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Comment by gilgamesh3 | Hacker News Reader

IMHO Visa and Mastercard duopoly are way more powerful than other companies like Facebook or Google. In the end, people still need to pay for services and they use credit cards to pay for it. If Mastercard or Visa don't want a service do exist, they can simply block it and then people won't be able to use the service. The recent OnlyFans and PornHub controversies prove my point. OnlyFans was in the verge of banning explicit porn in their plataform.

https://www.protocol.com/policy/onlyfans-visa-mastercard

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Chamath argued in a recent episode of the All in Podcast that Visa and Mastercard are going to get wrecked soon, as it becomes apparent they are an unnecessary trillion dollar parasite on the economy. They add a 2-3% tax on every transaction and can block people out at will, as you note. But now we increasingly have cheaper alternatives that are also censorship resistant.

>"But now we increasingly have cheaper alternatives that are also censorship resistant."

I eagerly await them. However, I strongly suspect there is a massive network effect in-place that keeps Visa and Mastercard dominant. So many businesses want to stop taking credit card payments but the loss of business is often way too much. Anecdotally, getting my paycheck through direct-deposit means I almost never carry cash on me anymore. I would hope that business can find a new payment processor but I am still skeptical, as those companies also want a percentage of the transaction through fees.

> Visa and Mastercard are going to get wrecked soon, as it becomes apparent they are an unnecessary trillion dollar parasite on the economy.

This is a completely unsupportable view. The rise of CC processing happened because it was manifestly better than the options you had before (every seen a hand-written credit list at a bodega?)

Now you can probably squeeze the price point a little, and argue about if/when newer technology means the same level of service could be provided for less (maybe) but the complexity of what they do is pretty high. Not to mention the reach and reliability.

Lot's of people wave hands about crypo/defi being a solution to this but currently that's at best wishful thinking.

BNPL companies are a real potential threat for them though.

A 2-3% is tax is a small price to pay for being able to carry out chargebacks against sellers that don't deliver.

Also, pretty sure their cut is more like 1% after you take into account the 2% cashback.

Very much this. There is no other payment mechanism in existence (correct me if there is) where strong consumer protection is enshrined into the regulation.

With credit cards I can have zero worry about fraud charges because I'm not going to lose any money over it and that's guaranteed by regulation, not by the goodwill of the bank (which could change any moment, the regulation won't).

Also with credit cards I have no worry about unscrupulous vendors because I can always do a charge back if they don't deliver and I get my money back.

I also fear no future payment mechanisms will ever have these kinds of protections, because these regulations come from a different era when the US was still willing to impose consumer protection regulations. That political climate isn't here now.

Yes the cut is much smaller and doesn't all go to visa/mastercard (card brand). The card processor, acquirer, and in most cases a gateway also gets a cut.

Right, it ends up being a good deal.

And I don't see how censorship resistant becomes a thing. If the government wants to block my participation on the system, then I'm sure it will find a way. If the government can't block participation, then it can take the whole thing down.

> But now we increasingly have cheaper alternatives that are also censorship resistant

I really hope you're not referring to crypto.

It exists. It works. And governments, companies, and individuals have started to adopt it for real transactions (rather that speculation).

The ship has already sailed. Get over it.

You still have to pay a payment processor if you aren't doing it in-house, on top of gas and conversion fees

Conversion fees are a problem for the time being[1], but the Bitcoin lightning network solves the issues of gas and payment processing. There are entire countries using crypto currencies now. Cheaper doesn't mean free.

1: assuming you need to convert, which isn't always true. You can use bitcoin as is (case in point, El Salvador).

> And we increasingly have cheaper alternatives that are also censorship resistant.

Such as?

"Web3 crypto projects"[0] he's long on and ready to pump. He's a salesman and his conviction only goes as deep as his lock-up agreements, which thankfully aren't a thing in crypto.

0: https://uk.finance.yahoo.com/news/billionaire-chamath-paliha...

Bitcoin. "Crypto enthusiasts" and the uninitiated will argue that "Bitcoin doesn't scale to Visa levels", but it does through the Lightning Network.

Most critiques assume that you don't need the graph of liquidity-weighted edges that Lightning Network requires to achieve cheap transactions at high throughput. I seriously doubt this isn't necessary without handing over control to a central third party and thus creating something with the same properties as VISA.

I am a Crypto-Enthusiast but people need to realize that "being your own bank" is actually a paranoid nightmare of responsibility. Bitcoin, and other cryptos, are tremendously intimidating to the average person. Even I get nervous when sending any significant amount of crypto and I've been doing this for almost ten years now.

Just look at this: 17XiVVooLcdCUCMf9s4t4jTExacxwFS5uh

Now imagine telling the average person to take note of this and send the Bitcoin equivalent of $1,000 to it. Clearly, you would need to build a system around Bitcoin in order to make it user-friendly enough for the average person to ever feel comfortable using on a regular basis. At which point, though, you've just remade a bank and a payment processor.

What's the difference in scanning a QR code vs swiping a card? Even with CC you have to constantly enter it manually or store it in browser.

This is going to sound odd, but I think the QR code still carries the same level of 'unrecognizable' that a long string of alphanumeric text does. My brain can't really parse or recognize a QR code from memory. As such, I have a sense of unease. However, I am able to roughly recite my credit card number because it is 4 sets of 4 digit numbers.

