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Comment by csomar | Hacker News Reader

I was expecting this about disrupting the MasterCard/Visa duopoly and sure was I disappointed.

All fintech relies on two things: A bank and a payment network (Mastercard/Visa). This makes fintech an inferior product and most fintech I have tried have an abysmal customer service. Also, because fintech does its verification thing over the Internet, it seems that they rely more on their AI to block/ban people than a phone call. Fintech also seems to be more down to lick regulation, banks and mastercard feet at the expense of their customers.

This explosion of credit cards/offers/rewards is hardly innovation. It has already happened with banks (every big store has its own credit card) and it's usually a bad deal for customer as it requires "loyalty" to that brand.

That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?

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This sounds exactly why people like Jack Dorsey are pushing for bitcoin + lightning network adoption. They've experienced first hand how much gatekeeping has developed in the space (via Square + CashApp in his case) that make true innovation almost impossible.

An open, permissionless, and GLOBAL monetary network for final settlement and small payments (and micropayments) which no single competing nation state has unilateral control over would be a game changer for fintech innovation. The function of everything from Visa/Mastercard, Fedwire, SWIFT, Paypal, Western Union, etc, all rebase onto one global network with countless businesses competing on top of it to provide the most appealing user experience.

It's been 45 minutes and I'm still waiting for my Bitcoin transaction to go through.

BTC and Crypto at large don't seem like a viable alternative solution, or even a solution to any real problem at all.

Do we seriously still have to deal with this criticism in 2022? Come on man. Educate yourself about the bitcoin layer 2.

https://www.youtube.com/watch?v=7bOo3zLFhEk

For small payments, lightning is instant and extremely low fee. For larger payments that you want certainty of settlement, even a few hours confirmation time is drastically superior to traditional settlement networks that take days if not weeks internationally. FYI, your credit card payments are instant, but not finally settled. That happens in periodic bulk batches between banks.

https://www.swanbitcoin.com/a-look-at-the-lightning-network/

Even the Fed is on top of trying to understand this, https://www.clevelandfed.org/~/media/content/newsroom%20and%...

Eh, in the UK I already have instantaneous bank transfers that are free for normal retail customers to use.

Money arrives instantly, and as far as a retail customer is concerned, it settles instantly. Under the hood their regular batch settlement between banks, but that doesn’t matter to a retail customer, because the money is instantly withdraw-able, and covered by government deposit protection the moment the faster payment appears on your bank statement (which is milliseconds after the payment is initiated by the sender).

Why would I want to mess around with Bitcoins, when I already have access to fast, secure, cheap, money transfers to any UK bank account?

Sometimes you need to pay someone outside of the UK. Maybe you want to purchase something online. Perhaps you don't want to share your bank account with a stranger.

> Perhaps you don't want to share your bank account with a stranger.

Or else what? They'll deposit some money into your account? The biggest reason bank accounts are semi-secret in the US is free-for-all ACH pulls; a minimal threat in other countries due to the fundamental differences on who is liable for unauthorized withdrawals (not the depositor!)

SEPA gets me most of Europe, and open banking lets me use bank transfer rails for online purchases.

What’s wrong with share bank details? You can’t do anything with them, except send me money.

Most countries have similarly capable local payment systems. The US is the only developed nation I’m aware of that’s missing such basic financial infrastructure.

People did all this long before Bitcoin.

Digitally, without fees, with a fair exchange rate? With no limits on transaction sizes, with complete finality?

> Digitally

With the exception of stores that are cash only, 100% of my money movements in the past 10 years have been digital, from my perspective. The actual money movement technology doesn't really matter to me, as long as I can do it online. Excluding settlement times (which I don't notice, unless I'm doing a wire transfer), as a consumer there's no difference.

> without fees

With bitcoin, you're paying fees per-transaction for bitcoin itself, and both parties are paying fees to move money to/from fiat. Wire transfers for large transfers may be slower, but they're absolutely cheaper than bitcoin. Bitcoin is considerably more expensive for small payments.

