How hard it is to rival Visa/MC duopoly?
These are incredibly profitable public companies. But does anyone think they can be dethroned? İs it possible?
Visa and Mastercard make a highly complex payment system look easy to consumers. They also have developed a high level of trust with consumers and businesses.
It is a two sided market. I know I can go out with a credit (or debit) card in my wallet and use it in many places, the vendor knows that most people have a payment card so it is worth it for them to work with the incumbent. Starting out from zero you have a much harder time.
They also play a mean game of political engineering. Since they work closely with banks there are local and regional banks in every legislative district. Vendors complain about high fees, but some of those fees get kicked back to consumers in the form of “points”; consumers see that, they don’t see that everything is a little more expensive even if you don’t use credit because vendors are forced to build those fees into their prices.
Note it isn’t free to handle cash so comparing 3%-ish fees to 0% is wrong since cash is attractive to steal for both employees and others and requires time safes, armed guards, etc.
Note American Express and Discover are both alternative payment cars that look the same to the consumer but worked differently from a business perspective at least until the 2008 crisis. Then there are the Paypals and Venmos and M-PESAs of the world which there are an awful lot of because there are so many countries where Visa and Mastercard are not as entrenched.
Vastly important point here.
So sure, there are a few bigger providers but a lot of POS systems (not all) are in it for the CC fees (they want a cut) which means they work closely with MC/Visa/etc, how do you think the existing CC companies will respond to a POS working to help dethrone them? And what’s in it for the POS company?
Yes and yes.
Lookup RuPay of India.
While you're at it, also lookup UPI, also from India.
Some details I just read on its Wikipedia page[0]:
> NPCI conceived RuPay as an alternative to Mastercard and Visa, while consolidating and integrating various payment systems in India.
> ...causing Indian banks to bear the high cost for affiliation and the connection with international card associations schemes like Visa and Mastercard. This results in the need for routing transactions of which domestic account for more than 90%, through a switch located outside the country.
And, of course:
> Mastercard and Visa have raised concerns with the Office of the United States Trade Representative (USTR) over India promoting the use of RuPay.
Visa and Mastercard have built trust not only with consumers but also large banks. That relationship in itself is hard to dethrone. You really need a viable alternative that can get the confidence of the consumers and companies that will invest in the product
So, those of us that refuse Visa and Mastercard (for example, refusing cards embedding NFC) now have no service available in some area, and will be monitoring for alternative solutions.
Yes, many. For example:
-- A radio bridge to a bank account already does not sound right.
-- Payment must need some signature: it could be a PIN, it could be that the payer hands money to the payee. It cannot be that the recipient approaches a card.
-- Technical circumvention of security systems is a possibility that overwhelms any possible benefit of "contactless" payment. Risks are created and no value is added. (Actually, less then zero: tapping the card instead of inserting it in a reader seems an unjustifiable transition.)
-- Already reading the card contents could create access to personal information (it apparently happened that some cards revealed full details).
-- Were the card stolen, the thief would be able to use it. Then you should go through bureaucracy to void those purchases - but there was no need for any such unretributed waste of energies in the first place. Nor there was a need for insurance when what you wanted was security.
-- The protocol was apparently faulty, in that transactions between card and reader always work (as if to prevent failures in case of data connection outage), and if the card was recalled the transaction is cancelled at a later stage (instead of being validated as a condition to carry on the expense).
-- In case of a major failure, good luck in winning the litigation.
-- In case of a mid-sized failure, e.g. the thief committed more transactions having gained access to the PIN, the declared policy of many banks is to put the fault on the card owner, who "must have misplaced the PIN - they all do that, don't they".
-- Unclear contract: the expense roof is 10u today, maybe 100u in the future, later 1000u - decided by the systemic side.
-- Unclear workings: proponents will often be unable to answer to simple questions such as limits in rate of expenses ("You set a limit of 10u for PIN-less expenses: what happens if somebody tries many transactions in a short timeframe? One may not fear a transaction of a 1000u, but 100 transactions worth 10u" "Ah.")
-- Vile communication, such as "it is secure because you will always keep the card with you" (this was on the website of a major player) should as always be an alarm.
I may have not remembered a few while writing, especially obvious ones.
> Payment must need some signature: it could be a PIN, it could be that the payer hands money to the payee. It cannot be that the recipient approaches a card.
...could be easily solved with a button on the card (like my FIDO2 key has), or, in the case of the NatWest trial, a fingerprint scanner[1] on the card itself. This would stop the card from being (accidentally/maliciously) charged by NFC through a wallet or pocket. Unfortunately, it doesn't look like NatWest continued the trial - for the moment, at least, that makes gives them the privilege of being both 'the first' and 'the last' UK bank to unveil biometric credit cards!
[1]: https://www.natwestgroup.com/news-and-insights/feature-conte...
https://www.frbservices.org/financial-services/fednow/organi...
https://www.federalreserve.gov/paymentsystems/fednow_faq.htm
https://www.frbservices.org/financial-services/fednow/instan...
Then the Amex reps call you can try to spout the benefits of accepting Amex, how they can advertise your business to their card holders, yada, yada. It all feels like bullshit. I have an Amex card, I’ve never visited or not visited a business due to them taking or not taking Amex. I’ve never cared to look at the Amex site to find places that accept it.
They want to make it feel exclusive but it’s just not.
And even if the financial landscape changes dramatically, i.e. we stop using Fiat and Crypto and we switch to (physical) Gold and Potatoes, they have the skills/infrastructure/funds to quickly adapt and remain relevant/dominant.
How hard it is to rival it? Well, what's your horizon? Some with billions of $$$ to spare can get it done in 10 years if you ask me. It's not just about hiring like crazy in every country in the world, lobbying with every legislator/central bank on the planet, comply to every regulation/ISO/PCI-DSS/etc. under the sun..
Doable? Definitely. Chances of seeing it happen? Big fat Nope.
What is the business case for banks?
What is the business case for consumers?
How much money you got?
the Nilson Report, a publication that tracks the credit card industry, found that Visa's global network (known as VisaNet) processed 100 billion transactions during 2014 with a total volume of US$6.8 trillion. https://en.wikipedia.org/wiki/Visa_credit_card
Good luck.