But you're right that you can offload addresses to browser or app memory just like with credit cards and get rid of some of the trepidation that way.

The bitcoin-to-bitcoin transactions may be censorship resistant, but sooner or later you will have to cash out to pay for other things (even if just taxes). We've simply moved the censorship from point-of-sale to point-of-exchange-to-fiat.

Oh, cool. How does the lightning network handle stuff like chargebacks?

And reinstating access when cards or other credentials are lost?

And so on, and so forth, etc. The actually hard parts aren't about moving money around.

> The actually hard parts aren't about moving money around

Yes, they are, if you're trying to be censorship resistant and scale transaction throughput. Do you have any examples, or was your original comment about showing us there are no possible alternatives to the full feature set of existing payment processors at their current price point?

With Strike or BlueWallet you can do this today.

2-3% "tax" isn't really a tax, it's a small cost to increase the buying power of people without debt and its a small fee for the recourse action buyers have in shopping protection.

For example, with my costco card I get extended warranty on everything I purchase, fraud protection, buyer protection and I get cash back. If i was a retailer, I'd be super thrilled that people use Costco cards because my products I sell are backed by that cards extended coverage and consumer protections. They file the extended warranty claim with the card carrier, not me. Sure, I can sell junk coverage - which many electronic stores used to do but those were always junk and didn't turn into revenue streams when the cost of selling junk caught up to people refusing to shop there and hating the store/service. (Looking at your Circuit City)

Prior to credit cards, we'd never have a TV, Microwave or computer in every home.

Not saying that I "Love it", but we can't deny the buying power of debt and what that has done for consumers and more importantly retailers over the years.

Interestingly, for many purchases if the bank chooses to charge it as a debit, then you have no recourse and some banks consider debit a cash transaction and charge YOU a transaction fee (non bank cash use) that is much more than 1-3% fee in the end that would be in the product...

I have no idea about censorship resistant... i can use my card to buy porn, legal weed or whatever...

None of the legal weed stores in my state take credit cards but they do have ATMs in the lobby. Cannabis is still federally illegal so, as I understand it, banks big enough to issue credit cards want nothing to do with it.

In Colorado, it just shows up as a candy shop or something like that. long time ago it was just ATMs, but i believe they said they set up their own Colorado state Credit Union to process the charges and have been doing so for a while... always joked that it pays to discover

The Federal Reserve is working on FedNow to replace FedWire. It will deliver a replacement for Visa/Mastercard in many ways.

While a government system that makes electronic money transfer a utility should exist, the real benefit of credit cards for merchants is that credit card users are willing to pay a higher price and thus catering to credit card users results in more profit. This is evidenced by the fact that all major merchants do not offer discounts for using debit cards/cash, with the exception of Target. But even Target does not make it easy, you have to sign up for a Redcard and link your debit card to it.

Merchants that do not like credit card processing fees already stipulate card purchase amount minimums or discounts for cash/debit. The merchants that do not evidently are betting that more money can be made from selling goods at higher prices to credit card users.

Of course Visa/Mastercard offer debit, but even with FedNow, I suspect many merchants, especially the biggest, will continue to want buyers to use credit cards, and hence support Visa/Mastercard/Amex/Discover.

> 2-3% tax on every transaction

What's actually happening is that a ton of that is getting channeled into frequent flier miles and cash back and rewards and so on.

Not all of course, and there's probably room for disruption, but that's relevant.

My card gives 2% back on everything, so it's more like a 0-1% tax.

> They add a 2-3% tax on every transaction

That's incorrect. It is true that merchants generally pay 2.9% to process card transactions. But, the vast majority of that goes to entities outside of the card network.

Visa has a net income of 50% its revenues. There's a loot of margin for the taking.

That says more about the way the company does corporate accounting than its business model. Microsoft also has roughly the same reported margin -- does that mean that there's a lot of margin for the taking with Microsoft? No. You're taking a noisy signal and putting meaning into it which isn't there.

Again, the networks take a small fraction of the overall fee, and the vast majority go to entities outside of the card network itself. Take a look at how the merchant discount rate breaks down, and you'll see who the true takers of those processing fees are.

Yeah, thats exactly what net income means. Its an accounting of the actual profits your company generates after all expenses. Its a standardized measure, which means you are able to compare apples to apples.

Both are oligopolistic market players that can command price, and then generate outsized profits from their large market share. Both have fat margins, that has nothing to do with how easy that margin is to take away. Average corporate profits (net income) run 10-15%, so any outsized margin beyond that is a good indication that the company is able to generate excess profits through whatever means.

I suspect that is more a feature than a bug, from the regulator POV: instead of chasing and potentially failing to quickly remove some economic actor from the market, it takes at most two phone calls.

Pretending that the public interest if behind any of these actions an important part of the system, but certainly not the initiator.

In the rest of the world specially Asian countries QR code payment or similar systems have started competing with Visa and Mastercard duopoly when it comes to debit card payments at least.

With respect, “whataboutism” doesn’t mean that we shouldn’t also solve the problem of Fuckerberg and whatever he’s calling his latest sneeze machine.

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