> with a fair exchange rate

With the fluctuations in price in bitcoin, the exchange rate is rarely fair and almost always worse than fiat. Note that there's lots of cards that don't charge foreign transaction fees, and have quite competitive exchange rates.

To point it out again, using bitcoin requires two fiat exchanges, each of which charge fees and each of which has an exchange rate that the exchange is profiting from. If you're transferring fiat of the same currency, there's no fees and no exchange rate. Even if your transaction is between two fiat currencies, bitcoin is worse, because there's one extra layer of fees and exchange.

> With no limits on transaction sizes

I can't think of a time in which I've hit a transaction size limit. Who is this feature for? Transaction size limits exist primarily to protect people. If my card is compromised, it won't result in 100% of my money immediately (and irreversibly) being transferred away.

> with complete finality

This is an anti-selling point. If my money is stolen, I want to be able to get it back. If I typo an account number when I send a payment, I want to be able to reverse that payment.

Have you tried Wise? I've been using the service (based in the UK, created by Skype's founders). The exchange rate is always shared upfront, extremely cheap with various options provided, many free or dirt cheap, some faster but slightly more expensive. Not too sure about the rest because my use case is very specific. Excellent for international business payments and remittances, I can assure you about that.

Have you considered that people want to transfer money outside the country too? And that this volume is incredibly massive? And is critical to global trade? And that it has been used as a weapon to keep non-compliant countries out of international trade?

Do you actually know people using it to transfer money outside, or it's all in the realm of imaginary possibilities? All people I know used hawala or sometimes the expensive WU/Moneygram, but that's just me.

Personally, I used it to accept a mid five figure payment for a website in lieu of a wire transfer.

but the point remains that just because the legacy system exists doesn’t mean no alternative should ever exist.

What if you want to buy something from outside UK?

Then I'll pay with my credit card, since it's the safest, easiest, and pretty much instantaneous as far as I'm concerned.

You buy stocks with your credit card?

You are not the protagnist of reality. And one day even you might want to send money easily to somewhere other than a UK account, without jumping through any hoops of middlemen.

Sheesh, what a eurocentric post.

I think you meant “non-US centric post”. Most of the world has equivalent financial infrastructure. The US is notable for complete lack of cheap basic money transfer mechanisms.

Do you seriously think that's an educational video?

The second link follows the Wadsworth Constant in fabulous fashion.

https://www.swanbitcoin.com/a-look-at-the-lightning-network/... is almost exactly 30% of the way down the page.

> 1 hour 31 minutes read

In rhetoric we call this 'assigning homework' and it's considered deflecting, aka, trying to get out of jail free, aka, poor form, aka, you lost the argument.

I'm sure we can do better than either of these for educational material. If that's the best that exists, which I hope is far from the case, then this is essentially a "git gud scrub" situation and you have yourselves to blame for the unwashed masses still not understanding things.

Sellers obviously want certain settlement for all purchases regardless of amount.

If bitcoin needs a similarly hierarchical trust-based settlement systems as banks, how is that different from traditional banking?

That is not what the lightning network is though - it is trustless, just like the baselayer.

What factors are holding back adoption of lighting? I’ve come across Bitcoin as a payment option before when making some purchases, but I don’t think I’ve ever seen lightning.

Exchanges are more interested in running their shitcoin casinos and making money off gambling trading fees. Some even skim off their users for withdrawal fees like crypto.com. There's not much incentive to implement something that won't make them money.

> It's been 45 minutes and I'm still waiting for my Bitcoin transaction to go through.

At this point, and given HN's POV on BTC, I can't take these statements serious unless you are willing to post the tx hash?

Most of these criticisms seem to be unfounded and only speculative, or you deliberately put a low priority mining fee and feel the need to blame the protocol for that.

The truth is a 30 cent mining fee was clearing all day in the next block, so I struggle to see how this is the fault of Bitcoin mainchain. With that said, as someone already mentioned, LN txs are instant and near free.

> This sounds exactly why people like Jack Dorsey are pushing for bitcoin + lightning network adoption.

The solution was in the message you replied to.

very uninformed take - they specifically mentioned the lighting network where transactions happen as fast as VISA/Mastercard.

