost a fraction of a cent.
Most people would prefer to not be out all their life savings if someone swipes their card number. Combating and refunding fraudulent transactions takes some cost.
What would be superior is if every nation's national post office provided basic banking, debit card and mobile payment services for free (think similar to China's amazing system), so that no one would have to be unbanked except by choice. If people are in the "gubberment shouldn't exist" camp, then there should be a trans-national, independent, non-profit credit card system that provides credit card processing and transfer of money at about the cost of delivery: no surprises and no exploiting a basic human need to hand over as much cash as possible to short-term interested stock speculators.
In terms of developed countries, again, the US is an outlier in its treatment of people with no good options.
That seemed to happen due to a massive price and volume increase, so is hard to design for. At the same time, at peak, it was still doing a tiny fraction of the volume that any of the credit card networks do.
On the precise issue of transaction cost predictability, I think most solutions would revolve around creating a market for the ability to execute future transactions. There's a hackish project on Ethereum doing just that: https://gastoken.io/
I spent three months in China, and had 1 opportunity to use my credit card: booking a flight home. Everywhere else, I was out of luck. That forced me to use WeChat wallet and Alipay, and I got to say that the experience was really good. There’s so little friction to spending money and can be used for basically everything in China.
It must be way lower fees for everyone involved as well. I only need to do a single bank transaction for the month(loading my wallet) and then after that it’s just swapping credits. Perhaps that’s why cc companies are reluctant.
Honestly, with the chip readers these days also widely accepting NFC payments (Google/Apple/Samsung Pay) I think it'll allow the US to leapfrog WeChat and AliPay by obviating the need for yet another financial middleman.
See also https://news.ycombinator.com/item?id=22277404 on the rise of surcharging
It was inconvenient and rarely accepted. Maybe updated PoS terminals will fix where they went wrong (IMO using QR codes), but it’s difficult to get people to switch from a card swipe/tap or phone tap.
I think Chase Pay ended up getting cancelled.
Especially, those ones.
That really surprises me, given how high CC interest rates are and how many people carry a balance.
That may be true in many countries, but in India, there are cardless (non-credit/non-debit card) online payments available that are used a lot more than card based payments and are all instantaneous (similar to cards):
* Netbanking (where you're redirected to your bank's site and login to approve a specific payment)
* UPI (Unified Payment Interface), a private consortium [1] managed payment system where anyone can create a user@paymentprovider ID and exchange that as the receiver address instead of complex bank account numbers, branch details, etc. This also allows payment requests from merchants that one can login and approve.
* IMPS (Immediate Payment System), another service by the same private consortium. [1]
* Rupay cards, a local payment network (now recognized in a few other countries) by the same private consortium [1] that's a replacement for Mastercard/Visa/Amex networks.
* Digital wallets by payment providers and "payment banks" that work like wallets and/or allow direct transfers from one's linked bank account, like Paytm, Amazon Pay, Amazon Pay UPI, Google Pay, PhonePe, and many, many more.
* Bank transfers that may take an hour or several minutes, as opposed to the instantaneous ones above, with systems like NEFT (National Electronic Funds Transfer, a batched inter-bank payments settlement system) and RTGS (Real Time Gross Settlement, a real time inter-bank settlement system).
Though digital payments are still not huge in percentage terms, the ones above likely handle a lot more volume than Visa and Mastercard do. The government has also pushed for zero MDR (Merchant Discount Rate) on certain payment and transfer options, and made them more attractive to merchants.
The U.S. is comparatively very backward in payment systems, costs and payment speeds.
[1]: The private consortium is called NPCI, which stands for National Payments Corporation of India.
* Fees will go up for card not present transactions (online and phone) and fall a bit for card present transactions.
* Overall, Visa is increasing fees to make more money than before since there aren’t any other details provided.
My take is that if Mastercard plays it right, this is a good time to capture a higher market share at Visa’s expense (though it wouldn’t come anywhere close to toppling Visa’s lead).
In the context of this conversation, the distinction is clear. And Kroger tried super hard to communicate effectively regarding this fight.
Costco in Canada.
[1] https://techcrunch.com/2020/01/13/visa-is-acquiring-plaid-fo...
I have a colleague who worked there like five years ago. She bought as much stock as she could. Once it IPO or gets acquired I suspect she’ll get a hefty contribution to her retirement.
What's the problem with US payment system? People still use checks?
I have seen those only in movies. I think they were out in the 80s in Finland.
>For banks, the $91.2 billion in fees they earn on credit-card portfolios is now more than the interest they charge on the loans.
The fees are ridiculous. Profit margins at restaurants are often 3-5% (per Google). There is still a cost to handling cash, but if cash cost ~1% all-in, their profits would go up 20-30%, just like that, assuming consumption stayed the same.
Fast food venues didn't accept credit cards for a long time, but eventually found people spent more paying with a card than cash. A $300 TV and a $5 hamburger "feel" exactly the same with cards, which certainly doesn't help consumerism in the US.
