Hacker News Reader

Comment by legitster | Hacker News Reader

I'm pretty confident Visa's dominance is a completely natural monopoly. There are plenty of 3rd party payment options (Amex and Diners' are still both fairly widely accepted) and nothing is stopping consumers from having multiple cards.

But I think the network effects are too strong and we are seeing a pretty normal Pareto distribution. Even if you added 20 new market entrants with good coverage, consumers and businesses would still prefer to have Visa as the lingua franca of payments.

I think it will also be pretty hard to get away from that 3.5% processing fee. That covers a lot of fraud prevention work that credit card companies take on for consumers and businesses. Will consumers be happy to give up those protections and reap back a percent or two on prices? And emerging payment technologies seem to create more opportunity for fraud.

View on HN

Here in Japan there has been an explosion in QR code payment services over the past few years since the barrier to entry is so low (and traditionally credit card payments have had relatively low uptake compared to the west so it's seen as a wide open market)

It's extremely common to be confronted with a display like this at the register of a chain store detailing the bewildering array of supported payment options https://i.imgur.com/jmYrgHR.jpg

3.5% isn't what merchants pay unless you're tiny. Highest interchange is around 2.5 and maybe you'll pay 0.25% in settlement fees.

What interchange covers mainly is the cost of capital to give a consumer a 60 day interest free loan. Capital isn't free and this has real world costs to the bank underwriting the loans. Why you Chase or BOA debit card interchange rates are 0.05% because they aren't lending out their own money.

Not all, but a lot of fraud can be prevented with good 2FA. Chip+pin is usually hard enough for low effort fraudsters, and it's tried and tested in large parts of the world for decades.

The US has effectively no effective 2FA. Signature is never verfiied in practice, and magnetic strips are dead simple to clone.

It's not a 'natural' monopoly if they require heavy lobbying etc.

It's not the 'network effect' it's that the financial institutions i.e. the banking system want it that way, and will thwart any system otherwise.

It'll be easy to get away from the 3.5% fee we know that because of how it works in other countries.

America, shockingly, still does not use PIN chip cards, it's unbelievably nuts.

The simple addition of a PIN and a few other things can help reduce fraud substantially.

The complexity of the VISA network and disintermediation of 'ownership of the customer' creates problems for fraud tracking. At my bank the 'VISA' dept is totally separate from my other accounts - the entire customer service and data chain is separate. It's nuts.

Yeah, I think a lot of people are better off just paying 3.5% more but with the fraud protection. However, I still think this will be a huge improvement for a lot of other stuff like moving money between accounts at different banks or paying for large purchases which are guarded by a proper contract such as paying rent, buying a car, etc.

The Finance industry is especially attuned to this type of distribution mostly from dealing with pretty intense risk. The strongest players rise to the top fast and a moat of trust weeds out the rest. Crypto despite the ideological objectives is not immune to this.

Reply on news.ycombinator.com