What good is a transaction without guaranteed settlement?

I mean, I'm no crypto-as-in-currency fan (but am an actual crypto fan), but Visa is maintaining an elaborate illusion. It breaks down any number of ways, which you find out the moment you try to spend 40% of your credit limit on one thing, and someone screws up the transaction so it has to go twice. Then you start getting declined at the grocery store for being over the limit when you are in fact at 61% of your limit, but the vendor has reserved 80% of your limit for that 40% transaction.

Visa/Mastercard are not guaranteed settlements…

Visa/MC have phone numbers you can call for support and dispute resolution. What happens for BTC lightning?

So… you want guaranteed settlement but at the same time the ability to reverse a transaction? How do you propose that would work?

It might come as a surprise to some, but I had over the years many successful credit card transactions and I also had a few reversed when I called Visa/MC and told them something was not okay. So I have nothing new to propose here, just mentioning a system which already works fine for me.

I’m aware that you can do this with credit cards. I was replying to someone who wanted guaranteed settlement but at the same time the ability to reverse transactions (read: settled transactions). You can’t have both at the same time.

You still call a number for support: 988.

988 is the suicide hotline..

Anyone who overcommits to crypto should have a crisis plan in place in the event of disaster.

I'd rather have a bunch of gatekeepers than losing money with no recourse if my credit card number is stolen. The trade-off for crypto-style decentralization is complete loss of consumer protection.

Then you won't ever use raw bitcoin.

You'll continue using a service that obfuscates their use of bitcoin and lightning, like you do now with services that obfuscate their use of Fedwire and SWIFT. They'll provide you with consumer protection services, either for a fee or in exchange for harvesting and selling your data, like they do now.

I'm not suggesting that everyone is going to use raw bitcoin and have to manage their own keys. I'm suggesting that nation states and corporations (and many individuals) will all rebase their money operations on an open network, digital protocol. Bitcoin.

So there's a bunch of existing intermediaries, which is bad, and to fix that we're going to add the exact same set of intermediaries, but on top of bitcoin, which means its good?

Margins are insane and can definitely come down.

Boiling the oceans is incredible value add.

> An open, permissionless, and GLOBAL monetary network for final settlement and small payments (and micropayments) which no single competing nation state has unilateral control over would be a game changer for fintech innovation. The function of everything from Visa/Mastercard, Fedwire, SWIFT, Paypal, Western Union, etc, all rebase onto one global network with countless businesses competing on top of it to provide the most appealing user experience.

This is not ever going to happen.

Witness today the Ethereum tumbler getting sanctioned. When a payment method gets significant enough it will either be regulated or squashed by the state.

States are welcome to try to exclude themselves and their citizens from the network, as many nation states attempt to do now with the open internet.

Some people do compare the relatively free exchange of information on the Internet with cryptocurrencies, but modern democracies regulating commerce isn't anywhere near the intent of dictatorships regulating information.

It is also quite easy for a state to exclude themselves from cryptocurrency networks, to the extent that the only transactions taking places are enabled by black market in person exchanges for cash, and no legal business entity could use that currency so you're left with the only thing bitcoin was really ever good for, evading legal controls to do trivial things or illegal things. Nothing more.

Your argument to all of the problems affecting bitcoin is...don't use bitcoin. Use this other thing, lightning, which is sort of built on bitcoin, but not really. And also not actually used anywhere, yet, even though it's supposed to be so amazing at fixing bitcoin's problems that crypto merchants should have embraced it over night.

That bitcoin's biggest proponents still haven't embraced lightning is a pretty clear admission of defeat by bitcoin apologists that bitcoin doesn't actually solve anything, and isn't actually very useful for anything, even with the fix that was supposed to finally bring bitcoin into the promised land.

Every lightning transaction (or channel update) is a valid Bitcoin transaction that can be broadcasted to the Bitcoin network and settled at any time. Lightning capacity and transactions are growing fast. "Crypto"'s biggest proponents haven't embraced lightning because they have shitcoins to sell.

