[1] https://www.frbservices.org/financial-services/fednow/index....
[2] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa...
People can already use debit cards with no effort, and merchants can accept that at very minimal costs. But still, most merchants are hesitant to offer lower prices to purchases with debit card because they are betting people spend more with credit cards.
I don’t expect this to change when the Fed’s system comes into play. I would actually expect the Fed’s system to replace cash transactions more than credit cards.
Off course, this will probably take some time. But in my opinion, Visa's moat is thin and mostly reliant on the behavior of their users. For US, I expect Visa to still be dominant, but not so much in other countries in Europe and Asia where people are much more savvy with their money habits.
Debit cards in the US have been available and basically free to use for all merchants and purchasers for many decades. Yet, merchants willingly do not give people that buy with a debit card a discount. That seems like proof to me that merchants are betting that they earn more money from the use of credit cards, even after the fees associated with them, so I don’t see why another no or low fee purchase mechanism would change the situation.
You might only see them in gas stations, but it is much more likely that those are the local businesses you go to the most, since those are the ones working around the credit card merchant contracts.
For what it’s worth I believe cash discounts have never been against terms of service, specifically what was, were credit card surcharges, minimum transaction sizes and various other forms of discrimination against credit.
Not to mention that many government services charge an outrageously large “processing fee” (in the multiple dollar amount) for card purchases. They literally would rather I write them a check and go in person than just go online and use a card. How does that work with the law you cited?
That was the case prior to 1666f. Now, both "credit surcharges" and "cash discounts" are permitted.
It was just a perspective thing, card brands didn't want to have cards feel "disadvantaged" relative to cash. Instead they had cash "advantaged" related to credit. It was never illegal to do either, this change just rendered terms of service which included them unenforceable.
And you can get a minimum 2% cash back on no fee cards, so unless the discount is at least that much, I don’t see a reason to not use a credit card.
For what it’s worth the bulk of the spread between processing fees and origination is returned to customers in North America, certainly in the US with 2% cash back no annual fees like the Citi Double Cash.
In Europe interchange is capped at 0.2% for debit and 0.3% for credit and has been since 2015. I’m not sure off hand but I believe Australia has interchange caps too.
Australia had interchange caps since around 2006, with several subsequent changes forcing the rates even lower.
I was head of portfolio management for one of the big Aussie credit card companies at the time. Lower interchange fundamentally changed how loyalty products got funded. Annual fees for rewards programs had to be increased. The benefits were cut. High spenders were encouraged to move to products which still attracted higher interchange, etc, etc.
It’s definitely a hard sell currently, but once the rails are available cheaply to everyone, most of the arguments against it evaporate away.
3% transaction fee means 0.1-0.2% to visanet, 2% in rewards and more than likely a large portion of the remainder is the cost of originating and serving that loan.