As an example, when I pay my property taxes, I can either pay by sending a check in the mail, doing an electronic check (ACH transfer that takes 2-3 business days to clear) and paying $0.25, or pay a 2% transaction fee. Stamps are $0.50, eventually I'll need to reorder checks (at a cost), so I do the ACH transfer.
In Canada, we have "bill pay" for utility, property tax, credit card, etc. but all that happens is your bank transfers money to the biller's account. The biller pays a bit for this service but evidently much less than the cost of handling physical checks as I've never seen a surcharge for it. Even the small town of 3,000 I live in is set up to receive property tax and water payments through this system.
Regardless of who makes your bill pay service or exactly how it works, my main advice if you use any bill pay service is to ready the fine print very closely and be sure you understand what you have to do to be covered (late fee reimbursement, etc) if a payment does get screwed up.
Obviously, Visa and Mastercard are trying to see if they can ruin the system.
I just paid some property taxes with one instead of ACH; keeps all of my accounting in one place in the card, and the payment is immediate instead of waiting for the ACH payment to wind its way through the antiquated Fed plumbing. Anyone who won’t take a CC, I’ll use Plastiq; they cut a check, I pay the CC fee, but it’s still rebated back.
They are negotiating with very few entities: just 2 (Visa and MasterCard) account for most card holders. Throw in Amex, and Discover if you want and you've covered nearly 100%.
Merchants don't have a lot of negotiating power, so they are really not in a position to dictate prices. Visa and MasterCard are in a position to dictate prices.
They regularly do crossovers and promotions to encourage people to use the cheaper ones.
They sorted through the fees and got things turned back on by explaining the situation, but it was a nightmare. Precarity is hard to understand if you've never been in or near it, or if it's a distant memory for you. It's overwhelming on a good day.
The way it works fore me here in the EU is that bills land in my bank account and I log in on mobile, select the ones I want to confirm, and sign the transfer.
We also have bank to bank instant transfers for free (useful for paying back 1/2 pizza etc) without external private middlemen. US banking feels so legacy, much more so than the COBOL I work on.
I guess it's because of the bank you chose, since the one my relatives use don't have any of that, and are those apps bank-specific? Do people not having your bank also receive the money instantly?
The timing of payments can be a real burden when you're on the edge. I wrote about a time something similar happened to me a few years back https://news.ycombinator.com/item?id=6424493 This is about overdraft fees, specifically, but it's the same principle.
Why electronic payment costs money in the US? That's the cheapest way to pay and process payments. In Finland that cost's nothing and it's the default for paying large bills and payments.
EDIT: "for credit cards"
https://brussels-express.eu/bank-transfers-will-immediate-fr...
It is a cultural thing to an extent though; there are EU countries where they’re still used to some extent despite the presence of a modern banking system.
As for the $1000 TV, I would probably pay that at an electronic payment terminal with a debit card. If buying from a retailer, that's usually the way to go, no matter how small.
Buying a used car form an individual might happen in cash. Some countries will not allow cash transactions over 3000€. So depending on the price, it might also happen with a SEPA transfer.
Car could be SEPA (or equiv in non-Eurozone countries), bank draft, or even cash, though cheque is possibly less likely due to fraud concerns. Some people do it by actually physically going to a bank with the seller, I think (I don’t drive, so have never done his myself).
For in person stuff, where you live plays a role too; only a minority of countries currently have SEPA Instant, though that should change soon. For everyone else, it’s a day or so delay from when you send the payment in the bank app.
I know that sounds stupid but it's the truth. There is no law against banks charging fees like this, banks like to make money (don't we all!), and (significantly) banks don't seem to lose customers by charging these fees.
I currently pay my rent via wire transfer, which is I guess better than a check because it's electronic but is also worse because there's a fee. When I first moved away from home for a job I had to pay rent with cashier's checks (which meant going to the bank and paying a fee first to get the check).
While Virginia Natural Gas is large enough, they handle their credit card payments via Western Union and the customer pays a fee to do it. It's the only check I write every month.
Like buying a house or a car?
It's 2020, I'd love to be able to pay for a transaction using a secret key to sign an authorization proving I was there.
Instead, credit card companies force us plain text numbers and somehow blame us when it gets stolen.
And all my major credit cards also allow me to generate one-time use numbers to use online, which I need to sign in to generate using 2FA.
Finally, I've never been "blamed" for fraudalent transactions. They've happened but I've never had to pay, nor do I know anybody who has.
So really not sure what you're upset about?
Revolut is interesting in many ways, but they get the interchange just like any other debit card issuer.
I don’t know many folks moving more than $3k/day to be honest. I don’t disagree though that Fed ACH modernization efforts need to pick up the pace, as Zelle is a shim until federal payment infra is up to par with Europe.
If you receive money from another user and transfer it out to your bank account, Revolut might lose some money from using the third-party that provides the bank transfer service. (I have no details on what their arrangement is.)
Revolut has been known to warn and suspend users that use their transfer feature too much.