I think if your coin uses more energy to settle one transaction than a typical South American uses in a year it's the "shitcoin"

Crypto being filled with scams is a feature, not a bug.

> your coin uses more energy to settle one transaction than a typical South American uses in a year

Do you even know what you're talking about? The energy concerns are real, but please avoid exaggeration to win arguments.

https://www.moneysupermarket.com/gas-and-electricity/feature...

>By far the most power-hungry crypto in our study, we found that a single Bitcoin transaction uses an average of 1,173 Kilowatt Hours (kWh). If we consider that the average monthly electricity usage for a UK household is 350 kWh, that’s enough to power the typical UK home for more than three months at a cost of roughly £125 ($173), based on a fixed cost of £0.11 ($0.148) per kWh

>In the U.S, it would equate to roughly 6 weeks of electricity based on an average household electricity usage of 877 kWh per month (U.S Energy Information Administration).

Not quite an entire year, but definitely a number of months.

Also according to digiconomist's latest figures, it's currently at around 1500kWh per transaction. So even worse.

Individual transactions don't use energy. The energy is used to secure the entire value of the ledger back to the very first transaction. Each layer 1 final settlement Bitcoin transaction can support potentially limitless transactions on the layer 2 lightning network. Electricity use does not equal emissions. Digiconomist works for the Dutch central bank.

Energy is converted directly into security. Energy use isn't a bad thing.

> The function of everything from Visa/Mastercard, Fedwire, SWIFT, Paypal, Western Union, etc, all rebase onto one global network with countless businesses competing on top of it to provide the most appealing user experience.

Even if they do rebase on top of one global network, what incentive do these companies have to change their product offerings or their fees? Consumers will not care what Visa/Mastercard or Western Union use on the backend, could be carrier pigeons as far as most people are concerned.

What would cause fintech to become more competitive? I'd love to see every transaction fee, loan rate, etc. go to zero. But would "one global network" lead to that?

> All fintech relies on two things: A bank and a payment network

Actually, one of those two isn't necessary – the payment network.

It's possible to build a payment platform _just_ on top of banks. We're doing exactly this at Sway.

In Europe this is driven by Open Banking initiatives. In the US, this will land next year with the FedNow service.

In other parts of the world, like China, Brazil, and India, instant (and free) payment networks have existed for a long while.

https://sway.money

https://standards.openbanking.org.uk/customer-experience-gui...

https://www.frbservices.org/financial-services/fednow/about....

> That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?

It’s a fundamentally hard market for anyone else to enter because Mastercard and Visa basically have natural monopolies.

The value that both Mastercard and Visa bring to the table is:

1) if you’re a bank, most merchants accept their cards

2) if you’re a merchant, most banks provide a card from one of them.

So any new network has the classic chicken and egg problem. How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?

The EU tried to force a fox on this issue by creating EuroPay. Which ultimately failed and was bought by… Mastercard. But on the upside, part of the purchase deal require that Mastercard provide “at-cost” access to its network for a new card network to piggy back off, to help solve the above chicken and egg problem. But atlas’s, even that doesn’t reduce the barrier to entry enough, especially when coupled with the EU rules capping maximum interchange fees.

> How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card.

Well, at least at the national scale, it can and is done. You start with terminal providers or select the niche that doesn't use them at all (online payments). Then you need top 5 banks to support your new method in their mobile apps/transaction systems. All is left is massive advertising campaign, and if it is successful, other banks will join. https://en.wikipedia.org/wiki/Mobile_payment contains a huge list of attempts that worked out (or not).

It is going international where things get very tricky. Even Paypal and Stripe had to be based on Visa/MC, there are no other worldwide options than credit cards. It is a bit better if you want to only cover EU(thanks to PSD2 banks had to provide APIs), but that is all. Google's and Apple's payment systems could become independent from Visa/MC but people just don't want to top up some weird accounts when they can just "connect" a card instead.

> How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?

In Russia banks and merchants were convinced to use the national payment system basically overnight.

