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Comment by carlosjobim | Hacker News Reader

Visa made $17-$18 billion in profits in 2023 for handling transactions worth $12 trillion. Is that an absurd number for maintaining an instant payment system on a planetary scale?

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It would be an absurd amount for a payment system, yes, because we already have a secure worldwide communications network that we pay to maintain and there's nothing special about Visa's encrypted bits.

The value that credits cards provide isn't the network, it's the insurance (chargebacks). And while I appreciate payment insurance when I'm paying for an expensive object from halfway around the world, it's unnecessary overhead when I'm buying a bagel in a cafe.

So if we lived in a perfect hacker paradise where there are no company profits or private property, what would be reasonable operating costs for maintaining an instant planetary payment system – including fraud insurance? Assuming the same amount of transactions as today?

I don't know, but in Europe the visa/mastercard charges are capped at 0.2% for debit cards and 0.3% for credit cards. This seems to be enough for them to continue operating.

Are there any European-based credit cards that have entered and competed in the American market, with it supposedly being so lucrative compared to Europe? I'd assume someone would've made that jump?

I can't imagine Visa would continue to operate in Europe if it wasn't profitable, and I'm not surprised that there are no European competitors considering Visa has the highly profitable U.S. market to buoy their position in Europe.

Building a new network from scratch would be extremely expensive with limited chance of success.

Visa can certainly remain profitable even with the fee caps but I find it hard to imagine that they would try to enter the EU market if they had no presence in it and there were already several established competitors there these days.

I cannot speak for other country but VISA bought the Carte Bleue system in France un exchange of following all regulation and not upping the fees.

For two decade before that and since then, all carte bleue are visa and vice versa.

Mastercard exists here as a premium level card giving you tons of bonus, and usually fee with your account. Eg my bank account online is free and almost no fee for anything (I pay 9e for extra phone and wallet insurance and next day replacement), and as long as I keep more than 24k in the various accounts and give me a Gold+ visa card and a mastercard with 1% cashback.

> any European-based credit cards

Are/were there any in Europe to begin with?

Eurocard made a deal with Mastercard in the 60s which made it impossible for them to enter the US market.

Barclaycard, was as the name implies limited to a single bank.

The were a few other systems that were mostly national and didn’t even expand into other European countries.

So carry cash then.

I do, in fact. Unfortunately, the push for cashlessness has made this impractical in many places, and as mentioned elsewhere in this thread the cost of handling cash isn't zero, which means that direct transfers via a FedNow-like mechanism have the opportunity to reduce costs for everyone involved.

> It would be an absurd amount for a payment system, yes, because we already have a secure worldwide communications network that we pay to maintain and there's nothing special about Visa's encrypted bits.

Sure there is. Someone had to build the all the software that deals with those encrypted bits. Someone had to scale it up to handling tens (hundreds?) of billions of transactions per year, each one approved or declined within a few seconds.

If you think it costs zero dollars and we can just say "the internet is our payments system" and call it a day... well, I don't know what to tell you. Your expectations are so far from reality that I'm not sure we're going to have a productive discussion.

The maintenance costs are probably closer to zero than to the current profit margins of the credit card companies. FedNow transfers are almost free after all. $0.043 per transaction according to Wikipedia.

Visa's operating costs in 2023 were $10-$11 billion, compared to their profit of $17-$18 billion. This is on a revenue of $32 billion.

FedNow's operating cost must be multiple orders of magnitude lower.

Would they be if FedNow had a planetary instant payment system with the same amount and value of transactions as Visa, including fraud protection?

> If you think it costs zero dollars and we can just say "the internet is our payments system" and call it a day... well, I don't know what to tell you.

If you can somehow manage draw this conclusion after reading my comment, then I'm not sure we're going to have a productive discussion.

A lot of their fees are redistributed from the poor who struggle with credit card debt to the well off who play the credit card points/rewards game.

The actual lender for a CC is not Visa, it's the associated bank that's backing the CC. So the redistribution of wealth is occurring on the banks books not Visa's.

You may be right, but where does all their revenue go then? They can offer their service profitably for 0.1% fees, their fees are often 2-3%.

Over $200 billion revenue though, almost 2%. Does seem like a lot.

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