In India, RuPay (Rupee+Pay not Russia+Pay) was essentially adopted through a combination of incentives and penalities. Though not overnight, they did manage to get a sizable share of the domestic market in a few years

Congress is poised to force Visa and Mastercard to allow their branded cards to be processed through alternate processing networks. That should be an interesting shakeup, if it pans out.

Sounds like Congress is feeling like Visa/Mastercard haven't been spending enough money on lobbying recently.

Does the reason really matter, if what they're doing is a clear positive?

> regulatory barriers

Because markets are never anti-competitive on their own, oligopolies are only ever due to big bad regulators, right? Uh-huh. Some alternate ideas about why the CC payment processors are an oligopoly:

1. They have a card in every wallet and a reader in every aisle.

2. They can force merchants to hide the fees they charge.

3. They don't just process payments, they arbitrate disputes.

(1) could be addressed by standardization (see: Europe). (2) could be outlawed. (3) could be replaced with better consumer protections or smoother small-claims process.

Most markets have a substantial undergrowth of perverse incentives and anti-competitive strategies. Killing the gardener doesn't make the weeds disappear.

> (3) could be replaced with better consumer protections or smoother small-claims process.

Doing that doesn't actually depend on eliminating Visa/MC, so the fact that it hasn't been done suggests that there are other barriers.

If you want to argue that eliminating Visa/MC will also eliminate those barriers, some details would be nice.

> All fintech relies on two things: A bank and a payment network (Mastercard/Visa).

Fintech is much bigger than credit card networks. Bitcoin may be the most obvious fintech example that requires neither, but there are many others.

I don't think Bitcoin is categorized as fintech but rather crypto/blockchain.

Fintech encompasses all financial technologies. Cryptocurrency is a cornerstone financial technology.

https://en.wikipedia.org/wiki/Financial_technology

Cryptocurrency is a niche hobbyist area within fintech, nothing more. If it all turned off tomorrow, virtually nobody would notice. Compare that with Visa or SWIFT, which are actual cornerstones.

Let me rephrase — the type of people (consultants, VCs, industry analysts, blockchain bros, etc.) who use the term "fintech" on a regular basis consider crypto/blockchain technologies to be a key area of fintech innovation.

From https://en.wikipedia.org/wiki/Financial_technology: "[Fintech] is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, Blockchain, Cloud computing, and big data are regarded as the 'ABCD' (four key areas) of FinTech."

In contrast, the credit card networks which have been with us for decades are considered to be "traditional financial methods". Even Visa thinks about itself as a company that partners with "fintechs" and "fintech enablers" rather than being a "fintech" itself, e.g. "Our worldwide network helped fintechs like Chime, Rappi and Airwallex deliver on their vision". (https://usa.visa.com/partner-with-us/info-for-partners/info-...)

Visa has an SVP of fintech who has a ton of org under him, gives talks about how it’s a fintech company, and has hired tons of people into jobs that have “fintech” in their title. We can argue about whether they’re right, but Visa certainly considers itself a fintech company.

Completely disagree. I have tried 3 fintechs. I still use two as my primary "banks".

They got rid of all the fees and BS the banks had been abusing me with for decades. There have been a few times traditional banking was better so I used a credit union I kept open. All my other traditional bank accounts have been closed for years.

May I know the names of those fintechs, please?

Diners and AmEx too, no?

Do they really have any presence? I spend almost all of my time internationally and basically never see AmEx. Had a Discover card years ago when I began traveling but got rid of it because its presence was spotty in the US and nonexistent elsewhere.

I'd expect more out of UniPay at this point -- I do actually see that quite often.

AmEx is pretty big in Europe for corporations and big businesses to issues to their workers for business expenses.

Is it? I have actually never seen one and I live in Europe.

If you work for some F500 or other such rich multinational mega corp, you'll see them everywhere, otherwise nobody gets them for private use.

I got one for private use: somehow they swing a deal with US grocers that recovers a significant fraction of the transaction processing fee back to the consumer. no idea why, but that's why i got one.

My local rewe doesn't accept Amex.

Yes, and Discover (which owns Diners).

Yep, more middlemen is not innovation.

True progress would be CBDC or actual usage of cryptocurrency

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